Today, Washington State Attorney General Bob Ferguson announced a partnership with the U.S. Department of Justice and a bipartisan coalition of 20 attorneys general in an antitrust lawsuit against Apple, accusing the tech giant of monopolizing the smartphone market.
The federal lawsuit, originally filed on March 21 in the U.S. District Court for the District of New Jersey, claims that Apple wields unlawful monopoly power in the smartphone market. This dominance allows Apple to dictate how users, developers, and businesses can use the iPhone, thereby stifling innovation and maintaining high prices.
The lawsuit argues that Apple’s alleged monopoly harms consumers in various ways beyond the initial smartphone purchase. For instance, by restricting iPhone users to only Apple-authorized banking apps for their digital wallets, Apple retains complete control over both users and the revenue generated from these apps. Additionally, Apple prohibits the creation and use of alternative app stores, which could offer consumers greater security, privacy, and other values tailored to their preferences. These restrictions prevent consumers from making informed choices about which smartphones to buy and which apps to use, maintaining Apple’s monopoly.
In 2010, then-CEO Steve Jobs discussed with other Apple executives how to “further lock customers into our ecosystem” and “make Apple’s ecosystem even more sticky.”
“An open marketplace encourages competition and creativity,” Ferguson said. “Apple’s monopoly over smartphones pads its profits at the expense of users, developers, and businesses. Ending its illegal monopolization over smartphones will level the playing field for everyone.”
The coalition of states and the DOJ is asking the court to order Apple to stop undermining technologies that compete with its own apps, such as streaming, messaging, and digital payments. They also want Apple to cease crafting contracts with developers, accessory makers, and consumers that enable it to maintain and entrench its monopoly.
According to the Attorney General’s Office (AGO), Apple’s market share of performance smartphones exceeds 70 percent, with a particularly strong hold among teenagers, where the iPhone’s market share is 85 percent. The lawsuit notes that nearly 90 percent of U.S. iPhone owners replace their iPhones with another iPhone, illustrating the tight control Apple maintains over its users. In fiscal year 2023, Apple generated net revenues of $383 billion, with net income surpassing that of any other company in the Fortune 500 and exceeding the gross domestic product of more than 100 countries.
The lawsuit claims that Apple violates antitrust laws in several ways:
• Messaging Restrictions: Apple limits the functionality of third-party messaging apps on the iPhone, making them less effective compared to Apple’s own messaging app. This degradation in quality, privacy, and security discourages users from switching to non-Apple smartphones.
• Blocking Cloud-Streaming Apps: Apple prevents the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other applications without needing expensive smartphone hardware.
• Restricting Smartwatch Functionality: Apple limits the functionality of third-party smartwatches, making it costly and inconvenient for users to switch from an Apple Watch to a non-Apple smartwatch.
• Inhibiting Digital Wallets: Apple prevents third-party apps from offering the same functionality as its digital wallet, thus denying users access to alternative digital wallets with potentially enhanced features.
• Suppressing Super Apps: Apple disrupts the development of super apps, which could offer broad functionality in a single app and improve competition by providing consistent user experiences across devices.
The AGO claims that Apple promotes itself as the guardian of consumer privacy and security, but the lawsuit argues that Apple compromises these interests when it serves its financial goals. The lawsuit aims to dismantle what is alleged as Apple’s monopolistic practices in order to foster a more competitive and innovative marketplace that benefits consumers, developers, and businesses alike.
