US sues Apple, alleging smartphone monopoly

The United States’ Department of Justice (DoJ), alongside 16 individual states and the District of Columbia, has launched an antitrust lawsuit accusing Apple of “broad-based, exclusionary conduct” that makes it harder for users to switch phones, undermines developers’ ability to innovate, and imposes “extraordinary” costs on the mobile ecosystem.

Filed in the US District Court for the District of New Jersey, the civil suit accuses Apple of monopolisation – or attempted monopolisation – of the smartphone market, which is a violation of the US’ 134 year-old Sherman Act.

It alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions and withholding critical access points from developers; undermines apps, products and services that might make users less reliant on the iPhone ecosystem, promote interoperability and lower costs for users; and exercises its power to extract more money from users, developers, content creators, artists, publishers, small businesses and merchants.

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” said US attorney general Merrick 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.”

Speaking at a news conference, Garland argued that Apple had been able to maintain its monopoly position not by improving its own products, but by damaging the products of others.

Some of the actions alleged in the suit include that Apple disrupted the growth of apps with broad functionality that would enable consumers to easily switch to other platforms – generally Android; that it suppressed and blocked the development of cloud-based streaming services that would have let consumers get away with not having to pay for expensive smartphones; that it intentionally degraded the quality of cross-platform messaging services, including making them less secure so that users have to keep buying iPhones; that it limited the functionality of third-party smartwatches to lock those who buy the Apple Watch into the iPhone ecosystem; and that it has limited third-party digital wallets from offering services such as tap-to-pay functionality.

The complaint does not stop there, going on to allege multiple examples of supposed misconduct affecting mobile browsers, video calling, news and entertainment services, advertising, location services, and even automotive services.

The DoJ said Apple had “every incentive” to keep extending this pattern of conduct to acquire and maintain more power over up-and-coming technologies.

Responding publicly to the lawsuit, an Apple spokesperson said: “At Apple, we innovate every day to make technology people love – designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users. This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets.

“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.”

The US action comes just weeks after Apple received a €1.8bn (£1.54bn) fine from the European Commission (EC) on similar grounds. The EC found that Apple had abused its dominant position on the market for the distribution of music streaming services to iOS users, and that it had restricted developers by stopping them from informing their customers about alternative and cheaper services available beyond the confines of Apple’s App Store.

Early reaction

Early reaction to the DoJ’s announcement has come swiftly, with voices ranged on both sides of the argument.

Matt Schruers, president and CEO of the US Computer and Communications Industry Association (CCIA), said: “US antitrust law protects consumers from harmful practices, but this complaint takes aim at design choices that have produced a product beloved by consumers.

“Consumers have ample hardware and software options to choose from and easily move to alternatives if they prefer different features. The DoJ’s complaint, if successful, could prevent Apple from offering consumers the unique products and integrated services they love.”

But Ted Miracco, CEO of mobile security specialist Approov, spoke broadly in support of the action. He said: “Apple’s efforts to bundle security with the App Store marketplace has stifled competition in cyber security for mobile apps. This practice reinforces their [the DoJ’s] claims that only Apple can provide security and perpetuates and reinforces the monopoly.

“An important element of the DOJ action is the balance between Apple’s role in setting security standards and the rights of developers to choose independent, potentially more flexible and cost-effective security and payments solutions.”

Miracco said that developers needed more freedom to select security and payment solutions that adhere to reputable standards, such as those laid out by the OWASP Foundation, without being subject to what he termed “Apple’s heavy taxes”.

“Independent security and payments vendors can offer robust protection against a range of threats, aligning with external standards and allowing developers to bypass platform-imposed fees, like Apple’s controversial core technology fee (CTF).

“The European Commission’s fine and the broader implications of the Digital Markets Act underscore the importance of allowing developers the freedom to implement independent security that can meet or exceed recognised standards,” he added.

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