Why the US Department of Justice Is Suing Apple
On Thursday, the US Department of Justice, in addition to more than twelve states, filed an antitrust lawsuit against Apple . This is no ordinary corporate dispute either: The lawsuit claims Apple’s policies are “anti-competitive and exclusive” and accuses Apple of having a smartphone monopoly.
The Justice Department’s lawsuit against Apple points to the company’s intentions to lock users into its ecosystem by offering experiences only available on the company’s devices. The lawsuit alleges that Apple does this by controlling developers and partners who want to work on the platform: if you want to create an iPhone app, you have to sell it through the App Store, and for each sale Apple gets a 30% discount. . The same goes for features like tap-to-pay: if you want users to pay with their iPhones, Apple needs to see some of that money too.
The lawsuit focuses on five key allegations that Apple stifles competition, resulting in a worse market for consumers:
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Apple suppresses “super apps”—apps that perform multiple functions and can be used on multiple devices—on its platforms.
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Apple is suppressing streaming gaming apps in the cloud, making hardware less important when choosing intensive games. Users may not feel obligated to buy a better iPhone for their games if a cheaper and underpowered device can provide the same streaming from the cloud.
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Apple is suppressing the usefulness of third-party messaging apps by preventing carrier messages from passing through them. Green text bubbles wouldn’t be a problem on the iPhone if it weren’t for Apple.
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Apple doesn’t allow consumers to buy the smartwatch of their choice by limiting the compatibility of third-party smartwatches with iPhone. For example, you can’t reply to messages on a smartwatch other than the Apple Watch on your iPhone.
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Apple is cracking down on digital wallets on its platforms. The lawsuit argues that Apple should allow digital wallets to work across devices and allow financial institutions to offer “enhanced digital payment services” to customers.
The Justice Department joins New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin and the District of Columbia in arguing that Apple’s policies stifle innovation. from third parties, as well as from Apple itself, since customers are tied to the platform in any case. Why worry about innovation if you know your user base isn’t going anywhere?
Apple, for its part, is unhappy with this lawsuit. The company statement says:
At Apple, we innovate every day to make people love technology by designing products that work together seamlessly, protect people’s privacy and security, and create magical experiences for our users,” the company said in a statement. “This lawsuit threatens who we are and the principles that distinguish Apple products in fiercely competitive markets. If successful, it will hinder our ability to create the technology people expect from Apple, where hardware, software and services intersect. It would also set a dangerous precedent by giving the government the ability to tightly control the development of technology for people. We believe this lawsuit is meritless as a matter of fact and law, and we will vigorously defend against it.
This is, of course, not the first legal situation the company has found itself in regarding its monopoly potential. In perhaps the most famous case, Epic Games took on Apple against the 30 percent “Apple tax” but ultimately lost. In fact, the courts decided that Apple does not have a monopoly over its App Store. However, these arguments have been well received in Europe , with the European Commission ruling that Apple must, among other things, allow third parties to create their own app stores on iOS, allow third parties to create original web browsers for iOS, and allow third parties to create digital wallets. ( The Commission did not rule that iMessage is a “core platform service,” so the platform will remain closed for now.)
This will be an interesting case to watch. It’s true that Apple works hard to lock its users into its ecosystem, and part of that effort comes through tight controls over how users and developers interact with the platforms. But it’s unclear how much of this operating standard might be considered illegal or truly monopolistic. I’ll leave us with a quote from the lawsuit:
Smartphones have so revolutionized American life that it’s hard to imagine a world other than the one Apple, a self-interested monopolist, thinks is good enough. But in our antitrust system, “good enough” is simply not good enough.