The U.S. government is taking Apple to court, alleging that the company used its monopoly power over the iPhone to block developers from offering better alternatives to iPhone apps, driving up costs for consumers.
The antitrust suit was filed in New Jersey with 16 state attorneys general joining the U.S. Justice Department. The government alleges that because of Apple's conduct, iPhone owners have no choice but to get their apps via Apple-approved channels. That, in turn, makes it harder to switch to other mobile platforms.
“Consumers should not have to pay higher prices because companies violate the antitrust laws,” U.S. Attorney General Merrick Garland sais in a statement announcing the lawsuit. “We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly."
No one would dispute that Apple maintains a rigorous level of control over what apps can and can't go on its smartphones. In the past, the company has argued that its policies are necessary to prevent viruses and fraud from unvetted apps.
"This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets," Apple 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 government to take a heavy hand in designing people’s technology. "
Apple's App Store practices have come under increasing scrutiny both at home and abroad. In addition to the Justice Department's antitrust suit, European Union regulators took aim at Apple's App Store, passing the Digital Markets Act. As a result, Apple now allows iPhone owners in EU countries to sideload apps from third party stores, though with some lingering restrictions. That feature went live with the recent iOS 17.4 update.
It's too early to say if the U.S. antitrust suit could force a similar move in this country. "Lawsuits take time, and Apple will fight this," said Avi Greengart, lead analyst with Techsponential. "Therefore, in the short term, I wouldn’t expect any changes to the App Store or Apple’s business."
In its complaint (available as a PDF), the government claims that Apple's behavior blocked app makers from creating apps that would make it easier to switch to other platforms. It also claims Apple blocked development of cloud-streaming apps and services, excluded cross-platforming message apps and prevented third-party apps from offering tap-to-pay features. In addition to the iPhone, the suit also alleges that Apple's policies have diminished the functionality of smartwatches that aren't the Apple Watch.
"We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it," Apple said in its statement.
There's no word on when the case will go to trial. "These lawsuits are not slam dunks; before the government can prove harm, it will need to define the market in such a way that Apple even has a monopoly in the first place," Greengart said. "Apple’s current market share in smartphones is high, but not overwhelming, and there is certainly competition."
In the fiscal quarter ended last December — Apple's most recently completed quarter — the company recorded $69.7 billion in iPhone-related sales, which was 58% of Apple's total revenue.
