WASHINGTON (AP) – The Justice Department announced Thursday a wide-ranging antitrust case against Apple, accusing the tech giant of illegal smartphone monopolies that exclude competitors, stifle innovation and keep prices artificially high. He was accused of orchestrating this.
The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopolistic power in the smartphone market and uses its dominance of the iPhone to engage in “pervasive and persistent illegal activities.” .
“Apple has locked consumers into the iPhone and shut competitors out of the market,” said Deputy Attorney General Lisa Monaco. It slowed the development of the very market it was revolutionizing and “stifled the entire industry,” she said.
Apple said the lawsuit is “false on the facts and the law” and will “vigorously defend itself.”
The lawsuit alleges how Apple manipulates its technology and business relationships to “extract more money from consumers, developers, content creators, artists, publishers, small businesses, and retailers, among others.” It is said to be focused on what is being built.
This includes reducing functionality on non-Apple smartwatches, restricting third-party digital wallets' access to contactless payments, and allowing the company's iMessage app to exchange encrypted messages with competing platforms. This includes refusing to do so.
Specifically, it will prevent Apple from infringing technology that competes with its apps in areas such as streaming, messaging, and digital payments, and will engage in “get and keep” deals with developers, accessory manufacturers, and consumers. They are trying to prevent them from continuing to enter into contracts that allow them to do so. , extend or establish a monopoly. ”
The lawsuit, filed before 16 state attorneys general, also takes on Google, Amazon and other tech giants with the stated goal of making the digital world more fair, innovative and competitive. It's just the latest example of the administration's aggressive antitrust enforcement.
“The Department of Justice has an enduring legacy of taking on the largest and toughest monopolies in history,” Assistant Attorney General Jonathan Cantor, head of the antitrust division, said at a press conference announcing the lawsuit. “Today, we stand here again to foster competition and innovation in next-generation technologies.”
Dina Srinavasan, a Yale University fellow and antitrust researcher, compared the significance of the case to the government's actions against Microsoft a quarter century ago, when it waged a “hard fight” against the world's most prosperous company. did.
“It's really hard to walk up to someone who is acting like a bully and pretending they're not a bully and hit them,” she said.
President Joe Biden called on the Justice Department and the Federal Trade Commission to vigorously enforce antitrust laws. The tougher crackdown on mergers and questionable business practices has been met with resistance from some business leaders who accuse the Democratic administration of overreach, but others have praised it as long overdue. has been done.
The lawsuit alleges that Cupertino, Calif.-based Apple Inc. has worked hard to build what is often referred to as a “walled garden” around popular products such as the iPhone, iPad, Mac, and Apple Watch. They are trying to poke holes in the digital fortress they have built over the years. ”, hardware and software seamlessly blend together in a user-friendly manner.
This strategy has helped Apple generate nearly $400 billion in annual revenue and until recently have a market value of more than $3 trillion. But even as much of the stock market hit new highs, Apple's stock price fell 7% this year, dethroning longtime rival Microsoft as the world's most valuable company. .
Apple said that if the lawsuit were successful, it would “impede our ability to develop the kind of technology people expect from Apple at the intersection of hardware, software, and services” and “set a dangerous precedent and create a government-designed “It will give strong authority to the.” People's technology. ”
“At Apple, we innovate every day to make technology people love, and design products that work together seamlessly, protect people's privacy and security, and create magical experiences for users. ” the company said in a statement. “This lawsuit threatens who we are and the principles that make Apple products stand out in a fiercely competitive market.
Apple defended the walled garden as an essential feature that will be appreciated by consumers who want maximum protection for their personal information. The company describes the barrier as a way to differentiate the iPhone from devices that run on Google's Android software. Android software is less restrictive and licensed to a wide range of manufacturers.
“Apple claims to be a champion of user data protection, but its app store pricing and partnership with Google Search erode privacy,” said Sumit Sharma, senior researcher at Consumer Reports. said in a statement.
The lawsuit alleges that Apple charges as much as $1,599 for each iPhone and has high profit margins per unit that are more than twice that of other companies in the industry. And when users perform Internet searches, Google gives Apple a “significant cut” of the advertising revenue generated by those searches.
The company's app store also charges developers up to 30 percent of the consumer app price.
Critics of Apple's alleged anticompetitive practices have long complained that the company is hypocritical in its claims to prioritize user privacy when profits are at stake. The company's iMessage service is protected from prying eyes with end-to-end encryption, but that protection evaporates the moment someone sends a text message to a non-Apple device.
But while mobile security expert Will Strafach believes Apple needs to govern, the Justice Department's focus on messaging may be misplaced and that security and He said he was concerned that privacy could be undermined.
“We are very happy that access to SMS messages is restricted,” said Strafach, creator of the Guardian Firewall app.
He points out that many apps on the iPhone, ostensibly for weather or news purposes, covertly and persistently send users' GPS data to third parties. Strafach said he was concerned that weakening Apple's security “could open the door to stalkerware/spouseware, which is already difficult to install on Apple devices compared to Android.”
However, prominent commentator Cory Doctorow said that while Apple has prevented companies like Facebook from spying on its users, it has “developed its own” He complained that he was running a “surveillance advertising empire.”
“Apple has a history of secret deals with surveillance giants like Google, and when[the ride-hailing company]built a backdoor to monitor iPhone users,[CEO]Tim Cook told the Uber app “Instead of a store ban, it's a slap on the wrist,” said Sean O'Brien, founder of the Yale Privacy Lab.
Concerns about antitrust crackdowns on Apple's business model have not only contributed to the decline in the company's stock price, but also caused the company to lag behind Microsoft and Google in promoting the development of products that utilize artificial intelligence technology. There are also concerns that
Antitrust regulators say in the complaint that Apple's walled garden is primarily a weapon to avoid competition, creating market conditions that allow it to charge higher prices and stifling innovation. However, he made it clear that he sees the company as promoting high profit margins.
“Consumers don't have to pay higher prices just because a company breaks the law,” said Attorney General Merrick Garland. At this rate, Apple “will only continue to strengthen its smartphone monopoly,” he added.
William Kovacic, a former chairman of the Federal Trade Commission and a professor at George Washington University, said he expects Apple's core defense will be that it never has a monopoly on the smartphone market. He said Justice Department lawyers built a “quality” argument about harm in the 88-page indictment, using “striking excerpts from the office's own documents.”
But don't expect a verdict until 2026. That means the case could easily drag on on appeal.
The case further escalates the Biden administration's antitrust siege, which has already accused Google and Amazon of engaging in illegal anticompetitive tactics, and failed attempts to block new acquisitions by Microsoft and MetaPlatform. As a result, he is suing Google and Amazon.
Additionally, the FTC filed suit in 2020 over Facebook's acquisition of Instagram and WhatsApp.
Kovačić predicted that an antitrust lawsuit by the FTC or the Department of Justice against Microsoft over its relationship with OpenAI is “on the horizon,” adding, “Both agencies are fighting over who is better equipped to handle this.” ” he said.
“They foresaw that this was going to be their agenda, and they're filling out the agenda exactly as they said they would,” he added. “These are all high-stakes issues, and you can expect a fierce and aggressive defense.”
Apple's business interests are also intertwined with the Justice Department's lawsuit against Google, which went to trial last fall and is headed to closing arguments scheduled to begin in Washington, D.C., on May 1. In this case, regulators claim that Google stifled competition by paying for the acquisition. Already, the dominant online search engine has won the rights to be the place to automatically process queries on iPhones and various web browsers, a deal expected to bring him between $15 billion and $20 billion a year in revenue. It is.
Apple could incur even more losses as the Justice Department steps up direct attacks on its entire business.
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Liedtke reported from San Francisco.
