The Knockout Punch - U.S. Justice Department Takes On Apple in Civil Antitrust Lawsuit

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Lawsuit

The inevitable has happened. Apple has finally come under serious scrutiny from the United States Department of Justice (DOJ) after the latter has sued the company for illegal monopoly over the smartphone market.

The lawsuit is filed by the Justice Department alongside 16 other state and district attorney generals. The lawsuit alleges Apple has violated Section 2 of the Sherman Act by monopolizing or attempting to monopolize the smartphone market.

The complaint, filed in the U.S. District Court for the District of New Jersey, accuses Apple of maintaining a monopoly over smartphones through contractual restrictions on developers and withholding critical access points. Apple's actions hinder the development of apps, products, and services that could reduce reliance on iPhone, promote interoperability, and lower costs. The company leverages its monopoly power to extract more money from consumers, developers, and various other entities. The Justice Department and state Attorneys General aim to restore competition in these markets through the lawsuit.

Attorney General Merrick B. Garland said:

Consumers should not have to pay higher prices because companies violate the antitrust laws. 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.

He affirmed DOJ's commitment to fight against illegal monopolies and said:

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

Acting Associate Attorney General Benjamin C. Mizer also elaborated on DOJ's mission, stating:

Today’s action against Apple sends a strong signal to those seeking to box out competitors and stifle innovation — that the Justice Department is committed to using every tool available to advance economic justice and root out anticompetitive practices, wherever they arise.

 

Summary of Complaints

The complaint alleges that Apple is:

  • Hindering Innovative Super Apps: Apple disrupts the advancement of apps with extensive features, impeding consumers from easily transitioning between rival smartphone platforms.
  • Suppressing Mobile Cloud Streaming Services: Apple obstructs the progress of cloud-streaming applications, denying consumers access to high-quality gaming and other cloud-based services without the need for costly smartphone hardware.
  • Excluding Cross-Platform Messaging Apps: Apple deteriorates the quality, innovation, and security of cross-platform messaging apps, compelling its users to continue purchasing iPhones.
  • Reducing the Functionality of Non-Apple Smartwatches: Apple restricts the capabilities of third-party smartwatches, imposing significant expenses on users who opt not to purchase iPhones and instead choose the Apple Watch.
  • Limiting Third-Party Digital Wallets: Apple prohibits third-party apps from offering tap-to-pay functionality, hindering the development of cross-platform digital wallets by third-party providers.

 

Observations

The lawsuit has been brewing for a long time, and Apple has been fortunate to avoid it until now. The iMessage itself could have been a nail in Apple's coffin here, as it gives the false impression that Apple's iPhone somehow has better messaging capabilities that competitors lack.

More to follow ...

 


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