Apple faces its biggest antitrust challenge
Apple is set to face its biggest antitrust challenge yet as the Department of Justice (DOJ) targets the tech giant’s alleged control of the smartphone market.
Apple faced a high-profile antitrust challenge a few years ago by video game company Epic Games over the company's app store rules, and the tech giant mostly prevailed against the challenge. The wide-ranging claims posed in the government’s latest complaint, however, will put Apple’s rules to the test again over its control in the app market.
The complaint argues that Apple's creation of the iPhone ecosystem has given the company dominance over the market for smartphones, which are now ubiquitous across U.S. households. Apple is accused of creating services and products that only work best when used with Apple-run systems, using a “playbook” to maintain dominance across technologies ranging from its app store and messaging platform to smartwatches and digital wallets.
“It is the most significant challenge they've faced so far,” said William Kovacic, former chair of the Federal Trade Commission (FTC).
Kovacic said the Epic Games case dealt with “crucial issues” involving the Apple system — and gave a glimpse into possible Apple defenses and brought to light materials through the discovery process — but the case filed against Apple by the DOJ and 16 states attorneys general last week is more important.
“The scope is broader; the range of behavior addressed is more expansive. And in some ways, there's greater significance to having the force of the government of the United States behind the case,” he said.
“There's the intangible benefit of arguing that you represent the interests of the United States as a whole and not simply the interest of a single interested party,” he added.
The DOJ complaint makes five major allegations about Apple’s conduct. Prosecutors argue the company blocked "super apps" that could transcend its own applications, suppressed mobile cloud streaming services, excluded cross-platform messaging apps, limited function of third-party smartwatches with Apple devices and hindered the use of third-party digital wallets.
Beyond the existing implementations of the alleged anticompetitive “playbook,” the complaint alleges Apple has “every incentive” to follow that same pattern in the future as it expands.
“Apple has countless products and services—AirPods, iPads, Music, Apple TV, photos, maps, iTunes, CarPlay, AirDrop, Apple Card, and Cash. These provide future avenues for Apple to engage in anticompetitive conduct and the ability to circumvent remedies. Appropriate forward-looking remedies are necessary to ensure that Apple cannot use these products and services to further entrench its monopoly power,” the complaint stated.
The wide-ranging complaint could lead to impacts across industries based on how the lawsuit plays out, said Henry Hauser, a lawyer at Perkins Coie. Hauser previously worked as a trial attorney in the DOJ’s antitrust division and as an attorney at the FTC’s technology enforcement division.
“This would affect so many different markets — financial services, media, entertainment, gaming, telecommunications,” Hauser said.
Apple has pushed back strongly on the allegations laid out in the DOJ’s complaint and argued it would in effect create less competition.
“If successful, [this lawsuit] 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,” Apple said in a statement.
An Apple spokesperson also claimed the antitrust suit seems to advocate on behalf of its large rivals, rather than the small developers prosecutors say have been harmed by Apple's dominance. The spokesperson said Apple is not responsible for the inability of other large tech companies with similar resources to offer quality smartphones for consumers.
Kovacic said smaller developers may be more willing to come forward and serve as witnesses in the case now that the DOJ has filed the complaint.
“If you're a smaller enterprise and you're afraid of crossing swords with a powerful entity whose cooperation you need in order to succeed, you might be very reluctant to take an adversarial position unless you're certain that the government is all the way in,” he said.
Bringing the case is one way for the government to show “we are committed,” he added.
Apple argues that it has helped create more competition by creating options for users to use their system, which is safer and more secure, it says. The company's argument that its limits on other devices and apps are essential to maintain safe and secure products is likely to be a key point of defense; the company used similar arguments to defend itself in its case against Epic Games, and under pressure from U.S. and global policymakers.
Sam Weinstein, a Cardozo Law professor and former attorney in the DOJ antitrust division, said the argument about security and privacy could be “very persuasive.”
He said the fact that the DOJ already addressed that argument in its complaint highlights how important that will be as the case proceeds.
In the complaint, the DOJ alleged Apple “wraps itself in a cloak of privacy, security and consumer preferences to justify its anticompetitive conduct,” while in fact the company “selectively comprises privacy and security interests” by degrading security of text messages or crafting deals to let Google be its default search engine “when more private options are available.”
“In the end, Apple deploys privacy and security justifications as an elastic shield that can stretch or contract to serve Apple’s financial and business interests,” the complaint alleges.
Hauser said the strength of the argument will come down to testimony from technical and industry experts as to how essential Apple’s policies are.
“Is there a way — without really burdening the business, without undermining those really legitimate pro-competitive goals — to get less exclusionary conduct?” he said.
Apple is not the only tech firm facing pressure over its market power. The DOJ has two cases against Google, one based on search and one about its ad market power, and the FTC sued Meta and Amazon over monopoly allegations.
All the tech giants have pushed back against the allegations leveled against them. In addition to the cases in the U.S., they’ve had to adjust to new regulations targeting their market power put in place by the European Union.