The Justice Department joined 16 states and the District of Columbia in filing an antitrust lawsuit against Apple on Thursday. This is the federal government’s biggest challenge to the reach and influence of the company that has put iPhones in the hands of more than a billion people.
In an 88-page lawsuit, the government argued that Apple violated antitrust laws with practices designed to increase customers’ dependence on their iPhones and reduce the likelihood that they would switch to a competing device.
The tech giant blocked other companies from offering applications that compete with Apple products, such as: B. his digital wallet, which could reduce the value of the iPhone, the government said. Apple’s policies harm consumers and smaller businesses that compete with some of Apple’s services in the form of “higher prices and less innovation,” the lawsuit says.
“Each step in Apple’s conduct built and strengthened the moat around its smartphone monopoly,” the government said in the lawsuit filed in the U.S. District Court for the District of New Jersey.
The lawsuit caps years of regulatory scrutiny of Apple’s wildly popular lineup of devices and services, fueling the company’s growth into a nearly $2.75 trillion publicly traded company that was for years the most valuable on the planet. It takes direct aim at the iPhone, Apple’s most popular device and most powerful company, attacking the way the company has made the billions of smartphones it has sold since 2007 the centerpiece of its empire.
By tightly controlling the user experience on iPhones and other devices, Apple has created what critics call an unlevel playing field, giving its own products and services access to core features that it denies its competitors. Over the years, financial companies’ access to the phone’s payment chip and Bluetooth trackers has been restricted through the use of the location services feature. It is also easier for users to connect Apple products such as smartwatches and laptops to the iPhone than to those from other manufacturers.
The company says this makes its iPhones more secure than other smartphones. But app developers and rival device makers say Apple is using its power to crush the competition.
“This lawsuit represents a threat to who we are and the principles that define Apple products in highly competitive markets,” an Apple spokeswoman said. “If it succeeds, it would impact our ability to develop the kind of technology that people expect from Apple – where hardware, software and services overlap. It would also set a dangerous precedent and enable the government to play a crucial role in shaping technology for the people.”
The lawsuit asks the court to stop Apple from engaging in current practices including blocking cloud streaming apps, undermining messages across smartphone operating systems and preventing the creation of alternatives to digital wallets. Apple will also be ordered to pay an unspecified fine.
It’s unclear what impact the lawsuit — which will likely drag on for years before any resolution — would have on consumers.
Apple has effectively fended off other antitrust challenges. In a 2020 lawsuit brought by Fortnite maker Epic Games over its App Store policies, Apple convinced the judge that customers could easily switch between its iPhone operating system and Google’s Android system. Data has been presented showing that the reason few customers change their phone is their loyalty to the iPhone.
The company has also defended its business practices in the past by saying its “approach has always been to grow the pie” and “create more opportunities, not just for our company, but for artists, creatives, entrepreneurs and every ‘crazy.’ ‘ with great success.” Idea.”
Every modern tech giant has faced a major federal antitrust challenge. The Justice Department is also pursuing a case targeting Google’s search business and another case focused on Google’s influence over advertising technology. The Federal Trade Commission filed a lawsuit accusing Meta, the owner of Facebook, of stifling competition by buying Instagram and WhatsApp, and in another lawsuit accusing Amazon of abusing its power over online retail to have. The FTC also unsuccessfully tried to stop Microsoft from acquiring Activision Blizzard, the video game publisher.
The lawsuits reflect a push by regulators to increase scrutiny of companies’ roles as gatekeepers to commerce and communications. In 2019, authorities under President Donald J. Trump launched antitrust investigations into Google, Meta, Amazon and Apple. The Biden administration has poured even more energy into the effort, appointing critics of the tech giants to head both the FTC and the Justice Department’s antitrust division.
In Europe, regulators recently fined Apple €1.8 billion for blocking music streaming rivals from communicating with users about promotions and options to upgrade their subscriptions. App makers have also appealed to the European Commission, the European Union’s executive arm, to investigate claims that Apple is violating a new law that requires iPhones to be opened to third-party app stores.
The company may face fines in South Korea and the Netherlands over the fees it charges app developers for using alternative payment processors. Other countries, including Britain, Australia and Japan, are considering rules that would undermine Apple’s influence over the app economy.
The Justice Department, which began its investigation into Apple in 2019, opted for a broader and more ambitious case than any other regulator ever brought against the company. Instead of focusing narrowly on the App Store like European regulators, they focused on Apple’s entire ecosystem of products and services.
The lawsuit, filed Thursday, focuses on a series of practices that the government says Apple used to consolidate its dominance.
The company is “undermining” iPhone users’ ability to message with owners of other types of smartphones, such as those with the Android operating system, the government said. This gap – embodied by the green bubbles that display an Android owner’s messages – is a signal that other smartphones are of lower quality than the iPhone, the lawsuit says.
Apple similarly made it harder for the iPhone to work with smartwatches other than its own Apple Watch, the government argued. Once an iPhone user owns an Apple Watch, it becomes far more costly for them to give up the phone.
The government also said Apple tried to maintain its monopoly by not allowing other companies to build their own digital wallets. Apple Wallet is the only app on the iPhone that can use the chip known as NFC, which allows a phone to pay with a tap at the checkout. Although Apple encourages banks and credit card companies to allow their products to work in Apple Wallet, it prevents them from gaining access to the chip and creating their own wallets as an alternative for customers.
The government also said Apple was refusing to allow game streaming apps that could make the iPhone a less valuable piece of hardware, or to offer “super apps” that let users perform a variety of activities through one application.
The government’s complaint uses similar arguments to the claims it made decades ago against Microsoft in a landmark lawsuit that argued the company had tied its Web browser to the Windows operating system, said Colin Kass, an antitrust lawyer at Proskauer Rose. He added that the most compelling claim – and the one that brings it closest to the Microsoft case – is that Apple could contractually prevent competitors from developing apps that work with other app providers, as was the case with “Super Apps” would be the case.
Other legal experts noted that the law allows companies to favor their own products and services, so the government will have to explain why this is a problem at Apple.
“This case is about technology,” Mr. Kass said. “Can antitrust laws force a company to redesign its product to make it more compatible with competitors’ products?”
Apple has defended itself against other antitrust challenges by arguing that its policies are critical to making its devices private and secure. In its defense against Epic Games, it argued that by restricting the distribution of apps, it could protect the iPhone from malware and fraud. The practice benefited customers and made the iPhone more attractive than competing devices with the Android operating system.
The government will try to show that the effect of Apple’s policies was to harm consumers, not help them.
“Competition makes devices more private and secure,” said Jonathan Kanter, assistant attorney general for the Justice Department’s Antitrust Division. “In many cases, Apple’s behavior has resulted in its ecosystem being less private and less secure.”
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2024-03-21 16:08:05
www.nytimes.com
