Sources say Apple will be sued by the Biden administration in a major antitrust case


Washington
CNN

The US Department of Justice and a dozen states filed a blockbuster antitrust lawsuit against Apple on Thursday. It's the latest — but not the biggest — in a string of big tech companies facing monopolization charges from the U.S. government, which stifles a massive industry that has been largely unregulated for the past several decades.

The long-awaited lawsuit comes after years of accusations by critics that Apple harmed competition with restrictive app store terms, high fees and its “walled-garden” approach to hardware and software: Apple famously makes its technology easy to use, but it It achieves that by tightly controlling — and in some cases, controlling — how third-party companies can interact with the tech behemoth's products and services. In some cases, Apple may offer better access and features to its own products than its competitors. The company said it denies the lawsuit's allegations and will fight them.

“Apple undermines applications, products and services that would otherwise reduce users' trust in the iPhone,” the Justice Department said in a press release. “Apple uses its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses and merchants.”

For example, Apple's iPhone allows customers to send high-quality photos and videos to each other seamlessly, but multimedia texts for Android phones are slow and grainy. Late last year, the company agreed to improve the standard it uses to communicate with Android phones via text message.

The company gives its own products the ability to access parts of its hardware that it restricts other companies from using. While competitors' products fall far short of their capabilities, it reveals an almost magical experience of how iPhones interact with AirTags.

This year, European regulations forced Apple to give other companies access to the iPhone's tap-to-pay hardware chip, enabling it to develop competing digital wallets. But those rules are only for the European Union.

Apple maintains a 30% commission on top sales through its App Store — a frequent complaint from companies trying to sell subscriptions that Apple's huge share of the smartphone market prompts, which they argue is an unnecessarily high commission.

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“We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it,” Apple said in a statement.

A lawsuit alleges Thursday that Apple illegally monopolized smartphone markets by using a complex web of contractual terms that harmed everything from texting to mobile payments. Among other things, the DOJ alleges, Apple used its control over iOS, the iPhone platform, to block innovative new apps and cloud streaming services from the public; Reduces the way Android messages appear on iPhones; Competing smartwatches limited how they could work with iPhones; and hindered competitive payment solutions.

“By blocking these technologies and more, Apple is strengthening the moat around its smartphone monopoly, not by making its products more attractive to users, but by discouraging innovation that threatens Apple's smartphone monopoly,” Thursday's complaint says.

Apple, in a statement, said the lawsuit would hinder its ability to create the compelling and consumer-friendly technology that has made the company the world's most valuable company.

“At Apple, we innovate every day to create technology people love — designing products that work seamlessly together, protecting people's privacy and security, and creating a magical experience for our users,” the company said in a statement. “This lawsuit threatens who we are and the principles that differentiate Apple products in fiercely competitive markets.”

Apple has for years fended off legal challenges and criticism that its practices are anti-competitive. Its sterling consumer reputation and disciplined public relations and legal strategy reflect the precision with which Apple manufactures and oversees its products.

But the Justice Department's landmark case challenges Apple's broader practices.

The case represents the latest effort by the Biden administration to hold a major tech company accountable under U.S. antitrust law. Apple is the only major tech company the federal government has yet to sue for antitrust violations.

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Named Apple A spacious house report In 2020, the iPhone maker found that Meta, along with Google and Amazon, held “monopoly power.”

The legal action could devalue Apple's stock at less than $3 trillion now and force changes by the tech giant in policies, business strategies, products and apps. Even divesting some assets is not out of the question for Apple, the tech giant founded by Steve Jobs in the 1970s.

apple (APL) shares fell less than 1% Thursday. The case was highly anticipated.

Along with a pair of antitrust cases against Google, the DOJ case against Apple will become a symbol of the Biden administration's commitment to reducing competition and prices. It will also be a test of how far courts are willing to go in applying decades-old antitrust law to the modern digital economy.

The Apple case may be one of the most closely watched cases brought by Jonathan Contor, Biden's top DOJ antitrust official. Kanter, who in private practice has represented rivals to Google, including Microsoft and Yelp, is seen as part of a new generation of regulators.

Joining Lina Kahn at the Federal Trade Commission, Kanter argued that America has allowed decades of corporate consolidation and anti-competitive practices.

To solve Android phone customers' “green bubble” problem, Apple quickly shut down an app called Beeper Mini to help Android users send messages to iPhone users without those limitations.

“It went on for a total of three days, and Apple started attacking us,” Mikikowski said. “Technically, they've worked very hard to penalize Beeper Mini users by knocking them offline or by gradually making them unreliable.”

Those kinds of interactions have made Apple's App Store the center of antitrust complaints.

Beginning in 2020, Apple engaged in a public court battle against Epic Games, the maker of the video game “Fortnite.”

Apple is not an illegal monopoly in the distribution of iOS applications; Federal courts have decided If so, it highlights the difficulty Apple faces in reducing federal antitrust charges. However, Apple was fined for violating California competition law It changed some of its app store practices In response to a court order.

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Those rulings highlight the challenges ahead for the judiciary, which legal experts say must come up with a strong legal theory about how Apple has harmed competition. The DOJ must prove that the benefits Apple provided to consumers did not outweigh its antitrust violations.

The US government isn't the only one pressuring Apple to change its business practices. In March, a new EU law came into effect that forces Apple to make significant changes.

In a seismic move to comply with the European Union's Digital Markets Act (DMA), Apple said for the first time it will allow users in trade groups to download apps from third-party app stores.

But critics, including Epic, are already accusing Apple of breaking EU law. Just before the DMA came into effect, Epic filed a complaint with competition authorities that Apple had blocked the launch of its own app store on iOS. The European Commission is investigating.

Since its early days, Apple has pursued a reputation as an elite, high-design brand. It differentiates its products from competitors like Microsoft and Google by focusing on premium user experience and design aesthetics. That limited approach worked for years, until a wave of complaints from app developers and consumers drew more attention to potential flaws in Apple's control.

In the era led by founder Steve Jobs, “Apple was a cultural phenomenon that pitted wings against sandals; suits against T-shirts,” said James Bailey, a professor of leadership development at the George Washington University School of Business. “Apple innovated relentlessly. They were always one step ahead of the competition.

For now, however, Apple's advances are “increasing” rather than earth-shattering, Bailey added. “[CEO Tim] Cook is focused on financial management and expanding market share.

“Apple is financially healthy,” Bailey said, but their reputation for innovation is “tarnished.”

This is a developing story and it will be updated.

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