The US Department of Justice, along with the Attorneys General of 15 states and the District of Columbia, filed a lawsuit against Apple for violating Section 2 of the Sherman Antitrust Act, the federal law that limits the power of a company with a monopoly. .
According to the lawsuit, Apple has made it difficult for developers to expand the iPhone's capabilities, made it difficult for the iPhone to be released, and, as a result, generally made the entire smartphone market worse, among numerous accusations.
In a video briefing, US Attorney General Merrick Garland explained that Apple has a 65% share of the US smartphone market. Garland claims that “Apple has maintained monopoly power in the smartphone market not simply by getting ahead of the competition on the merits, but also by violating federal antitrust law.”
In response, Apple points out that it only has a 20% global share of the smartphone market and that it competes globally, not just in the United States.
Apple withheld critical access to developers
The lawsuit is divided into three main complaints. The first is that Apple is “selectively imposing contractual restrictions on developers and withholding critical access points.” That is, while other smartphones allow developers to access hardware features like tap to pay, Apple locks this hardware into its own Apple Pay platform. On other phones, you can tap to pay with Venmo or PayPal instead of Google Wallet. On the iPhone, every transaction is made through Apple Pay, and Apple takes a big cut.
Additionally, limiting access to phone hardware means accessories like smartwatches are not interoperable. You can't use the latest Galaxy Watch with the latest Apple iPhone. You also can't use an Apple Watch with anything other than an iPhone, and that means Apple Watch buyers are unfairly locked into buying one iPhone after another, according to the US government.
Apple makes it more difficult to leave Apple products
The second complaint is that Apple “undermines apps, products and services that would otherwise make users less dependent on the iPhone, promote interoperability, and reduce costs for consumers and developers.” Of course, this is the argument of iMessage and the green bubble, taken much further.
Apple has not only locked users out of its own messaging platform, it has actively worked to make competing messaging platforms worse. If you send a video from an iPhone to an Android, the Android user will see a grainy and pixelated video, as Garland explained. That leaves iPhone owners with the impression that Android phones are sub-par, when in reality it's Apple that's lowering quality, not the Android device.
In the opinion of Garland, and the 16 other attorneys general who filed the lawsuit along with the US Department of Justice, Apple should retain customers by improving its own products, not by making its competitors' products worse. Apple should keep buyers on its platform by making the best phone, not by making it impossible or cost-prohibitive to abandon Apple products.
Garland also cites Apple's blocking of so-called “Super Apps,” which are single apps that run multiple apps. Think Xbox Cloud Gaming, where you launch the Xbox app and then have access to all your Xbox gaming apps within the Xbox environment. That app has been blocked from Apple's App Store, although Apple claims it allows you to run super apps on the iPhone.
Apple uses its power to charge more money
The third complaint detailed in the lawsuit says that Apple “exercises monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses and merchants, among others.” The government did not offer specific examples for this argument, but presumably Apple's App Store policies, along with its blocking of Apple Pay, will come under intense scrutiny over the course of the lawsuit.
Apple appears to have dug its own grave with this antitrust lawsuit, and many of the examples offered by Garland and the other Attorneys General come straight from the horse's mouth. Garland specifically cited a notorious incident in which Vox Media's LiQuan Hunt was complaining to CEO Tim Cook that he couldn't text his mom, and Cook rather coldly suggested to Hunt that Hunt should “buy him an iPhone to your mother”, in a moment reminiscent of Marie Antoinette.
Jonathan Kanter, the Justice Department's antitrust chief, used an example from 2010 in which an Apple executive sent an email to Steve Jobs about a Kindle ad that showed the Kindle running on both iPhone and Android. The executive was concerned that the “message that cannot be overlooked is that it is easy to switch from iPhone to Android. “It’s not fun to watch.”
From this, Kanter says it's clear that Apple's goal was to make it difficult to switch when it should have been Apple's goal to make consumers want to stay. In a 2013 email, another Apple executive said that supporting iMessage on Android “would simply eliminate [an] obstacle for families with iPhones to give their children Android phones,” according to Garland. It seems that change will be a constant theme in the lawsuit.
Apple says case is wrong on facts and law
We believe this lawsuit is factually and legally flawed, and we will vigorously defend against it.
Apple
We spoke to Apple about the situation and, simply put, Apple is not accepting it. He called the Justice Department's case baseless and plans to seek immediate dismissal.
“At Apple, we innovate every day to make people love technology: we design products that work together seamlessly, protect people's privacy and security, and create a magical experience for our users. This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple, where hardware, software and services intersect. It would also set a dangerous precedent, empowering the government to take a heavy hand in the design of people's technology. “We believe this lawsuit is factually and legally flawed, and we will vigorously defend against it.”
Apple maintains that its smartphone business is a global business and also highly competitive. While Apple might have a 70% market share in the United States, it represents about 20% of the global market.
This may be key to Apple's argument, as it believes the Justice Department is trying to fit the company into a mold of Microsoft circa 1990s. Back then, the Justice Department successfully sued Microsoft for owning 95% of the desktop market and essentially defining who won the browser war.
Apple characterizes its business as, if not open, then certainly not prescriptive. The company insists it allows “super apps” in the App Store and has allowed streaming services to make changes; and how we have reported here, now offers limited RCS support; It is not integrated into iMessage but will live alongside it.
Apple wanted to point out all the benefits that the market and developers enjoy thanks to its approach. It claims a massive 374% growth in payments to app developers between 2014 and 2023. Apple also says that iOS apps generate 85% more revenue than Android apps.
Also central to Apple's argument is that it feels government officials should not define technological features or act as proxy engineers, and believes this point was raised in the recent Epic versus Apple case. In that case, the judge wrote: “Apple's evidence strongly suggests that the low switching between operating systems is due to general satisfaction with existing devices, rather to any 'lock-in.'”
Apple's approach is based on providing the best iPhone customer experience and strict adherence to privacy and security principles. Unfortunately, it's those principles that the Justice Department calls into question, as Apple's policies on iMessage interoperability make messages less secure when sent between Apple and Android phones.
This case could lead to the homogenization of Apple's iPhone, making it more like the best Android phones and, Apple claims, possibly less secure and private. Finally, Apple insists that iPhone customers stay with Apple not because of the high cost of switching but because they love the company and the product.
Apple maintains that there is not even a “high switching cost.”
