WASHINGTON (AP) – The Justice Department announced Thursday a wide-ranging antitrust lawsuit against Apple, accusing the company of orchestrating an illegal smartphone monopoly that excluded competitors and stifled innovation.
The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopolistic power in the smartphone market and uses its control over the iPhone to engage in “pervasive and persistent illegal conduct.” ing.
Specifically, it will prevent Apple from infringing on technology that competes with its apps in areas such as streaming, messaging, and digital payments, and will require “monopoly and Expand or establish.”
The lawsuit, which was also filed by 16 state attorneys general, is the latest example of the Justice Department's approach to aggressively enforcing federal antitrust laws and, officials say, The aim is to ensure a fair and competitive market despite the loss of anti-competition laws. Case.
“The Department of Justice has an enduring legacy of taking on the largest and toughest monopolies in history,” Assistant Attorney General Jonathan Cantor, head of the antitrust division, said at a press conference announcing the lawsuit. “Today, we stand here again to foster competition and innovation in next-generation technologies.”
Apple said the lawsuit is “false on the facts and the law” and will “vigorously defend itself.”
President Joe Biden called on the Justice Department and the Federal Trade Commission to vigorously enforce antitrust laws. The tightened crackdown on mergers and business deals has met resistance from some business leaders who say the Democratic administration has gone too far, but others hail it as long overdue.
The incident alleges that Apple Inc., based in Cupertino, Calif., has made so-called “customers pay close attention to their products by simply turning on their devices”, mainly on popular products such as the iPhone, iPad, Mac, and Apple Watch. Hardware and software designed to work seamlessly together allow you to thrive.
This strategy has made Apple the world's most prosperous company, with annual sales of nearly $400 billion and a market value that until recently exceeded $3 trillion. But even as much of the stock market hit new highs, Apple's stock price has fallen 7% this year, resulting in long-time rival Microsoft, which a quarter-century ago had to face the Justice Department's massive antitrust ban. (which was the target of a legal lawsuit) ended up taking that position. As the world's most valuable company.
Apple said that if the lawsuit were successful, it would “impede our ability to develop the kind of technology people expect from Apple at the intersection of hardware, software, and services” and “set a dangerous precedent and create a government-designed “It will give strong authority to the.” People's technology. ”
“At Apple, we innovate every day to make technology people love, and design products that work together seamlessly, protect people's privacy and security, and create magical experiences for users. ” the company said in a statement. “This lawsuit threatens who we are and the principles that make Apple products stand out in a fiercely competitive market.
Apple defended the walled garden as an essential feature that will be appreciated by consumers who want maximum protection for their personal information. The company describes the barrier as a way to differentiate the iPhone from devices that run on Google's Android software. Android software is less restrictive and licensed to a wide range of manufacturers.
“Apple claims to be a champion of user data protection, but its app store pricing and partnership with Google Search erode privacy,” said Sumit Sharma, senior researcher at Consumer Reports. said in a statement.
The lawsuit alleges that Apple charges as much as $1,599 for each iPhone and has high profit margins per unit that are more than twice that of other companies in the industry. And when users perform Internet searches, Google gives Apple a “significant cut” of the advertising revenue generated by those searches.
The company's app store also charges developers up to 30 percent of the consumer app price.
Critics of Apple's anticompetitive behavior have long complained that Apple's claims to prioritize user privacy when profits are at stake are hypocritical. The company's iMessage service is protected from prying eyes with end-to-end encryption, but that protection evaporates the moment someone sends a text message to a non-Apple device.
Prominent commentator Cory Doctorow says that while Apple prevents Facebook from spying on its users, Facebook has “its own surveillance advertising empire” that collects the same kind of personal data for its own use. He complained that he was running a
In addition to concerns about antitrust crackdowns on Apple's business model, concerns that the company is lagging behind Microsoft and Google in developing products that utilize artificial intelligence technology are also contributing factors to the stock price decline. It becomes.
But antitrust regulators say in the complaint that Apple's walled garden is a weapon used to avoid competition, creating a market environment that allows it to charge higher prices and stifling innovation. However, he made it clear that he believes that the company is promoting high profit margins.
“Consumers should not have to pay higher prices just because a company violates antitrust laws,” Attorney General Merrick Garland said in a statement. “We argue that Apple's monopoly power in the smartphone market is not just an advantage over the competition, it violates federal antitrust laws. If left unchecked, Apple will continue to further strengthen its smartphone monopoly.”
In an attempt to rein in Apple's dominance, the Biden administration has escalated its antitrust siege, already suing Google and Amazon for engaging in illegal anticompetitive tactics, as well as Microsoft Attempts by Facebook's parent company to block the acquisition have also failed. meta platform.
Apple's business interests are also intertwined with the Justice Department's lawsuit against Google, which went to trial last fall and is headed to closing arguments scheduled to begin in Washington, D.C., on May 1. In this case, regulators claim that Google stifled competition by paying for the acquisition. Already, the dominant online search engine has won the rights to be the place to automatically process queries on iPhones and various web browsers, a deal expected to bring him between $15 billion and $20 billion a year in revenue. It is.
Now, with the Justice Department launching a direct attack on its entire business, Apple could lose even more.
The Justice Department is pursuing other recent attempts to force Apple to change the way it operates iPhone and other businesses.
Epic Games, the maker of the popular video game Fortnite, filed an antitrust lawsuit against Apple in 2020 in an effort to break down barriers protecting the iPhone App Store and the lucrative payment system it operates within. woke up. Apple has long charged fees of 15% to 30% on digital transactions completed within its apps, which Epic argued was made possible by an illegal monopoly that drove up prices for consumers.
After a month-long trial in 2021, a federal judge ruled mostly in Apple's favor, except that it should allow links to competing payment options within iPhone apps. Apple unsuccessfully resisted that part of the ruling until the U.S. Supreme Court refused to hear the appeal in January, forcing the company to relent. However, the concessions Apple made to comply with the ruling still face a “bad faith” challenge from Epic. Epic is seeking an April 30 hearing from U.S. District Judge Yvonne Gonzalez Rogers to order further changes.
Earlier this month, Apple also had to open up iPhones to download and install apps from competing stores in Europe to comply with new regulations called the Digital Markets Act (DMA), an approach that has drawn criticism from critics. It has been criticized by It's just the end of the rules that allow real competition to continue to intensify. European Union regulators have already vowed to crack down on Apple if they determine that its tactics continue to prevent consumers from making real choices.
All of this comes on top of the $2 billion ($18 billion) that European regulators imposed on Apple earlier this month, concluding that the company had stifled competition in music streaming through the iPhone, even though Spotify is the market leader. This was in addition to a fine of 1 billion euros.
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Liedtke reported from San Francisco.
