US Justice Department Sues iPhone Maker Apple for Creating 'Smartphone Monopoly'

WASHINGTON (Sputnik) - The US Department of Justice filed a lawsuit on Thursday against Apple, accusing the iconic iPhone maker of carving a monopoly from its operating system that created “astronomical valuation” for itself at the expense of rivals, consumers and software developers.

“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” one of the Justice Department's contentions in the suit said.

The iPhone has created a stranglehold for Apple both in terms of competition and fortune. The company captured the top seven positions in the global list of best-selling smartphones in 2023, with a 64% US market share alone in the final quarter of last year versus 18% for Samsung, data from Counterpoint Research showed.

On the New York Stock Exchange, Apple’s market capitalization of $2.679 trillion makes it the world's second most valuable company.

The Justice Department’s suit took aim at this dominance, with Attorney General Merrick Garland saying the free and fair markets the American economy was built on were being threatened by Apple and other giants violating US antitrust laws. “They stifle innovation, hurt producers & workers & increase costs for consumers,” Garland said in a press conference. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly."

Apple isn’t the only technology giant facing government scrutiny. The Justice Department has also been fighting an antitrust case against Google since 2020 over that company’s dominance in web search and advertising business. The US government’s most famous battle against the tech sector remains its suit against Microsoft in the 1990s, when it forced the firm to unbundle its Internet Explorer browser from the Windows operating system.

The suit against Apple, filed in the District of New Jersey, was supported by 16 attorneys general who said the company’s anti-competitive practices extended beyond the iPhone and Apple Watch, into its advertising, browser, FaceTime and news offerings.

The Justice Department alleged that in order to keep consumers buying its iPhones, Apple blocked cross-platform messaging apps, limited third-party wallet and smartwatch compatibility and disrupted non-App Store programs and cloud-streaming services.

“For years, Apple responded to competitive threats by imposing a series of 'Whac-A-Mole' contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” Assistant Attorney General Jonathan Kanter said in a statement illuminating the government’s case.

Users say Apple has made messaging from Android to iPhones difficult and shut down applications created by developers to circumvent such complications.

The Justice Department suit highlighted comments from Apple CEO Tim Cook that mocked people who tried to get around the iPhone using other devices.

“Not to make it personal but I can’t send my mom certain videos,” one user told Cook, referring to a 2022 interview at a media event.

“Buy your mom an iPhone,” the CEO responded.

The sweeping action against Apple, the biggest in its near five-decade history since being co-founded in 1976 by technology revolutionary Steve Jobs, could shake up the IT industry as a whole, analysts say.

Aside from being a significant risk to its walled-garden business model, the company fears that complying with regulations would not just cost it money but also prevent it from introducing new products or services, ultimately hurting customer demand.

Apple is facing action in Europe too. It was fined $2 billion in the EU over a dispute with music service Spotify. It is also being probed by the European Commission over whether it is complying with a new Digital Markets Act that forces Apple to open up the iPhone app store to rivals such as Microsoft or Epic Games. Apple plans to charge major rivals that eschew its app store 50 cents per download.