The Justice Department and the attorneys general of 15 states and the District of Columbia jointly filed a lawsuit against Apple Inc. on Thursday, alleging that the company violated antitrust laws by using its dominant iPhone platform to freeze out competitors.
“Apple has maintained a monopoly in the smartphone market not only by staying ahead of the competition on merit, but also by violating federal antitrust law,” Attorney General Merrick B. Garland said at a news conference. “Apple has employed a strategy that relies on exclusively anti-competitive behavior that harms both consumers and developers.”
Apple’s smartphone market share in the United States exceeds 65 percent, the company charges as much as $1,600 for an iPhone, and the company’s annual net income exceeds “the individual gross domestic product of more than 100 countries,” he noted.
The lawsuit is the latest step by the Biden administration in its fight against Big Tech. The Federal Trade Commission has pending antitrust lawsuits against Amazon and Facebook, while the Justice Department has sued Google on antitrust grounds related to its search engine dominance.
Garland detailed how Apple imposes restrictions on developers to prevent them from creating certain features, while “selectively restricting access to connection points between third-party apps and the iPhone operating system, degrading the functionality of non-Apple apps and accessories.”
Meanwhile, Apple collected a “tax” in the form of a 30 percent commission on the price of any app downloaded from Apple’s app store, as well as on in-app purchases, he said.
Garland said the lawsuit is not intended to prevent Apple from vetting apps featured in its app store, but to ensure that Apple does not engage in “exclusionary” actions that affect competitors.
“Instead of responding to competitive threats by offering lower smartphone prices to consumers or better monetization for developers, Apple would counter the competitive threats by imposing a series of rules and restrictions in its App Store guidelines and developer contracts that would allow Apple to extract higher fees, stifle innovation , offer a less secure or degraded user experience and stifle competitive alternatives,” according to the lawsuit filed in the U.S. District Court for the District of New Jersey.
Apple said it would vigorously defend itself against the lawsuit.
“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” the company said in a statement. “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 the government to take a heavy hand in designing human technology.”
Deputy Attorney General Lisa Monaco said at a press conference that “Apple has gone from revolutionizing the smartphone market to halting progress” with its app store rules.
Acting Assistant Attorney General Benjamin Mizer compared Apple’s behavior to Microsoft’s tactics that led to the 2001 lawsuit, in which the US accused Microsoft of using its Windows Explorer web browser to exclude competition.
Although the US District Court for the District of Columbia ruled that Microsoft’s actions constituted an illegal monopoly, the decision was partially overturned on appeal. The two sides later reached a settlement and Microsoft agreed to change some of its practices.
Apple itself was the beneficiary of that lawsuit, Assistant Attorney General Jonathan Kanter said at a news conference, saying it paved the way for the launch of “iTunes, iPod and eventually iPhone, without anti-competitive restrictions, excessive fees and retaliation.”
In addition to the District of Columbia, the states joining the lawsuit are Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont and Wisconsin.