The United States Department of Justice filed a lawsuit this morning accusing Apple of monopolistic smartphone practices. Sixteen state attorneys general joined the federal division in the massive suit.
“Consumers should not have to pay higher prices because companies are violating antitrust laws,” U.S. Attorney Merrick Garland said in a statement released with the news. “If not challenged, Apple will only continue to strengthen its smartphone monopoly.”
Thursday’s lawsuit cites Apple’s long-standing ecosystem game as evidence of anticompetitive practices, including the blue and green bubble colors used by Messages to distinguish iOS users from Android users.
Specifically, the lawsuit targets the iPhone maker’s share of the premium smartphone sector. He accuses the company of increasing friction for those looking to switch to competitors. This includes things like “contractual restrictions” and the vetting process the company has long had with its App Store.
Regulators list the ban on five categories: “super apps” (which combine a wide range of functionality in one app), cloud gaming apps, messaging apps, digital wallets and cross-platform smartwatch compatibility. The final piece is digging into the company’s longstanding practice of ensuring that certain features only work properly when paired with other Apple devices.
“Instead of responding to competitive threats by offering lower smartphone prices to consumers or better monetization to developers,” the lawsuit states, “Apple would have countered the competitive threats by imposing a series of rules and restrictions on reshaping in its App Store guidelines and developer agreements.” developers that would allow Apple to extract higher fees, stifle innovation, offer a less secure or degraded user experience, and stifle competing alternatives. He has applied this playbook to many technologies, products and services, including cool apps, text messaging, smartwatches and digital wallets, among many others.”
The suit further accuses Apple of “stifling” competition, adding: “Apple is tightening the moat around its smartphone monopoly not by making its products more attractive to consumers, but by discouraging innovation that threatens Apple’s smartphone monopoly.”
The complaint draws parallels with the DOJ’s antitrust lawsuit against Microsoft in the 1990s, which found Apple and then-CEO Steve Jobs on opposing sides. The company is further accused of imposing even stricter structures on Windows developers.
“In 1998, Apple co-founder Steve Jobs criticized Microsoft’s monopoly and ‘dirty tactics’ in operating systems to target Apple, prompting the company to ‘turn to the Justice Department’ in hopes that Microsoft would ‘play fair.'” DOJ notes. “But even back then, Apple didn’t face the same kinds of restrictions it imposes on third parties today; Apple users could use their iPod with a Windows computer, and Microsoft didn’t charge Apple a 30% royalty for every song downloaded from Apple’s iTunes store. Similarly, when Apple brought the iPhone to market in 2007, it benefited from competition among component manufacturers and wireless carriers.”
Aspects of the lawsuit echo Apple’s ongoing legal battle with Epic Games, which concerns the company’s tight control over the App Store. He notes that Apple has long restricted alternative and web-based app stores — something the company argued was a product of security and quality control concerns.
Apple quickly fired back, arguing that — if successful — such a suit would hamper its ability to compete in the crowded smartphone market. In a statement provided to TechCrunch, the company notes,
At Apple, we innovate every day to make technology love – designing products that work seamlessly together, protect people’s privacy and security, and create magical experiences 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 impede 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. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.
Late last year, Apple announced support for the RCS standard, which increases cross-platform massage compatibility with Android devices. The company, however, did not go so far as to promise to remove the green/blue split on the bubble. Thursday’s lawsuit addresses the issue, noting, among other things, that it signals to users that Android devices are inferior to its own.
“For example,” the lawsuit says, “if an iPhone user sends a message to a non-iPhone user in Apple Messages—the default messaging app on the iPhone—then the text appears as a green bubble to the iPhone user and includes limited functionality: the conversation is not encrypted, videos are pixelated and grainy, and users can’t edit messages or see typing indicators. This signals to consumers that competing smartphones are of lower quality because the experience of messaging friends and family who don’t have iPhones is worse—even though Apple, not the competing smartphone, is the cause of that degraded user experience.”
It goes on to cite a series of internal company communications suggesting that removing the green bubbles would hurt Apple’s bottom line. The lawsuit cites a 2013 email from a senior vice president of software engineering saying such a move would “simply serve to remove [an] barrier to iPhone families giving their kids Android phones.”
The lawsuit follows a good deal of international regulatory scrutiny in markets such as the European Union, which has targeted the company over antitrust concerns. The Biden administration, meanwhile, has vowed to take more aggressive action against anti-competitive practices.
Attorneys general from New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin and the District of Columbia participated in Thursday’s filing.
With today’s announcement, the Justice Department is taking a strong stance against Apple’s control over the mobile app ecosystem, which stifles competition and hurts American consumers and developers. The DOJ’s complaint details Apple’s long history of illegal behavior — abusing its App Store guidelines and developer contracts to drive up prices, extract excessive fees, degrade the user experience and stifle competition. The DOJ joins regulators around the world who have recognized the many harms of Apple’s abusive behavior and are working to address it. As this case develops in the coming years, more must be done now stop the anti-competitive practice all mobile application guardians. It remains imperative that Congress pass bipartisan legislation, such as the Open App Markets Act, to create a free and open marketplace for mobile apps.
Read more about Apple’s antitrust lawsuit here:
