Fast Facts
- The U.S. Department of Justice on Thursday filed an antitrust lawsuit against Apple.
- In its complaint, the DOJ alleges that Apple has built a 'smartphone monopoly' that will continue to grow if left unchallenged.
- Apple told TheStreet in a statement that the suit would set a 'dangerous precedent.'
The U.S. Department of Justice on Thursday filed an antitrust lawsuit against Apple (AAPL) , alleging that the tech giant has built a "smartphone monopoly" at the expense of consumers, developers and competitors.
Beyond the mere existence of the iPhone, the complaint — which was joined by 16 attorneys general — asserts that Apple has engaged in illegal, anticompetitive behavior in everything from the App Store to its smartwatches, messaging apps, Apple Wallet and FaceTime.
The DoJ said Apple's behavior violates the Sherman Act, an antitrust law passed in 1890. The lawsuit was filed in U.S. District Court for the District of New Jersey.
"Apple has maintained monopoly power ... by violating federal antitrust law," Attorney General Merrick Garland said in a news conference Thursday. "We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts consumers and developers."
For consumers, he said, Apple's conduct has resulted in fewer choices and less innovation. For developers, it has "meant being forced to play by rules that insulate Apple from competition."
"We allege that Apple has consolidated its monopoly power not by making its own products better but by making other products worse," Garland said.
He added that Apple accomplishes this in two main ways: one, by imposing heavy fees on third-party developers who use Apple's ecosystem, and two, by "restricting connections" between these third-party apps and Apple's user interface.
Garland cited difficulties in cross-platform messaging from an iPhone user to a non-iPhone user, saying that Apple "knowingly degrades quality and security for its users, making iPhone users perceive other phones as lower quality even though Apple is the one responsible for breaking cross-platform messaging."
Apple disagrees with and will fight the lawsuit
Apple said in a statement that disagrees with the lawsuit, adding that it will "vigorously defend against it."
"This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets," Apple said. "If successful ... It would set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law."
International Data Corp. found in January that Apple was the top smartphone maker by market share in 2023, the first time it has clinched that top spot from Samsung since 2010.
The tech giant recently engaged in a fight with Epic Games over the revocation of Epic's European developer account, newly acquired under Europe's recently enforceable Digital Markets Act.
Shares of Apple fell more than 3% Thursday.
“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” Garland said. "But there's a law for that."
Related: Epic Games CEO explains how it fought Apple and won
Wedbush: Case is a 'serious matter'
Wedbush's Dan Ives said in a note Thursday morning that the suit would likely take years in the courts and could ultimately lead to a U.S. vs. Apple trial.
Ives said that he didn't expect Apple to make any business-model changes now. But he said Apple was going to have to "find a way to eventually settle this case, pay a hefty fine, and ultimately find some compromise with developers on the App Store."
Ives said that the case added to the "headline risk" of Apple's story, saying that it would drag on, keeping the company under a microscope both in the U.S. and abroad.
"The DoJ antitrust case is a serious matter that has taken years to build and they are clearly aggressively heading down this collision path with [CEO Tim Cook] and Cupertino," Ives said. "This clearly escalates the Biden administration antitrust efforts against Big Tech giants and adds to the current ongoing antitrust case against Google and other various cases against Meta and Amazon."
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