Why the US Department of Justice Is Suing Apple
Could this be the beginning of the end for Apple's iPhone empire?
On Thursday, the US Department of Justice, in addition to more than twelve states, filed an antitrust lawsuit against Apple. It isn't your average corporate clash, either: The suit alleges that Apple's policies are "anticompetitive and exclusionary," and it accuses Apple of having a smartphone monopoly.
The Department of Justice's lawsuit against Apple points to the company's intentions to lock users into their ecosystem by offering experiences only available on the company's devices. The suit alleges that Apple does this by controlling developers and partners who want to operate on the platform: If you want to make an iPhone app, you need to sell it through the App Store, and with each sale, Apple gets a 30% cut. The same applies to features like tap-to-pay: If you want users paying with their iPhones, Apple needs to see some of that money, too.
The focus of the suit is on five key claims of Apple stifling competition, making the market worse for consumers:
Apple suppresses "super apps" on its platforms—apps that do many things and can be used across devices.
Apple suppresses cloud streaming game apps, which would lessen the importance of hardware when choosing to play intensive games. Users might not feel obliged to buy the best iPhone to play their games when a more inexpensive, underpowered device would achieve the same streaming from the cloud.
Apple suppresses the usefulness of third-party messaging apps by not allowing carrier messages to go through them. Green text bubbles wouldn't be an issue on iPhone if not for Apple.
Apple suppresses consumers from buying the smartwatch of their choosing by restricting the compatibility of non-Apple Watch smartwatches on iPhone. For example, you cannot respond to messages on a smartwatch other than an Apple Watch on your iPhone.
Apple suppresses digital wallets on its platforms. The suit argues that Apple should be allowing digital wallets to operate across devices, as well as allow financial institutions to offer "advanced digital payments services" to customers.
The Department of Justice, along with New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin, and the District of Columbia, argue that Apple's policies have stifled innovation from third parties but also from Apple itself, since customers are locked into the platform anyway. Why bother innovating when you know your user base isn't going anywhere?
Apple, for their part, are not happy about this lawsuit. In a statement, the company says:
At Apple, we innovate every day to make technology people love—designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” the company said in a statement. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it 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.
This is, of course, far from the first legal situation the company finds itself in regarding its potential of being a monopoly. In perhaps the most famous case, Epic Games took Apple head-on to fight against the company's 30% "Apple tax," but ultimately lost. In fact, the courts decided Apple wasn't a monopoly in regards to its App Store. However, these arguments were well received in Europe: The European Commission ruled Apple must, among other things, allow third parties to build their own app stores on iOS, allow third parties to build original iOS web browsers, and allow third parties to create digital wallets. (The Commission stopped short of ruling that iMessage was a "core platform service," so that platform will stay closed for now.)
This is going to be an interesting case to watch. It's true that Apple works hard to lock its users into its ecosystem, and part of that effort is made by heavily controlling how both users and developers interact with the platforms. But it isn't clear how much of that operating standard could be considered illegal or truly monopolistic. I'll leave us with this quote from the suit:
Smartphones have so revolutionized American life that it can be hard to imagine a world beyond the one that Apple, a self-interested monopolist, deems good enough. But under our system of antitrust laws, "good enough" is, quite simply, not enough.