The US Department of Justice sued Apple on Thursday, accusing the tech giant of illegally maintaining a monopoly for its iPhone by stifling competition and imposing exorbitant costs on consumers.
The lawsuit, also brought by multiple US states, said Apple raked in hundreds of billions of dollars by allegedly making it difficult for consumers to switch to cheaper smartphones and devices.
The long anticipated case against Apple sees the company founded by Steve Jobs in 1976 clash with Washington after largely escaping US government scrutiny for nearly a half century.
It joins Amazon, Google and Facebook-owner Meta which are also facing antitrust lawsuits in the United States.
News of the lawsuit sent shares in Apple down by as much as 4.3 percent on Wall Street on Thursday.
At the heart of the case is Apple’s alleged exclusionary practices that set strict and at times opaque conditions on firms and developers seeking to reach the iPhone’s 136 million US users.
According to the lawsuit, these rules and decisions have been designed to force Apple users into staying in the Apple ecosystem and buying the iPhone.
“Consumers should not have to pay higher prices because companies violate the antitrust laws,” said Attorney General Merrick Garland.
“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” he added.
Apple fights back
The far-reaching case singled out practices it said was making Apple richer to the detriment of advancing innovation and technology for consumers.
Apple said the suit was “wrong on the facts and the law, and we will vigorously defend against it.”
If successful, the suit would “set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology,” the company added in a statement.
Apple also argued the government’s case would benefit companies that have long wanted to do business on the iPhone free of charge.
The lawsuit accused Apple of squashing the creation of Super Apps, portals giving consumers access to services like messaging, social media, mobile payment, music, photos and movies all in one place.
Other tech giants such as Meta have long dreamed of launching such super-apps on the iPhone, which accounts for roughly two-thirds of the smartphone market in the United States.
The accusations also target Apple’s Wallet app, the most popular way for iPhone users to make tap payments in stores, forcing banks and others offering the service to pay a fee to the company.
Messaging apps are under the microscope too, with prosecutors accusing Apple of making it hard for its users to interact easily with Android phone users, coercing them to buying the more expensive iPhone.
Apple says it will be implementing changes to ease interoperability on messages soon.
The case also mentions smartwatches, with the Apple Watch only being available on the iPhone, and competing smartwatches having very limited functionality on Apple devices.
The complaint alleges that these nefarious practices go into other services such as web browsers, entertainment and even automotive services.
‘New era’
“This a new era of antitrust enforcement,” said US Senator Elizabeth Warren, a critic of big tech’s dominance of the economy.
But some legal scholars expressed doubt the monopoly case was clear-cut, given that the iPhone isn’t the only player in the market.
“Apple is not a monopoly as a matter of fact — if anything it is a duopoly,” said Michael Santoro, professor of management at Santa Clara University.
“This lawsuit has no basis in economic reality,” he added.
The attack on Apple’s service offerings comes as the company seeks ways to make money beyond the iPhone, which changed the world of consumer technology when it was introduced in 2007.
But iPhone sales growth has been slowing, raising pressure on the company to find other sources of revenue.
In a separate case, Apple largely won a US lawsuit from Fortnite-maker Epic Games that has been pursuing Apple in jurisdictions worldwide over the rules and fees it imposes on the iPhone.
In a case brought by Spotify, the EU this month hit Apple with a 1.8-billion-euro ($1.9 billion) fine for preventing European users from accessing information about alternative, cheaper music streaming services.