This is the bitterest bite of the apple championed by Silicon Valley and which seemed untouchable.
The US Department of Justice (DOJ), together with the attorneys general of 16 states, filed a complaint this Thursday against Apple because the iPhone, its watchword, uses monopolistic practices to achieve an “astronomical valuation” and raise prices of services at the expense of consumers, technology developers and other mobile phone manufacturers. This is the first major antitrust movement against this firm.
The complaint highlights that the company uses anticompetitive practices even beyond the iPhone and Apple Watch businesses, and there cites brand advertising, the browser, Face Time calls and new offers.
“Each of these steps by Apple leads to building and reinforcing the moat it has dug around the smartphone monopoly,” says the text filed in federal court in New Jersey. The company’s shares fell more than 4% as soon as this legal initiative became known.
The until now almost model company joins other large technology companies denounced by the US administration, such as Alphabet (parent of Google), Meta (groups Facebook or Instagram) or Amazon.
According to a statement from the DOJ, and so that consumers will continue buying their iPhones, Apple blocked cross-platform messaging applications, causing harm to cloud programs and streaming services that were not in its online store.
Merrick Garland, Attorney General of the United States (equivalent to the Minister of Justice), remarked in a press conference that “consumers should not pay higher prices due to companies’ violation of competition laws.”
The head of the DOJ defined monopoly in that appearance as “the power to control prices or exclude competition.” And he added: “As our complaint states, Apple has that power in the smartphone market. If this is not questioned, the company will continue to reinforce that monopoly.”
This challenge represents a significant risk for the company and its well-walled territory model. The company led by Tim Cook responded that complying with regulations costs it money and that this case could prevent it from introducing new products or services and harm customer demand.
The 88-page complaint has the potential to force Apple to make changes to some of its most valuable businesses: the iPhone, which reported more than $200 billion in sales in 2023; the Apple Watch, which is part of the 40 billion dollar allocation in the clothing sector; and its benefits from the service line, which brought it profits of 85,000 million.
“This lawsuit attacks who we are and the principles that distinguish Apple products in a fiercely competitive market,” the company noted in its statement. “If successful, it will hinder our ability to develop the type of technology that users expect from Apple, be it hardware, software and cross-services,” he insisted. “It will also set a dangerous precedent by empowering the government to interfere with a heavy hand in the design of technology for citizens,” he stressed.
The accusation, however, responds to years of investigation into Apple’s practices and there were already two other more limited complaints regarding the price of electronic books and collusion with other companies to lower salaries.
But this new allegation is a depth charge aimed at Apple’s waterline, beyond the sanctions it has had to face, for example from the European Union. “This anticompetitive conduct is designed to maintain Apple’s monopoly power while obtaining the maximum possible profits,” the plaintiffs maintain in their story.
“The initiative adopted today seeks to hold Apple accountable and ensure that it does not deploy the same illegal strategy in other vital markets,” the text indicates.
Apple controlled 64% of the US smartphone market with its iPhone in the last quarter of 2023, compared to 18% for Samsung’s product.
