The US Department of Justice files a lawsuit against Apple, alleging unlawful monopoly practices in the smartphone market.
According to the Justice Department, Apple prices its iPhones as high as $1,599 (approximately Rs. 1,33,200) and earns higher profits compared to other companies in the industry.
On Thursday, the US Department of Justice and 15 states filed a lawsuit against Apple as part of the government’s efforts to regulate Big Tech. The lawsuit alleges that Apple has monopolized the smartphone market, disadvantaged smaller competitors, and increased prices. This legal action adds Apple to the list of competitors targeted by regulators, which includes Google, Meta Platforms, and Amazon.com. These lawsuits have occurred under both former President Donald Trump and President Joe Biden’s administrations.
Attorney General Merrick Garland stated in a press release, “It is unfair for consumers to face inflated prices due to companies breaking antitrust laws. Without intervention, Apple will further solidify its dominance in the smartphone market.”
According to the Justice Department, Apple charges up to $1,599 (approximately Rs. 1,33,200) for an iPhone and generates higher profits than any other company in the industry. Additionally, officials stated that Apple imposes fees on a range of business partners, including software developers, credit card companies, and even competitors like Google, which indirectly leads to increased prices for consumers and boosts Apple’s profits.
Originating from its era as a minor contender in the personal computer industry, Apple’s fundamental business strategy has consistently revolved around levying a premium on technology products, where the company maintains extensive control over the functionalities and usage of the device. The Justice Department aims to disrupt this business strategy by compelling Apple, with a market capitalization of $2.7 trillion (approximately Rs. 2,24,98,600 crore), to provide users with greater flexibility regarding how applications can interact with the hardware designed by Apple.
On Thursday, shares of the iPhone manufacturer dropped by 4.1 percent, closing at $171.37 (approximately Rs. 14,300).
“This legal action jeopardizes our identity and the values that distinguish Apple products in highly competitive markets. If it prevails, it could impede our capacity to innovate the type of technology consumers anticipate from Apple — one that seamlessly integrates hardware, software, and services.”
White House assistant press secretary Michael Kikukawa stated: “President Biden firmly backs the fair and vigorous enforcement of antitrust regulations.”
The Justice Department, along with the District of Columbia, has filed a lawsuit against Apple, aiming to bring about changes within the company. An official hinted at the potential for some sort of restructuring or downsizing of Apple, stating that “structural relief is also a form of equitable relief.”
The 88-page lawsuit, submitted in US federal court in Newark, New Jersey, targets the goal of “liberating smartphone markets from Apple’s anticompetitive and exclusionary practices and reinstating competition to lower smartphone prices for consumers, decrease developer fees, and safeguard innovation for the future.”
The lawsuit filed by the US alleges that Apple has impeded consumer efforts to thwart competitors, citing five instances where Apple employed tactics to stifle technologies that could have fostered competition among smartphones: super apps, cloud streaming game apps, messaging apps, smartwatches, and digital wallets.
For instance, the US contends that Apple deliberately hindered the seamless functioning of rival messaging apps and smartwatches on its devices. Additionally, it claims that Apple’s app store regulations concerning game streaming services have had an adverse impact on competition.
The Justice Department aims to delineate the market as the smartphone sector within the United States, where Apple is estimated to hold slightly over fifty percent market share by most analysts. However, Apple’s representatives intend to argue before the court to define the market as the global smartphone industry, where the iPhone commands only twenty percent of consumers.
The Justice Department referenced an email exchange attributed to Steve Jobs, the late co-founder of Apple, in which he expressed frustration at how easily consumers could switch from iPhones to Android phones and pledged to compel developers to utilize its payment systems to retain both developers and consumers.
The exact alterations sought by the Justice Department remain unclear. The complaint requests that the court prohibit Apple from leveraging its dominance in app distribution, contractual agreements, and utilization of proprietary software interfaces to impede competitors. Additionally, it seeks any other necessary measures “to restore competitive conditions in the markets impacted by Apple’s illicit behavior.”
Apple has faced antitrust investigations and directives in Europe, Japan, and Korea, along with legal actions from competitors like Epic Games.
According to sources familiar with the situation, Reuters reported on Thursday that Apple, Meta Platforms, and Alphabet’s Google are under scrutiny for potential breaches of the European Union’s Digital Markets Act. This could result in substantial fines by the end of the year.
In Europe, Apple’s App Store business model has been disrupted by the Digital Markets Act, which came into force earlier this month. Apple intends to permit developers to establish their own app stores without paying commissions. However, rivals such as Spotify and Epic argue that Apple still imposes excessive barriers to offering alternative app stores.
