Apple has kept illegal monopoly over smartphones in US, Justice Department says in antitrust suit

Washington, March 21

The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation.

The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopoly power in the smartphone market and uses its control over the iPhone to “engage in a broad, sustained, and illegal course of conduct.”

The lawsuit — which was also filed with 16 state attorneys general — is the latest example of the Justice Department’s approach to aggressive enforcement of federal antitrust law that officials say is aimed at ensuring a fair and competitive market, even as it has lost some significant anticompetition cases.

Apple called the lawsuit “wrong on the facts and the law” and said it “will vigorously defend against it.”

President Joe Biden has called for the Justice Department and the Federal Trade Commission to vigorously enforce antitrust statutes. The increased policing of corporate mergers and business deals has been met with resistance from some business leaders who have said the Democratic administration is overreaching, but it’s been lauded by others as long overdue.

The case is taking direct aim at the digital fortress that Apple Inc., based in Cupertino, California, has assiduously built around the iPhone and other popular products such as the iPad, Mac and Apple Watch to create what is often referred to as a “walled garden” so its meticulously designed hardware and software can seamlessly flourish together while requiring consumers to do little more than turn the devices on.

The strategy has helped make Apple the world’s most prosperous company, with annual revenue of nearly USD 400 billion and, until recently, a market value of more than USD 3 trillion.

But Apple’s shares have fallen by 7 per cent this year even as most of the stock market has climbed to new highs, resulting in long-time rival Microsoft — a target of a major Justice Department antitrust case a quarter-century ago — to seize the mantle as the world’s most valuable company.

Apple said the lawsuit, if successful, would “hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect” and would “set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

“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.

But antitrust regulators made it clear in their complaint that they see Apple’s walled garden most as a weapon to ward off competition, creating market conditions that enable it to charge higher prices that have propelled its lofty profit margins while stifling innovation.

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” Attorney General Merrick Garland said in a statement.

“We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”

With the attempt to rein in Apple’s dominance, the Biden administration is escalating an antitrust siege that has already triggered lawsuits against Google and Amazon accusing them in engaging in illegal tactics to thwart competition, as well as unsuccessful attempts to block acquisitions by Microsoft and Facebook parent Meta Platforms.

Apple’s business interests are also entangled in the Justice Department’s case against Google, which went to trial last fall and is headed toward final arguments scheduled to begin May 1 in Washington, DC.