Apple is being accused by the Justice Department of creating an illegal monopoly in the smartphone market that keeps prices artificially high, locks out competitors, and stifles innovation. The department filed the broad antitrust complaint against Apple on Thursday.
Apple is accused of having monopoly power in the smartphone industry and using its hold on the iPhone to “engage in a broad, sustained, and illegal course of conduct,” according to the lawsuit, which was submitted to a federal court in New Jersey.
Deputy Attorney General Lisa Monaco claimed that Apple had “locked its consumers into the iPhone while locking its competitors out of the market.” It has, she claimed, “smothered an entire industry,” halting the growth of the very market it disrupted.
Apple stated that it “will vigorously defend against” the action, calling it “wrong on the facts and the law.”
The lawsuit targets Apple for allegedly manipulating its business practices and technological advancements to “extort more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”
Laptops 1000This includes reducing the functionality of smartwatches that aren’t made by Apple, restricting third-party digital wallets’ ability to use contactless payment, and prohibiting the exchange of encrypted messages between its iMessage program and other platforms.
In particular, it aims to stop Apple from sabotaging apps that rival its own, such as those for messaging, streaming, and digital payments, and from continuing to negotiate deals with accessory manufacturers, developers, and customers that allow it to “obtain, maintain, extend, or entrench a monopoly.”
With the declared goal of making the digital world more equitable, inventive, and competitive, the administration has also taken on Google, Amazon, and other internet titans. This case, which has been brought alongside 16 state attorneys general, is just the most recent example of its aggressive antitrust enforcement.
At a news conference to announce the complaint, Assistant Attorney General Jonathan Kanter, the chief of the antitrust division, said, “The Department of Justice has an enduring legacy taking on the biggest and toughest monopolies in history.” “We are here today to encourage innovation and competition for the next generation of technology.”
Yale University fellow and antitrust researcher Dina Srinivasan likened the lawsuit’s significance to the government’s case against Microsoft 25 years ago, saying that it was a “tremendous fight” against the most successful firm in the world at the time.
Going up and punching someone who is acting like a bully while acting like you’re not one is a huge issue, she added.
The Federal Trade Commission and the Justice Department have been urged by President Joe Biden to zealously enforce antitrust laws.
While some business leaders have criticized the Democratic government for going too far in monitoring corporate mergers and dubious business practices, others have applauded the administration for long overdue action.
To establish what is commonly referred to as a “walled garden” around the iPhone and other well-known products like the iPad, Mac, and Apple Watch, the lawsuit aims to breach the digital fortress that Cupertino, California-based Apple Inc. has painstakingly built.
This will allow its hardware and software to harmoniously provide a user-friendly experience.
Laptops 1000Thanks to this technique, Apple has been able to generate around $400 billion in revenue annually and, as of late, has a market worth above $3 trillion.
However, even though the majority of the stock market has reached record highs this year, Apple’s shares have dropped by 7%, allowing longtime competitor Microsoft to take the top spot as the most valuable business in the world.
Apple claimed that if the lawsuit was successful, it would “set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology” and “hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect.”
“We innovate every day to make technology people love at Apple — designing products that work together seamlessly, safeguard people’s security and privacy, and give our users a magical experience,” the company said in a statement.
“Our identity and the values that distinguish Apple goods in highly competitive markets are at risk due to this litigation.
Apple has defended the walled garden, claiming that users who value the highest level of protection for their personal data value it as an essential feature.
The barrier has been explained as a means by which the iPhone sets itself apart from gadgets that run Google’s Android operating system, which is licensed to other manufacturers and is less restricted.
Consumer Reports senior researcher Sumit Sharma stated in a statement, “Apple claims to be a champion of protecting user data, but its app store fee structure and partnership with Google search erode privacy.”
The lawsuit alleges that Apple charges up to $1,599 for an iPhone and that the large profit margins it receives on each device are more than twice as high as those of competitors in the market.
Additionally, Google provides Apple with a “significant cut” of the advertising money that results from user queries on the internet.
Additionally, developers can be charged up to 30% of the app’s retail price through the company’s app store.
For a considerable time, those who are against Apple’s purported anticompetitive actions have expressed their disapproval of the company’s apparent hypocrisy in putting profits before user privacy.
Laptops 1000While end-to-end encryption shields its iMessage services from prying eyes, that security is nullified the instant someone texts from a non-Apple device. Mobile security specialist Will Strafach, meanwhile, expressed concern that the Justice Department’s emphasis on message may be misguided and might compromise security and privacy, even though he thinks Apple has to be reined in.
“I am very happy that there are restrictions on SMS message access,” said Strafach, the person who developed the Guardian Firewall program.
He points out that some iPhone apps—purportedly for news and weather—have been surreptitiously and repeatedly sending users’ GPS data to unidentified parties.
Since stalkerware and spouseware are currently more difficult to install on Apple devices than on Android devices, Strafach expressed concern that weakening Apple security “could open the door to them.”
Prominent critic Cory Doctorow, however, has taken issue with Apple’s actions, claiming that despite Facebook and other companies being prohibited from monitoring its customers, Apple still maintains its “own surveillance advertising empire,” which collects similar personal data for its purposes.
Sean O’Brien, the founder of Yale’s Privacy Lab, pointed out that “Apple has a history of clandestine deals with surveillance giants like Google, and (CEO) Tim Cook gave Uber a slap on the wrist instead of an app store ban when (the ride-sharing company) built a backdoor to spy on iPhone users who had already deleted Uber’s app.”
Not only has Apple’s stock price dropped due to concerns about an antitrust investigation of its business model, but there are also worries that the corporation is falling behind Google and Microsoft in developing artificial intelligence-powered goods.
The antitrust inspectors’ complaint made it apparent that they primarily view Apple’s walled garden as a tool to stifle competition, allowing the company to charge higher prices that have driven up its enormous profit margins at the expense of innovation.
Attorney General Merrick Garland stated, “Consumers should not have to pay higher prices because companies break the law.” Apple would “only continue to strengthen its smartphone monopoly” if it were not challenged, he continued.
Former Federal Trade Commission chairman and George Washington University professor William Kovacic stated he anticipates Apple’s defense will center on the company’s claim that it is not a monopoly in the smartphone industry.
Using “impressive excerpts from the firm’s documents,” Justice Department attorneys constructed an 88-page indictment that presents a “high-quality” case of injury, he added.
However, a ruling won’t be rendered until 2026, so appeals might prolong the case.
This action intensified the Biden administration’s antitrust siege, which resulted in litigation against Amazon and Google for allegedly utilizing illegal strategies to stifle competition and ineffective attempts to stop Microsoft and Meta Platforms from making additional acquisitions.
Furthermore, Facebook was sued by the FTC in 2020 for acquiring WhatsApp and Instagram.
Antitrust action involving Microsoft and its partnership with OpenAI, according to Kovacic, is “coming up around the corner” and “the two agencies are fighting over who will handle that better.”
Laptops 1000“They’re filling out the agenda the way they said, and they hinted this would be their agenda,” he continued. “You should anticipate a fierce and combative defense because these are all high-stakes cases.”
The Justice Department’s lawsuit against Google, which went to trial last November and is set for final arguments on May 1 in Washington, D.C., is likewise entwined with Apple’s corporate interests.
Then, authorities claim that Google has stifled competition by paying $15 billion to $20 billion a year for the right to have its already-dominant online search engine appear as the first place to look up queries on the iPhone and other web browsers.
Apple threatens to lose much more as a result of the Justice Department’s direct assault on its business.
