Is buying from Apple really a choice for US customers?

The US Department of Justice accused Apple of monopolizing smartphone markets, thus preventing US consumers from changing devices and developers from developing innovative products and services.

On March 21, 2024, the US Justice Department, together with sixteen states and the District of Columbia, filed a civil antitrust lawsuit against Apple. The multinational firm has been accused of monopolization or attempted monopolization of smartphone markets, thereby undermining its competitors’ products and services and thus preventing consumers from gaining the benefits deriving from innovation in the industry.

The parties allege that Apple creates a monopoly by “selectively” imposing contractual restrictions on developers and withholding critical information from them. Moreover, finance companies and Bluetooth trackers have been facing limitations: the former to access the phone’s payment chip —meaning impediments to the development of the tap-to-pay functionality for third-party apps— and the latter from tapping into the location-service feature. It’s also easier for users to connect Apple products to iPhones and other Apple products in general than to those made by other manufacturers. Innovative apps whose broad functionality would make interoperability easier have been blocked; the same fate has been imposed on cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware. 

All these practices have been harshly criticized, as competitors’ apps, devices and services are undermined and cannot de facto compete in the market.

The purpose of this lawsuit is to restore competition in all markets related to Apple’s alleged monopolizing power and make consumers less reliant on products from Steve Jobs and Steve Wozniak’s company. 

 “When corporations engage in anticompetitive conduct, the American people and our economy suffer,” said Acting Associate Attorney General Benjamin C. Mizer.

Contractual rules and restrictions have throttled competitive alternatives from rival technologies and prevented consumers and developers from enjoying lower costs.

This 88-page long lawsuit comes as Apple has been forced by the EU to allow developers access to the device’s tap-to-pay functionality; in addition, third-party app stores are now available on the Iphone.

Notwithstanding that, the tech colossal is not new to legal actions, in 2020 Epic Games accused the company of engaging in “unfair and anti-competitive actions”. This followed Fortnite removal from the App Store after allowing in-app purchases using Epic’s own payment processor, which allowed it to avoid the up to 30 percent commission deriving from Apple’s one. According to some estimates, the hefty cut demanded from the multinational for in-app payments is a business that generates nearly $20 billion a year.

In 2021, a legal settlement was reached with app developers; Apple and those suing it framed the deal as a major concession and a victory; nonetheless, the only substantial change was maintaining the commission rates flat for three years and to continue to base search results in its App Store on characteristics such as downloads and user ratings for the same amount of time.

The biggest praise came from the App Association, an organization that claims to give "a voice to small technology companies" but it is funded by big technology companies, including Apple. 

The legal payoff was framed by the tech company as "a fund to assist small U.S. developers, particularly as the world continues to suffer from the effects of COVID-19”, an astute way of damage control from a communication perspective.

The Coalition for App Fairness, a group of firms fighting Apple's alleged monopolizing power, commented that "[the settlement]does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem." The group added that Apple generally bars companies from telling in private communications with their customers to pay elsewhere and, according to the dissenting association, this is a further illustration of Apple's inappropriate control over the app marketplace.

Whether the 2024 civil lawsuit will be won by the Justice Department or Apple is still unknown; nevertheless, the legal saga does not seem to be ending soon for the US colossal.

References

Feiner, L. (2024, March 21). US sues Apple for illegal monopoly over smartphones. The Verge https://www.theverge.com/2024/3/21/24105363/apple-doj-monopoly-lawsuit

Nicas, J. (2021, August 28). Settlement Reached In Apple's Lawsuit With App Developers: [Business/Financial Desk]. New York Times https://www.proquest.com/newspapers/settlement-reached-apples-lawsuit-with-app/docview/2565338504/se-2

Robertson, A. & Roth, E. (2023, April 24). Apple’s App Store can stay closed, but developers can link to outside payments, says appeals court. The Verge. https://www.theverge.com/2023/4/24/23696245/apple-appeal-epic-games-lawsuit-antitrust

Office of Public Affairs (2024, March 21). Justice Department Sues Apple for Monopolizing Smartphone Markets. U.S. Department of Justice https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets