The United States Department of Justice this morning filed a lawsuit accusing Apple of monopolistic smartphone practices. Sixteen state attorneys general joined the federal division in the massive suit.
“Consumers should not have to pay higher prices because companies violate antitrust laws,” U.S. Attorney General Merrick Garland said in a statement issued with the news. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”
Thursday’s suit cites Apple’s long ecosystem game as evidence of anticompetitive practices, including the blue and green bubble colors used by Messages to distinguish iOS from Android users.
Specifically, the suit focuses on the iPhone maker’s share of the premium smartphone segment. He accuses the company of increasing friction for those who want to switch to the competition. This includes things like “contractual restrictions” and the vetting process the company has long used with its App Store.
Regulators cite the removal of five categories: “super apps” (which combine a wide range of functions into a single app), cloud streaming gaming apps, messaging apps, digital wallets and cross-platform compatibility of smartwatches. The latest piece is a dig at the company’s long-standing practice of ensuring certain features only work properly when paired with other Apple devices.
“Instead of responding to competitive threats by offering lower smartphone prices to consumers or better revenue generation for developers,” the suit notes, “Apple will address competitive threats by imposing a series of reshaping rules and restrictions on its App Store guidelines and developer agreements that would allow Apple to extract higher fees, stifle innovation, provide a less secure or degraded user experience, and limit competitive alternatives. It has developed this playbook into many technologies, products and services, including super apps, text messaging, smartwatches and digital wallets, among many others.
The complaint goes on to accuse Apple of “stifling” competition, adding: “Apple is strengthening the moat around the smartphone monopoly not by making its products more attractive to users, but by discouraging innovation that threatens Apple’s smartphone monopoly.”
The complaint draws a parallel to the DOJ’s antitrust lawsuit against Microsoft in the 1990s, which found Apple and then-CEO Steve Jobs on the opposite end of things. He goes on to accuse the company of imposing even stricter structures than the Windows developer.
“In 1998, Apple co-founder Steve Jobs criticized Microsoft’s monopoly and ‘dirty tactics’ in operating systems to target Apple, prompting the company to ‘go to the Department of Justice’ in hopes of making Microsoft ” to play fair.” the DOJ notes. “But even back then, Apple didn’t face the same types of restrictions that it imposes on third parties today. Apple users could use their iPod with a Windows PC, and Microsoft didn’t charge Apple a 30% fee for every song they downloaded from Apple’s iTunes store. Similarly, when Apple brought the iPhone to market in 2007, it benefited from competition between component manufacturers and wireless carriers.”
Aspects of the lawsuit echo Apple’s ongoing legal battle with Epic Games over the company’s tight guard around the App Store. He notes that Apple has long restricted alternative and online app stores — something the company claimed was a product of security and quality control concerns.
Apple quickly hit back, arguing that — if successful — such a suit would hinder its ability to compete in the crowded smartphone market. In a statement provided to TechCrunch, the company notes,
At Apple, we innovate every day to make people love technology—by 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 will 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 by allowing the 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.
Late last year, Apple announced support for the RCS standard, which increases cross-platform massage compatibility with Android devices. The company, however, stopped short of promising to close the green/blue bubble gap. Thursday’s suit digs into the issue, noting, among other things, that it signals to users that Android devices are inferior to its own.
“For example,” the suit notes, “if an iPhone user sends a message to a non-iPhone user in Apple Messages—the default messaging application on an iPhone—then the text appears to the iPhone user as a green bubble and incorporates limited functionality: Chat is unencrypted, videos are pixelated and grainy, and users can’t edit messages or see typing clues. This signals to users that competing smartphones are inferior because the experience of messaging friends and family who don’t own an iPhone is worse – even though Apple, not the rival smartphone, is the cause of this inferior user experience.”
He goes on to cite a series of internal company communications suggesting that removing the green bubbles would hurt Apple’s bottom line. The lawsuit cites a 2013 email from a Senior Vice President of Software Engineering stating that such a move, “would simply serve to remove [an] barrier to iPhone families giving their kids Android phones.”
The lawsuit follows a flurry of international regulatory scrutiny in markets such as the European Union, which has targeted the company over antitrust concerns. The Biden administration, meanwhile, has promised to take more aggressive action against anti-competitive practices.
Thursday’s testimony included attorneys general from New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee , Vermont, Wisconsin and the District of Columbia.
With today’s announcement, the Justice Department is taking a strong stand against Apple’s stranglehold on the mobile app ecosystem, which stifles competition and hurts American consumers and developers alike. The Justice Department’s complaint details Apple’s long history of illegal behavior — abusing App Store guidelines and developer agreements to raise prices, extract excessive fees, degrade user experiences and stifle competition. The DOJ joins regulators around the world who have recognized the many harms of Apple’s abusive behavior and are working to address it. As this case unfolds over the next few years more needs to be done now to end its anti-competitive practices all mobile application gatekeepers. It remains imperative that Congress pass bipartisan legislation, such as the Open App Marketplaces Act, to create a free and open mobile app marketplace.
For more on Apple’s antitrust lawsuit, check here:
