As reported by CNBC, in a move that could potentially shake the tech industry, the Department of Justice has sued Apple, alleging that its iPhone ecosystem is a monopoly and that it has driven its "astronomical valuation" at the expense of consumers, developers, and other phone manufacturers. The lawsuit claims that Apple's anti-competitive practices extend beyond its iPhone and Apple Watch businesses, citing its advertising, browser, FaceTime, and news offerings. The government has not ruled out breaking up one of the largest companies in the world, with a Justice Department official stating that structural relief was on the table if the US were to win.
The lawsuit alleges that Apple moved to block cross-platform messaging apps and limited third-party wallet and smartwatch compatibility to keep consumers buying iPhones. It also disrupted non-App Store programs and cloud streaming services, which the Justice Department claims is anticompetitive behavior designed to maintain Apple's monopoly power while extracting as much revenue as possible. Apple shares fell more than 4% during trading on Thursday following the news.
If the lawsuit is successful, it could force Apple to make changes in some of its most valuable businesses, including the iPhone, Apple Watch, and its profitable services line. U.S. Attorney General Merrick Garland said that "Apple has that power in the smartphone market" and that "if left unchallenged, Apple will only continue to strengthen its smartphone monopoly."
Apple has disagreed with the premise of the lawsuit, stating that it threatens the company's principles and sets a dangerous precedent that could hinder its ability to create the kind of technology people expect from Apple. The company plans to defend against the lawsuit.
“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,” an Apple spokesperson told CNBC. “It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”
The lawsuit follows years of investigations into Apple's business practices and two prior DOJ cases against Apple over e-book prices and allegations that it colluded with other technology companies to depress salaries.
“This anticompetitive behavior is designed to maintain Apple’s monopoly power while extracting as much revenue as possible,” the complaint said.
“Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets,” the U.S. government said in a release.
Apple is currently facing a similar challenge from the European Commission, which is investigating whether the company is complying with the new EU Digital Markets Act.
Apple had 64% of the market share for US smartphones in the last quarter of 2023, versus 18% for Samsung, according to Counterpoint Research. The company isn't the only one facing government scrutiny, as the DOJ has filed antitrust cases against Google and Microsoft in the past.
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