DOJ, 16 States Challenge Apple's 'Monopoly Power' in Landmark Antitrust Suit

The U.S. Department of Justice and 16 states on Thursday filed an antitrust lawsuit accusing Apple of illegally monopolizing the smartphone market by throttling competitors and stifling innovation.

The lawsuit, filed in a New Jersey federal court, alleges that the California-based tech titan unlawfully blocks innovative competitive apps, suppresses mobile cloud streaming services, excludes cross-platform messaging apps, diminishes the functionality of non-Apple smartwatches, and limits third-party digital wallets.

These actions, the DOJ says, run afoul of Section 2 of the Sherman Act, one of three main federal antitrust laws.

"Each step in Apple's course of conduct built and reinforced the moat around its smartphone monopoly," the lawsuit states. "The cumulative effect of this course of conduct has been to maintain and entrench Apple's smartphone monopoly at the expense of the users, developers, and other third parties who helped make the iPhone what it is today."

"Despite major technological changes over the years, Apple's power to control app creation and distribution and extract fees from developers has remained largely the same, unconstrained by competitive pressures or market forces," the filing continues. "That this conduct is impervious to competition reflects the success of Apple's efforts to create and maintain its smartphone monopoly, the strength of that monopoly, and the durability of Apple's power."

U.S. Attorney General Merrick Garland said in a statement that "consumers should not have to pay higher prices because companies violate the antitrust laws."

"If left unchallenged, Apple will only continue to strengthen its smartphone monopoly," Garland added.

Democratic New Jersey Attorney General Matthew Platkin said that "Apple's dominance in the smartphone market is not an accident."

"Instead, Apple has gone to great lengths to create a monopoly that affected not only the smartphone industry, but also the choice of apps, payment systems, smartwatches, and more," Platkin continued. "The end result is you pay more for an inferior product—all while Apple collects billions in profits."

Kris Mayes, Arizona's Democratic attorney general, contended that "Apple has used its monopoly power to block competition, stifle innovation, and extract higher prices from consumers."

"No company, even one as big as Apple, is above the law," she continued. "Apple's anticompetitive behavior has violated antitrust law and harmed consumers. Holding Apple accountable is critical to ensuring a competitive market where innovation can flourish and consumers can access a wide range of affordable products and services."

"Fair competition protects consumer choice and encourages innovation, leading to better products and services for everyone," Mayes added.

Apple said in a statement that "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," the company added. "It would also set a dangerous precedent, empowering government to take a heavy hand in designing people's technology."

As The New York Times reported:

Apple has effectively fought off other antitrust challenges. In a lawsuit over its App Store policies that Epic Games, the maker of Fortnite, brought in 2020, Apple persuaded the judge that customers could easily switch between its iPhone operating system and Google's Android system. It has presented data showing that the reason few customers change phones is their loyalty to the iPhone.

It also has defended its business practices in the past by saying its "approach has always been to grow the pie" and "create more opportunities not just for our business, but for artists, creators, entrepreneurs and every 'crazy one' with a big idea."

Consumer advocates welcomed the suit.

"Apple has been an outlier in its willingness to make changes to products and services to the benefit of consumers and developers," Sumit Sharma, senior researcher for tech competition at Consumer Reports, said in a statement.

"We've seen Apple limit access to hardware and software for competing services and products like smartwatches and contactless payments, and that's harmed innovation and competition," Sharma added. "Apple claims to be a champion of protecting user data, but its app store fee structure and partnership with Google search erode privacy."

Barry Lynn, executive director of the Open Markets Institute, said that "for more than a decade, Apple has engaged in unfair competition designed to entrench its monopoly control in the smartphone market and in multiple closely related marketplaces such as wireless apps."

"Today's groundbreaking lawsuit seeks to fully pry open Apple's restrictive practices so that fair competition can thrive in ways that deliver the public real choice and opportunity, and improve the quality of both hardware and software products," Lynn added.

The lawsuit is the latest effort by the Biden administration to tackle Big Tech monopolies. The administration has previously targeted companies including Amazon, Google, and Meta.

Apple is also under scrutiny by European regulators. Earlier this month, the European Commission hit the company with a $2 billion fine for violating antitrust rules by suppressing competition from rival music streaming services including Spotify.