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US sues Apple in antitrust lawsuit

·5 mins

Landmark suit: The US Justice Department and more than a dozen states filed an antitrust lawsuit against Apple on Thursday. The allegations: The DOJ claims Apple has used anticompetitive tactics, such as blocking innovative new apps and degrading how Android messages appear on iPhones, to maintain a monopoly on the smartphone market. The long-anticipated lawsuit comes after years of allegations by critics that Apple has harmed competition with restrictive app store terms, high fees, and its walled-garden technology ecosystem. Apple is the latest — but largest — in a string of Big Tech companies to face monopoly accusations as the US government cracks down on a massive industry that went largely unchecked for the past several decades.

Apple claims the Justice Department has had to modify the legal theories underpinning its case at least six times over the course of a four-year investigation, as other court rulings have emerged undercutting the government’s case. For example, Apple said an appeals court ruling last year finding that the company didn’t violate US antitrust laws with its app store was a major blow to the DOJ. Apple also claimed DOJ is trying to make iPhones work more like Android devices — which Apple customers do not want — and would turn the US government into a de facto technology designer.

Although the lawsuit intends to break down Apple’s so-called walled garden and make its products and services more open, some experts worry about the potential downsides. Michael Santoro, a professor of management, said he believes the user experience could change for consumers. ‘The antitrust laws are ultimately meant to protect consumers,’ he said. ‘But there will be a lot of uncertainty because, for example, I worry the Apple store or an alternative app store may not work as well with my phone as it did previously, and people may be downloading something that Apple didn’t think it should.’ He also said if the lawsuit is successful, prices of an iPhone could potentially drop if the final product is ’less robust.’ ‘Customers may be less willing to pay for one,’ he said.

Not all consumers and organizations appreciated the action against Apple. Under founder Steve Jobs, Apple pioneered a sleek design for its hardware and a disciplined user experience for its software. Its products found early, loyal adoption among designers, graphic artists, and other creatives in the 1980s and 1990s before expanding to broader mainstream appeal. Some of Apple’s most loyal fans see the DOJ’s action as an assault on good taste and high design. The Computer & Communications Industry Association says it has advocated for sound competition and consumer protection principles that support innovation in tech for more than 50 years. CCIA President & CEO criticized the DOJ’s action, stating it could prevent Apple from offering consumers the unique products and integrated services they love.

The impact of the lawsuit could potentially ripple across Apple’s products, services, and business model. Fees: Apple may need to lower developer fees, which could ultimately impact its services revenue. App Store: The company could be forced to allow access to other app stores or direct app installations, called “side-loading.” Interoperability and compatibility could raise some concerns. Greater support for cross-platform messaging: Apple lets iPhone users send high-quality photos and videos to one another, but similar texts to Android phones are slower and grainy. Wallet compatibility: Apple currently blocks third-party developers from offering tap-to-pay functionality. Other changes could come to compatibility with Apple Watches and its mobile cloud services.

US Attorney General Merrick Garland announced a landmark lawsuit against tech giant Apple over a variety of allegations, including uses its control over iOS to block innovative new apps, degrades how Android messages appear on iPhones, restricts how competing smartwatches can work with iPhones, and hinders rival payment solutions. Garland claimed that Apple has a monopoly over the smartphone market, but not because of the value of its own products. “We allege that Apple has consolidated its monopoly power, not by making its own products better, but by making other products worse,” Attorney General Merrick Garland said in a news conference on Thursday. But, it will take some time to know whether Apple has, in fact, breached the antitrust laws. The case could take years to play out as it moves through the justice system.

The DOJ complaint points to remedies that could include: Preventing Apple’s current control approach to its app store, Limiting Apple from using its private APIs to “undermine cross-platform technologies like messaging, smartwatches and digital wallets, among others,” Preventing Apple from using terms and conditions with developers, accessory makers, consumers, and others “to obtain, maintain, extend, or entrench a monopoly,” and Restoring competitive conditions and awarding plaintiffs reasonable attorneys’ fees and other costs.

Apple’s stock fell on Thursday after the Department of Justice filed an antitrust lawsuit against the tech behemoth. Apple shares have fallen this year on worries about falling sales in China. That’s a reversal from last year when the iPhone maker’s stock surged. The decline in Apple shares has weighed down the Dow Jones Industrial Average index, which includes 30 stocks of so-called blue-chip companies including Apple. Still, the Dow has notched repeated record highs this year.

Attorney General Merrick Garland announced an antitrust lawsuit against Apple, comparing it to historically significant cases such as the breakup of Standard Oil and AT&T. Assistant Attorney General Jonathan Kanter said the DOJ has “an enduring legacy, taking on the biggest and toughest monopolies in history,” including those companies, and now adds Apple to that list.

Attorney General Merrick Garland said Apple undermines products that would enable customers to be less reliant on its product. Announcing the antitrust lawsuit against the tech giant, Garland said that Apple’s entire share of the US smartphone market exceeds 65% and ‘charges as much as nearly $1,600 for an iPhone.’ But, Garland claims, that monopoly over the smartphone market was not gained “simply by staying ahead of the competition on the merits, but by violating federal antitrust law.”