U.S. attorney general says consumers shouldn’t pay higher prices because companies broke laws
The U.S. Department of Justice sued Apple on Thursday, saying it illegally maintains the iPhone’s monopoly by stifling competition and imposing exorbitant costs on consumers.
The lawsuit, also filed by several U.S. states, accuses the iPhone of making hundreds of billions of dollars by making it difficult for consumers to switch to cheaper smartphones and devices.
Apple joins Amazon, Google and Facebook owner Meta in also facing antitrust lawsuits in the United States.
U.S. Attorney General Merrick Garland on Apple lawsuit
Earlier today, the U.S. Department of Justice, together with 15 states and the District of Columbia, sued Apple in the U.S. District Court for the District of New Jersey for violating Section 2 of the Sherman Antitrust Act.
Over the past two decades, Apple has become one of the most valuable public companies in the world. Today, its net income exceeds the individual gross domestic product of more than 100 countries. This is largely due to the success of Apple’s iconic smartphone product, the iPhone.
For more than a decade, iPhone sales have accounted for the majority of Apple’s annual revenue. Today, Apple’s share of the U.S. high-performance smartphone market exceeds 70%, and its share of the entire U.S. smartphone market exceeds 65%. Apple’s iPhones cost nearly $1,600.
But as our complaint alleges, Apple maintains a monopoly in the smartphone market not only by staying ahead of the competition but also by violating federal antitrust laws.
Consumers should not have to pay higher prices because a company broke the law.
We allege that Apple employs a strategy that relies on exclusionary, anti-competitive behavior that harms both consumers and developers.
For consumers, that means fewer choices; higher prices and fees; lower-quality smartphones, apps, and accessories; and less innovation from Apple and its competitors.
For developers, that means being forced to abide by rules that shield Apple from competition.
As we stated in our complaint, we claim that Apple solidifies its monopoly power not by making its own products better, but by making other products worse.
Apple mainly implements exclusionary and anti-competitive behavior in two ways:
First, Apple imposes contractual restrictions and fees that limit the features and functionality developers can provide to iPhone users.
Second, Apple selectively limits access to the connection points between third-party apps and the iPhone operating system, thereby reducing the functionality of non-Apple apps and accessories.
As a result, for most of the past 15 years, Apple has taxed the price of any app downloaded from the App Store, as well as in-app purchases, in the form of a 30% commission. Apple can charge companies of all sizes these fees.
Apple has also curbed the emergence of cloud streaming apps, including gaming apps, as well as super apps that could reduce users’ reliance on Apple’s own operating system and expensive hardware.
And, as any iPhone user who’s ever seen a green text message or received a tiny grainy video can attest, Apple’s anticompetitive behavior also involves making it harder for iPhone users to message users of non-Apple products.
It does this by reducing the functionality of its own messaging apps as well as those of third-party messaging apps.
Apple is doing this intentionally to reduce quality, privacy, and security for its users.
For example, if an iPhone user sends a message to a non-iPhone user in Apple Messages, the text not only appears as a green bubble but also contains limited functionality:
- Conversations are not encrypted;
- Video is pixelated and grainy; and
- Users cannot edit messages or view input indicators.
As a result, iPhone users view competing smartphones as lower quality because sending messages to friends and family who don’t have an iPhone is a worse experience—even though Apple is the main culprit for undermining cross-platform messaging.
It’s done this on purpose.
For example, in 2013, a senior Apple executive explained that supporting cross-platform messaging in Apple Messages “would just eliminate [an] iPhone families have barriers to providing their children with Android phones. “
In 2022, Apple’s CEO was asked if Apple would fix iPhone to Android messaging issues. The questioner added: “Not to get personal, but I can’t send certain videos to my mom.”
Apple CEO responded: “Buy your mom an iPhone.”
In addition to selectively controlling app distribution and creation, we allege that Apple violated the law by conditionally restricting developer access to the interfaces needed to make apps run on Apple’s operating systems.
For products like smartwatches or digital wallets to be useful to iPhone users, they must be able to communicate with the iPhone operating system. But Apple has put up barriers that make it extremely difficult and expensive for users and developers to venture outside the Apple ecosystem.
When it comes to smartwatches, Apple not only pushes users to buy Apple Watches that are only compatible with iPhones, it also uses its technology and contractual controls to make it harder for people with iPhones to use non-Apple smartwatches.
When it comes to digital wallets, Apple’s exclusivity goes one step further. The digital wallet allows users to store and use passes and credentials – including credit cards, personal identification, movie tickets and car keys – in a single app. Apple Wallet is Apple’s proprietary digital wallet on the iPhone.
Apple actively encourages banks, merchants and other parties to participate in Apple Wallet. But it also uses its monopoly power to prevent these partners from developing alternative payment products and services for iPhone users.
Apple, for example, has blocked third-party developers from creating competing digital wallets on iPhones that use the so-called tap-to-pay feature. That’s what a digital wallet does—well, a wallet.
Instead, Apple forces those who want to use Wallet features to share personal information with Apple – even if they would prefer to share that information only with a bank, medical provider or other trusted third party.
When an iPhone user puts a credit or debit card into Apple Wallet, Apple inserts itself into a process that could otherwise happen directly between the user and the card issuer. This creates additional potential points of failure for the privacy and security of Apple users.
This is just one way Apple is willing to reduce the security and privacy of iPhones in order to maintain its monopoly.
The Supreme Court defines monopoly power as “the power to control prices or eliminate competition.”
As we stated in our complaint, Apple has this power in the smartphone market.
Now, having monopoly power does not in itself violate antitrust laws.
But that’s what happens when a company gains or maintains monopoly power—not because it has a superior product or superior business acumen—but by engaging in exclusionary behavior.
As we stated in our complaint, Apple has maintained its power not because of its superiority but because of its unlawful exclusionary practices.
Monopolies like Apple threaten the free and fair markets on which our economy depends. They stifle innovation; they hurt producers and workers; and they increase costs for consumers.
If unchallenged, Apple will only continue to strengthen its smartphone monopoly.
But this is regulated by law.
The Department of Justice will vigorously enforce antitrust laws.
Enforcing the law protects consumers from higher prices and fewer choices.
This is a legal obligation of the Ministry of Justice. This is what the American people want. They deserve it.
I thank the attorneys and staff of the Department of Justice’s Antitrust Division for their tireless work on this case on behalf of the American people. I now turn the rostrum over to the Deputy Attorney General.
