United states files lawsuit against Apple, alleging iPhone monopoly

The legal action follows extensive regulatory scrutiny of Apple's highly successful range of devices and services, propelling its expansion into a nearly $3 trillion publicly traded company.

The legal action comes after years of regulatory scrutiny surrounding Apple's highly popular range of devices and services, contributing to its growth into a nearly $2.75 trillion company and former global leader. Specifically targeting the iPhone, Apple's flagship product and main revenue driver, the lawsuit criticizes the company for monopolizing the smartphone market. Critics argue that Apple's strict control over the user experience favors its own products, limiting access to essential features for competitors. The lawsuit, filed in the U.S. District Court for the District of New Jersey, alleges that Apple's practices have led to increased prices and stifled innovation in the industry.

Apple contends that its practices enhance the security of iPhones compared to other smartphones. However, app developers and competitors accuse Apple of leveraging its influence to stifle competition.

An Apple spokeswoman expressed concern that the lawsuit jeopardizes the core principles that distinguish Apple products in fiercely competitive markets. She warned that a successful lawsuit could impede Apple's ability to innovate and create technology that meets consumer expectations, where hardware, software, and services converge. Additionally, she cautioned against setting a precedent that could grant the government significant control over technological design.

Apple joins a string of companies facing heightened antitrust scrutiny from both the Justice Department and the Federal Trade Commission, aligning with the Biden administration's focus on updating laws for the modern era. Similar suits target Google, Meta, and Amazon, while other firms, including Kroger and JetBlue Airways, encounter increased scrutiny regarding acquisitions and expansion.

The lawsuit seeks to halt Apple's current practices, such as blocking cloud-streaming apps and impeding messaging across smartphone platforms. The Justice Department reserves the right to demand structural changes, potentially including a breakup of Apple's business.

The suit's impact on consumers remains uncertain, with the legal process expected to extend over several years. Apple intends to challenge the case, emphasizing its compliance with competition laws and its commitment to enhancing the iPhone user experience.

Apple has previously successfully defended against antitrust challenges. In a 2020 lawsuit brought by Epic Games regarding its App Store policies, Apple convinced the judge that customers have the option to switch between its iOS and Google's Android operating systems. Data presented by Apple demonstrated that customer loyalty to the iPhone is a significant factor in why few users switch phones.

Apple has previously defended its business practices by highlighting the positive impact of its App Store, which has fostered the growth of millions of new businesses since its inception in 2008. Over the past decade, the number of paid app developers has surged by 374 percent to reach 5.2 million, illustrating a thriving marketplace, according to Apple.

Major tech companies, including Google, Meta (formerly Facebook), and Amazon, have all faced significant federal antitrust challenges. The Justice Department is pursuing cases against Google's search business and its dominance in advertising technology. Additionally, the Federal Trade Commission (FTC) has filed lawsuits against Meta for its acquisitions of Instagram and WhatsApp, and against Amazon for alleged abuses of power in online retail. The FTC also attempted, albeit unsuccessfully, to block Microsoft's acquisition of Activision Blizzard.

These legal actions reflect regulators' efforts to scrutinize tech companies' roles as gatekeepers in commerce and communication. Under the Trump administration, antitrust inquiries were launched into Google, Meta, Amazon, and Apple. The Biden administration has intensified these efforts, appointing critics of tech giants to lead both the FTC and the Department of Justice's antitrust division.

In Europe, Apple has faced penalties for its practices, such as preventing music streaming competitors from communicating promotional offers to users, resulting in a 1.8 billion-euro fine. App developers have also urged the European Commission to investigate claims that Apple violates new laws requiring it to allow third-party app stores on iPhones.

In South Korea and the Netherlands, Apple faces potential fines regarding the fees it imposes on app developers using alternative payment processors. Other countries, including Britain, Australia, and Japan, are contemplating regulations to loosen Apple's control over the app economy.

The Justice Department, initiating its investigation in 2019, has pursued a broader and more ambitious case against Apple compared to other regulators. Instead of solely focusing on the App Store, as European regulators have done, it scrutinized Apple's entire ecosystem of products and services.

The lawsuit filed on Thursday targets several practices the government alleges Apple used to reinforce its dominance. For instance, the government claims Apple undermines iPhone users' ability to message users of other smartphones, such as those running on the Android operating system. This perceived division, symbolized by green bubbles indicating Android messages, suggests inferior quality of non-iPhone smartphones, according to the lawsuit.

Similarly, Apple allegedly complicates the iPhone's compatibility with smartwatches other than its own Apple Watch. The government argues that once an iPhone user adopts an Apple Watch, switching to a different phone becomes significantly more expensive.

The government alleges that Apple maintains its monopoly by restricting other companies from developing their own digital wallets. Apple Wallet is the exclusive app on the iPhone utilizing the NFC chip for tap-to-pay transactions. While Apple encourages banks and credit card companies to integrate their products into Apple Wallet, it denies them access to the chip to create alternative wallets.

Furthermore, Apple purportedly blocks game streaming apps and "super apps" that could diminish the iPhone's value or offer multiple functionalities within a single application.

Legal experts compare these allegations to the claims made against Microsoft decades ago, particularly regarding tying its web browser to the Windows operating system. The most compelling aspect of the case, akin to the Microsoft lawsuit, revolves around whether Apple contractually prohibits rivals from developing apps compatible with other providers, potentially hindering the emergence of "super apps."

However, some experts note that companies are entitled to promote their own products and services. Therefore, the government must articulate why Apple's practices raise antitrust concerns.

"This case delves into the realm of technology," remarked Colin Kass, an antitrust lawyer, questioning whether antitrust laws can compel a company to redesign its products for compatibility with competitors' offerings.

Apple has countered previous antitrust challenges by asserting that its policies are essential for ensuring the privacy and security of its devices. For instance, in the case involving Epic Games, Apple argued that its restrictions on app distribution were necessary to safeguard the iPhone from malware and fraud. According to Apple, this practice benefited consumers and enhanced the appeal of the iPhone compared to devices running on Android's operating system.

However, the government aims to demonstrate that Apple's policies ultimately harm consumers rather than protect them. Jonathan Kanter, assistant attorney general of the Justice Department's antitrust division, asserts that competition fosters increased privacy and security in devices. He contends that, in many cases, Apple's conduct has compromised the privacy and security of its ecosystem.