Apple Inc (NASDAQ:AAPL, ETR:APC) is being sued by the US Justice Department and more than a dozen states in an antitrust lawsuit that alleges the Tech giant is illegally monopolising the smartphone market.
“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.”
Apple is not the first to feel the Department of Justice’s (DOJ) wrath – Google (NASDAQ:GOOGL) has copped two antitrust lawsuits, and Meta and Amazon (NASDAQ:AMZN) have also been slapped with them within the last five years.
It’s also not Apple’s first rodeo – the European Union has brought multiple antitrust cases against the company for allegedly violating its competition laws, and recently fined Apple $2 billion for abusing its music streaming app dominance.
Apple stock falls 4%
The market wasn’t particularly pleased with the filing, cutting 4.09% out from under Apple’s stock price in the single day of trading since the announcement.
AAPL has only recovered 0.19% in after market trading, with no guarantee that trajectory will continue once the US markets open.
Apple spokesperson Fred Sainz responded to the DOJ’s allegations.
“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” the statement read.
“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.”
What exactly is Apple accused of doing?
The complaint alleges Apple holds a monopoly over the smartphone and performance smartphone markets, and uses that control to engage in a broad, sustained, and illegal course of conduct to maintain its monopoly and extract as much revenue as possible.
Apple's methods allegedly include:
- Blocking Innovative Super Apps. Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.
- Suppressing Mobile Cloud Streaming Services. Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.
- Excluding Cross-Platform Messaging Apps. Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so that its customers have to keep buying iPhones.
- Diminishing the Functionality of Non-Apple Smartwatches. Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.
- Limiting Third Party Digital Wallets. Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.
“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,” Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division said.
“Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.”