Overview
Apple’s dominance in the US smartphone industry and its competition strategies have faced mounting scrutiny from regulatory bodies and industry experts, prompting several antitrust investigations and potential policy shifts, according to Politico. On March 21, 2024, the Department of Justice (DOJ), along with 15 states and the District of Columbia, filed an antitrust lawsuit against Apple, accusing the tech giant of monopolizing the US smartphone market, resulting in multiple harms to customers (including inflated prices), among other antitrust violations. Subsequently, four more states joined the lawsuit, bringing the total number of co-plaintiffs to 21.
The lawsuit against Apple is not an isolated event but part of a broader federal effort to regulate Big Tech. This effort, which includes actions against Google and investigations into Microsoft, Nvidia, and OpenAI, could reshape the tech industry as we know it, as reported by Politico.
Background
The DOJ accuses Apple of impeding technological innovation by controlling app distribution, imposing high fees (up to 30 percent on in-app purchases and 0.15 percent on Apple credit card transactions), and enforcing strict developer guidelines. Apple’s restrictions on application programming interfaces (APIs) and cloud streaming services are also alleged to inhibit cross-platform functionalities and innovation. The DOJ also contends that Apple’s claims of its contributions to innovation are exaggerated, pointing to its relatively lower spending on research and development than on stock buybacks.
According to the complaint, despite not inventing technologies like Near Field Communication and other APIs, Apple exerts significant control over their use within its ecosystem. As described by the DOJ and highlighted in a post-congressional hearing with Apple’s CEO, this control allows Apple to limit third-party access to these features, permitting functional restrictions on competing services within its devices. The DOJ alleges that such actions can compromise user security and privacy, ultimately impacting cross-platform functionalities and consumer choice.
This complaint is one in a series of efforts to regulate the Big Tech that have impacted Apple. The European Commission’s Digital Markets Act, enacted in 2022, has already influenced the tech giant to change its App Store policies and payment structures. In the most recent action, the DOJ argues that Apple engages in exclusionary conduct by limiting access to hardware and software. This restricts competition from mobile wallets, messaging, and gaming apps, harming consumers.
As reported by TechCrunch, Apple counters these claims by emphasizing consumer security and seamless integration, arguing that litigation’s complexity and costs hinder its ability to innovate and maintain competitiveness. The company denies having a monopoly, pointing out that its US market share in units (not revenue) is below 50 percent, a claim scrutinized in a report by the Congressional Research Service. The report notes that Apple’s preferred calculation may not sufficiently establish monopoly power in court, as the DOJ has not established a precedent for firms with less than half the market share being deemed monopolists.
In a statement reportedly shared with MacRumors, Apple insists that consumers choose its products for their integrated user experience, rather than being locked into a sticky ecosystem. According to Apple, integrating competitors’ apps and third-party developer access could compromise the security of its devices and the integrity of its platform, as reported by Politico. The company also describes regulatory intervention in technology design as setting “a dangerous precedent,” hinting at governmental overreach in a TechCrunch article.
Attorney General Merrick Garland, quoted in a DOJ press release, acknowledged Apple's significant achievements but suggested its success stems from exclusionary tactics rather than product superiority. The DOJ’s accusations parallel the European Union’s allegations of Apple thwarting competition from rivals, including music-streaming competitors, according to BNN Bloomberg. The company has contested these claims issued by regulatory agencies in both the US and Europe.
In its complaint, the DOJ refers to prior antitrust enforcement by the agencies, such as the United States v. Microsoft lawsuit that resulted in a judgment issued in 1999 that described Microsoft’s dominance as an illegal monopoly. Apple contrasts its position with Microsoft’s, emphasizing its lower global market share. While Microsoft held “well over 90 percent” of the overall market for operating systems for Intel-compatible PCs, as cited by the DOJ, Apple’s worldwide smartphone share is less than 30 percent (28.58 percent in early 2024), overshadowed by competitor Android, which leads at 70.69 percent globally, according to Statcounter. The company also argues against the DOJ’s narrow market definition (as US smartphones and performance smartphones), stating that the global smartphone market is the only market definition that makes sense, as reported by TechCrunch.
Why Is This Important?
The outcome of this case could significantly impact digital market competition, payment structures, and regulatory strategies, setting a precedent for Big Tech regulation. Ongoing global investigations, as noted by William Gallagher, a tech writer and senior editor at AppleInsider, span various jurisdictions, including India, Japan, Portugal, Russia, Turkey, and the UK, each addressing concerns ranging from unfair business practices to antitrust breaches and payment system restrictions. Documented by Bloomberg, a recent decision by China’s Supreme People's Court in May 2024 deemed Apple’s App Store fees acceptable, pending appeal, potentially influencing global pricing and operational norms in digital markets.
The escalating scrutiny reflects a global push to redefine digital market practices and regulatory frameworks. Antitrust investigations across jurisdictions underscore concerns over pricing, innovation, and consumer choice, resonating with public demands for enhanced competition. In a CNBC interview, Federal Trade Commission Chair Lina Khan and US Assistant Attorney General Jonathan Kanter observed that bipartisan efforts to curb monopoly power are underway, citing parallels in sectors like food and health care. Critics of market dominance in Big Tech argue that current welfare standards focusing on pricing inadequately address Big Tech’s cross-stream data monetization practices and other non-price-based harms, prompting calls for a broader regulatory scope, as discussed in the American Affairs journal.
Legal experts like Gary Reback, known for the landmark Microsoft case (who later predicted Google’s ad tech dominance to no avail), warn of regulatory lag in addressing market dominance. Jeffrey Jacobovitz, as reported in Bloomberg, questions the applicability of century-old antitrust laws to modern tech giants. Such debates intensify amid revelations that Big Tech’s strategic partnerships may bypass formal regulatory scrutiny, potentially consolidating market dominance unchecked.
Enforcers are now also revisiting merger scrutiny standards to encompass evolving legal dynamics, aiming to preempt anticompetitive practices before they entrench, Reuters reports. As regulatory pressures mount, the implications for digital markets and consumer welfare remain pivotal in shaping future policy directions.
What Happens Next?
Regulators, including Consumer Financial Protection Bureau Director Rohit Chopra, express concerns that large tech firms may stifle smaller competitors, potentially transforming open online markets into “walled gardens” or closed ecosystems, according to an NBC News article.
Despite these developments, legal experts doubt the likelihood of a company breakup stemming from US antitrust probes, which have historically resulted in more altered business practices than divestitures.
Looking ahead to 2024, Apple plans substantial enhancements for Apple Pay and Apple Wallet, introducing new financing options, rewards programs, and buy now/pay later programs, as reported by the Associated Press. These updates aim to broaden compatibility with Windows and Chrome, thereby expanding Apple’s ecosystem.
Apple has moved to dismiss the lawsuit, with a court decision expected by late 2024 or 2025. If this motion fails, the case could extend well into 2027 or beyond. The outcome remains uncertain, but the DOJ seeks to establish a significant precedent in regulating Big Tech.