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The United States has filed a lawsuit against Apple on charges of using its power in the smartphone sector to suppress competition from rivals and limit consumer choice, in the latest criticism against the dominant big technology companies from the Joe Biden administration.
The move comes as Apple faces pressure from regulators, courts and competitors around the world over the way it operates the iPhone, putting its $85 billion annual services revenue at risk. Apple shares fell about 3 percent.
The landmark lawsuit filed Thursday in federal court in New Jersey by the U.S. Department of Justice, along with a bipartisan group of 16 state and county attorneys, accuses the group of imposing contractual restrictions on developers while making it more difficult for users to switch devices.
Jonathan Kanter, the Justice Department's antitrust chief, described Apple's response to competition over the years as a “series of Whac-A-Mole contractual rules and restrictions” that allowed it to crush competition.
The complaint accuses the company of abusing its market power in several ways: to crush the growth of innovative apps and messaging services, reduce the appeal of competing smartwatches, keep competing tap-and-pay apps off its devices, and block the development of game streaming apps. Apple changed its policy banning game streaming apps on its App Store earlier this year.
At a press conference on Thursday, US Attorney General Merrick Garland noted that Apple's net income — which reached $97 billion in 2023 — “now exceeds the gross domestic product of more than 100 countries,” largely due to the success of its iPhone. With it, which he said has more than 65 percent of the smartphone market share in the United States.
Garland said that over the years “Apple has maintained monopoly power in the smartphone market” not just by “competing on merits” but through a deliberate strategy of excluding competitors.
He added: “Apple has maintained its power not because of its superiority but because of its unlawful exclusionary behavior.”
Apple called the lawsuit “false in terms of facts and law.”
“This lawsuit threatens our identity and the principles that differentiate Apple products in highly competitive markets,” she said. “If successful, it would hamper 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, enabling the government to take a strong hand in designing human technology.”
This is the first antitrust challenge against Apple under the Biden administration, which is pursuing antitrust cases against some of Silicon Valley's largest companies.
Last year, the Department of Justice filed a lawsuit against Google, alleging that it exercises monopoly control over the digital advertising market. A separate federal case involving the Alphabet-owned company's market power in Internet search is still ongoing.
The Federal Trade Commission, another US competition regulator, has sued Amazon, alleging that it is illegally using monopoly power to overcharge consumers and exploit sellers, and is pursuing a case aimed at forcing Meta to back away from its acquisitions of Instagram and WhatsApp.
The Justice Department joins a growing global backlash against Apple's tight control over its iOS ecosystem, which critics claim allows the company to charge monopoly fees and impose unfair business conditions.
EU antitrust regulators fined Apple €1.8 billion earlier this month over “steering” policies that prevent rival music streaming apps like Spotify from directing customers outside its App Store to make payments.
This month, the Digital Markets Act also came into force, requiring the iPhone maker to make historic changes to Europe's mobile ecosystem, opening it up to competing stores and payment methods.
Five ways the US claims Apple abused its power
Blocking 'super apps' The Justice Department says so-called super apps will allow users to access a wider variety of content, “unlike the way Netflix and Hulu allow users to find and watch thousands of movies and TV shows in one app.” The complaint cites an Apple executive as saying such apps would “let barbarians in at the gate,” threatening “iOS stickiness.”
Block competing cloud gaming apps These apps, offered by companies like Microsoft and Nvidia, allow a library of games to be streamed to an app via the cloud. The Justice Department quoted individuals at Apple as saying that with such services, “all that matters is who has the cheapest devices” and consumers can “buy…[] a [expletive] Android for $25 at a garage sale and. . . To have a solid cloud computing device that “works well”.
Cross-Platform Messaging The Justice Department says Apple reduces the iPhone messaging experience for messages from Android users, citing the infamous “green bubble” that denotes messages from non-Apple users. “Apple could have delivered a better cross-platform messaging experience on its own by creating iMessage for Android,” the Justice Department says, but concluded that doing so “would hurt us more than help us.”
“After copying the smartwatch idea from third-party developers, Apple now prevents those developers from innovating and limits the Apple Watch to the iPhone to prevent any negative impact on iPhone sales,” the Justice Department says.
Digital Wallets “While Apple actively encourages banks, merchants, and other parties to participate in Apple Wallet, Apple simultaneously exercises its smartphone monopoly to prevent those same partners from developing better payment products and services for iPhone users,” the DOJ alleges.
