The US Sues Apple Over iPhone Competition: What to Know
"The Department of Justice says Apple has stifled competition and violated antitrust laws in the name of security.
The US Department of Justice and 16 state attorneys general say Apple has used its industry-defining iPhone to enrich itself while stifling competition.
James Martin/CNETThe US Department of Justice and 16 state attorneys general filed an antitrust lawsuit against Apple on Thursday, saying the company has used its industry-defining iPhone as a tool to enrich itself while stifling competition.
In an 88-page suit filed in the US District Court for the District of New Jersey, the government argued that Apple violated antitrust laws through its tight control over the iPhone, preventing other companies from creating key applications and services that would compete with its own. The result, the government said, is that Apple has kneecapped competition from apps that would offer functionality consumers would benefit from, such as support for a competitor's smartwatch, digital wallet or cross-platform messaging service.
"We allege that Apple has consolidated its monopoly power, not by making its own products better, but by making other products worse," US Attorney General Merrick Garland said in a news conference Thursday. He added that Apple's share of the US smartphone market exceeds 65% and that the company maintains its power by creating barriers that "make it extremely difficult and expensive for both users and developers to venture outside the Apple ecosystem."
Apple denied the government's accusations, saying in a statement that the lawsuit "threatens who we are and the principles that set Apple products apart in fiercely competitive markets." The company added that if the suit were to succeed, it would "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," the company added.
The US government's lawsuit strikes at the heart of Apple's nearly $3 trillion empire, built off the wild success of its iPhone. Since its introduction 17 years ago, Apple's been able to leverage the iPhone into a powerhouse of industry, powering services like its App Store, which itself has become the lifeblood of multibillion-dollar companies including Uber, Airbnb and Spotify.
Critics say Apple's success has come at a cost, choking out competitors whose products are unable to compete against Apple's own products and services built around the iPhone's core functionality.
The lawsuit has the potential to reshape the decisions tech companies can make when creating secondary experiences for the devices they build. The Justice Department cited many examples where it believes this is happening, including video game streaming, cross-platform messaging, smartwatches, web browsers and advertising.
Here's everything you need to know about the lawsuit so far.
Not just the US
The DOJ's lawsuit against Apple is a historic one that will likely have impact far beyond Apple's business practices for many years to come. But it's also the latest in a series of regulatory and legal challenges Apple's faced from governments around the world.
Most notably, the European Union hit Apple with a landmark $2 billion fine earlier this month, for preventing rival streaming services from telling users about cheaper ways to subscribe outside Apple's App Store.
More regulation
There's been a steady drumbeat of increasing regulation aimed at the tech industry over the past few years.
The first major one was the EU's General Data Protection Regulation, or GDPR, which was ratified in 2016. That sweeping law gave EU residents more control over their data, while requiring companies to disclose how it's tracked, gathered and used. Among other things, it forced websites to ask for permission every time they want to use cookies that gather information on you.
Another set of EU laws, known as the Digital Markets Act, attempts to curb the tech industry's power by identifying "gatekeeper" companies, whose power is so vast that they must follow rules that ensure fair competition.
For Apple, that's forced a radical change to the App Store. Earlier this month, the company released a version of its iPhone software made to allow European customers to download apps from outside the App Store, the first time the company has sanctioned such moves. Apple has said that while it intends to comply with the EU's laws, allowing people to download apps from anywhere around the web creates potential security threats that potentially expose user's private information.
Marketing vs. reality
The Justice Department's case against Apple questions the company's marketing that its strict controls over the App Store are in the best interests of consumers, and the wider industry.
Apple has argued for years that it needs to treat the security of its iPhones and iPads differently from any other device before, because these handheld internet-connected supercomputers can collect so much information about who we are, where we go and what we do. The DOJ is arguing that even if that's true, Apple has used security as an excuse to push out competitors who could have offered apps, devices or services people benefit from.
The DOJ's specific examples
The US agency's sweeping lawsuit focuses on some specific areas of Apple's business it believes are anticompetitive.
Cross-platform messaging
This is likely to be the issue most of us relate to, as we're all well steeped in the debate over green bubbles versus blue bubbles. The Justice Department went a step further and noted that green bubble messages are lower quality and don't have modern features like typing alerts that have become commonplace across the industry.
Video game streaming
Apple has famously fought Microsoft, Epic and other companies over game streaming, creating a rift among tech giants who say they're trying to provide more video game playing options on the iPhone. Apple eventually relented, as it was preparing to comply with the EU's DMA rules, among others.
Web browsers
Apple keeps particularly tight control over the web browsing experience on the iPhone, arguing it can be an attack vector for cybercriminals otherwise. Outside the EU, other web browsers are allowed to be offered on the iPhone, but they must use Apple's built-in "engine" to translate web data into the text and images you see on the screen. It may seem nerdy, but it's at the heart of how the internet runs. In the EU, because of the DMA, iPhone and iPad users can choose to use other web browsers and their separate engines, such as Mozilla's Firefox.
Smartwatches
The Apple Watch is an industry behemoth, selling more units than all Swiss watch makers combined. Few other companies have been able to compete in the smartwatch category, which the Justice Department says is because Apple's tight control over software effectively slows competition.
Advertising
This is a big one. Apple has come out swinging against companies like Alphabet's Google and Meta's Facebook, attempting to curtail the way they track user behavior across the iPhone and open web. Facebook has said some of Apple's moves, such forcing apps to ask users for approval of tracking technology, have cost it tens of billions of dollars."
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