US brings the hammer down on Apple in huge antitrust suit

The civil antitrust lawsuit was filed by the Justice Department and 16 other state and district attorneys general against Apple for ‘monopolization or attempted monopolization of smartphone markets.’

The crux of the claim is that Apple has stifled competition and innovation in the smartphone market in various heavy-handed ways which it considers illegal, such as selectively imposing contractual restrictions on developers and withholding critical access points from them on the iPhone. This sort of thing ultimately hurts the consumer wallet, so goes the claim, which is the end-point reason most state interventionalist action like this is justified.

It claims Apple undermines third party apps, products, and services that would otherwise make users less reliant on the iPhone itself, and ‘exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.’

“Apple has monopoly power in the smartphone and performance smartphones markets, and it uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct,” states the release by the Department of Justice. “This anticompetitive behaviour is designed to maintain Apple’s monopoly power while extracting as much revenue as possible.”

More specifically, the lawsuit identifies five areas in which it alleges Apple has done this:

The complaint also alleges that Apple’s misdeeds extend beyond these five main areas, pointing more broadly to web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, and location services.

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” said Attorney General Merrick B. Garland. “We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly. The Justice Department will vigorously enforce antitrust laws that protect consumers from higher prices and fewer choices. That is the Justice Department’s legal obligation and what the American people expect and deserve.”

Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division added: “For years, Apple responded to competitive threats by imposing a series of “Whac-A-Mole” contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies. Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.”

Apple as you might expect isn’t taking these charges lying down – in a statement it shared with Telecoms.com it said the lawsuit ‘threatens who we are’:

“At Apple, we innovate every day to make technology people love—designing products that work seamlessly together, 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 government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”

Through this lawsuit, the Justice Department and state Attorneys General are ‘seeking relief to restore competition to these vital markets on behalf of the American public.’ And it follows a raft of legal strife for US big tech firms such as Google, Facebook and Amazon, both in Europe and in the States.  

In Europe, Apple is currently embroiled in a case brought against it by the EU about its app store. The thrust of the complaint, articulated most fervently by Epic and Spotify, is that in order to make their apps available to the Android and IoS ecosystem, which basically covers all the phones in the West, they have to go through the App Store and Play Store. The problem with this is that they both demand a 30% commission on every commercial interaction that takes place via the app, in perpetuity.

Whatever one might think about Apple’s business practices, there are a couple of questions that present themselves straight off the bat from this latest DoJ lawsuit.

There would seem to be a distinction to be made between what’s bad for the consumer and what’s bad for other, sometimes rival, firms – however sympathetic one might be to the latter. Apple is no doubt a superpower in the world of smartphones and tech in general. But the assertion that impeding other firms trading as they’d like on Apple’s platform, for example, has necessarily led to it becoming as successful as it is (and short-changed the consumer in the process) would be an easier case to make if Apple’s own products were famously of poor quality.

In reality especially its hardware is consistently reviewed extremely well. Apple will surely want to make the case that it’s the quality of its products and services that is the primary driver for its staggering success in consumer electronics over the last couple of decades, not shady business practices.     

The second, and perhaps the larger point, is just like the EU case around app store commissions, it doesn’t seem logical to just go after Apple for the practice of charging, for example, 30% per app purchase when it’s only real rival, Google, is doing the same thing on its Android platform. The very fact that the duopoly have miraculously aligned their app store pricing policies is further fodder for the Epics of the world to cry foul – but surely hammering Apple alone for this is only looking at half of the problem. This will be relevant to some of the other listed complaints by the DoJ as well.

These questions and more will certainly be keeping Apple’s lawyers busy in the next few years - none of these cases will be resolved overnight.