The Department of Justice in Washington has leveled accusations of monopolistic behavior against tech giant Apple concerning its iPhone business.
The US government is taking legal action against Apple, alleging that the company has constructed an anti-competitive barrier, or "moat," around its iPhone ecosystem, effectively monopolizing the market. The lawsuit, filed by the Department of Justice in a New Jersey federal court, claims that Apple engaged in exclusionary practices that hindered Americans from switching smartphones and impeded other companies from offering applications, products, and services to iPhone users.
Joining the federal government in this civil claim are 16 state attorneys general. US Attorney General Merrick Garland emphasized the importance of preventing companies from violating antitrust laws and artificially inflating prices. He argued that Apple's dominance in the smartphone market, not solely based on merit, but also due to antitrust violations, requires legal scrutiny to prevent further consolidation of power.
The lawsuit highlights the astronomical valuation of Apple, which ranks second only to Microsoft, with a market capitalization exceeding $2.6 trillion. However, following the announcement of the DOJ lawsuit, Apple's stock experienced a 4.1% decline, resulting in a loss of over $100 billion in market value.
At the core of the case is Apple's "walled-garden" business model, which effectively locks out competitors and limits consumer choice. This legal action follows a recent fine imposed by the EU on Apple for violating competition laws. The company was accused of preventing rival streaming services, such as Spotify, from offering cheaper subscription options to iPhone users.
Apple is alleged to have maintained its smartphone app market dominance by stifling innovation from competitors. The lawsuit argues that rather than enhancing its products, Apple discourages innovation that could threaten its market dominance.
Apple has refuted the DOJ's claims, asserting that the lawsuit could impede its ability to innovate and interfere with its technology design process. Additionally, the company warns of setting a precedent that would grant the government significant control over technology development.
If successful, the lawsuit could compel Apple to modify its profitable products, including the iPhone and Apple Watch. It might even require divestiture of certain business segments to foster more competition. According to Counterpoint Research, the iPhone held a commanding 64% share of the US smartphone market in the last quarter of the previous year, far surpassing Samsung's 18% share.