The United States Justice Department and 16 States are taking Apple to court for “monopolising smartphone markets”, alleging the IT giant is behaving in an anti-competitive fashion.
Apple is alleged to have violated section 2 of the US Sherman Antitrust Act (1890) which prohibits monopolistic behaviour. The DoJ and states 88-page complaint starts with:
In 2010, a top Apple executive emailed Apple’s then-CEO about an ad for the new Kindle e-reader. The ad began with a woman who was using her iPhone to buy and read books on the Kindle app.
She then switches to an Android smartphone and continues to read her books using the same Kindle app. The executive wrote to Jobs: one “message that can’t be missed is that it is easy to switch from iPhone to Android. Not fun to watch.”
Jobs was clear in his response: Apple would “force” developers to use its payment system to lock in both developers and users on its platform. Over many years, Apple has repeatedly responded to competitive threats like this one by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.
The parties allege multiple violations by Apple, to restrict competition.
- Blocking innovative super apps. Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.
- Suppressing mobile cloud streaming services. Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.
- Excluding cross-platform messaging apps. Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so that its customers have to keep buying iPhones.
- Diminishing the functionality of non-Apple smartwatches. Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.
- Limiting third party digital wallets. Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.
That’s not all though. Other allegations of anti-competitive behaviour are made by the DoJ and the states against Apple, “affecting web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more”.
The Sherman Act encompasses both civil and criminal law, with prison sentence penalties for individuals who violate it, and US$100 million fines for companies. The latter can be increased to twice the amount conspirators gained from the illegal acts, if the amount exceeds US$100 million.
Apple responded to the lawsuit with a statement:
At Apple, we innovate every day to make technology people love—designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users.
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.
It would also 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, and we will vigorously defend against it
Monopoly watchdogs worldwide are starting to circle Apple, which is a market leader in smartphones. Already, Apple was forced to make substantial changes to its software, to remain compliant the European Union’s Digital Markets Act, and release a new version of its iOS mobile operating system.
