The federal government, along with more than a dozen states, is suing Apple in federal court, alleging that the technology giant has created a monopoly in the smartphone market.
Attorney General Merrick Garland announced the suit Thursday in Washington DC.
The Justice Department, joined by 15 states and the District of Columbia, sued Apple in federal court in New Jersey for violating the Sherman Antitrust Act, Garland said.
“Over the last two decades, Apple has become one of the most valuable public companies in the world. Today, its net income exceeds the individual Gross Domestic Product of more than 100 countries. That is in large part due to the success of the iPhone, Apple’s signature smartphone product,” he said. “For over a decade, iPhone sales have made up a majority of Apple’s annual revenue. Today, Apple’s share of the U.S. performance smartphone market exceeds 70 percent, and its share of the entire U.S. smartphone market exceeds 65 percent.
“Apple charges as much as nearly $1,600 for an iPhone. But as our complaint alleges, 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.
“Consumers should not have to pay higher prices because companies break the law. We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts both consumers and developers,” the attorney general said. “For consumers, that has meant fewer choices, higher prices and fees, lower quality smartphones, apps, and accessories, and less innovation from Apple and its competitors. For developers, that has meant being forced to play by by rules that insulate Apple from competition.
“And as outlined in our complaint, we allege that Apple has consolidated its monopoly power not by making its own products better — but by making other products worse,” he added. “Apple carries out its exclusionary, anticompetitive conduct in two principal ways. First, Apple imposes contractual restrictions and fees that limit the features and functionality that developers can offer iPhone users. Second, Apple selectively restricts access to the points of connection between third-party apps and the iPhone’s operating system, degrading the functionality of non-Apple apps and accessories.”
Allegations of corporate wrongdoing extends to software.
For most of the past 15 years, Apple has collected a “tax” in the form of a 30 percent commission on the price of any app downloaded from the App Store as well as on in-app purchases, Garland said.
“Apple is able to command these fees from companies of all sizes. Apple has also suppressed the emergence of programs like cloud streaming apps — including gaming apps — as well as super apps that could reduce user dependence on Apple’s own operating system and expensive hardware,” he said. “And, as any iPhone user who has ever seen a green text message, or received a tiny, grainy video can attest — Apple’s anticompetitive conduct also includes making it more difficult for iPhone users to message with users of non-Apple products.
“It does this by diminishing the functionality of its own messaging app and by diminishing the functionality of third-party messaging apps. By doing so, Apple knowingly and deliberately degrades quality, privacy, and security for its users,” Garland said.
“For example, if an iPhone user messages a non-iPhone user in Apple Messages, the text appears not only as a green bubble, but incorporates limited functionality, the conversation is not encrypted, videos are pixelated and grainy, and users cannot edit messages or see typing indicators. As a result, iPhone users perceive rival smartphones as being lower quality because the experience of messaging friends and family who do not own iPhones is worse — even though Apple is the one responsible for breaking cross-platform messaging. And it does so intentionally,” he said.
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