US accuses Apple of monopolising smartphone markets

The US Department of Justice and 15 states have sued Apple, alleging it has used the powerful demand for its iPhone and other products to drive up prices for its services and hurt smaller rivals.

Apple joins a list of the biggest tech companies sued by US regulators, including Alphabet’s Google, Meta Platforms and Amazon.com across the administrations of both former US president Donald Trump and President Joe Biden.

“Consumers should not have to pay higher prices because companies violate the antitrust laws,” Attorney General Merrick Garland said in a statement.

“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”

Dating back to its time as a marginal player in the personal computer market, Apple’s business model has long been based on charging users a premium for technology products where Apple dictates nearly all of the details of how the device works and can be used.

The Justice Department seeks to unwind that business model by forcing Apple to offer users more choices around how apps can tap into the hardware that Apple designs.

The Justice Department, which was also joined by the District of Columbia in the lawsuit, alleges that Apple uses its market power to get more money from consumers, developers, content creators, artists, publishers, small businesses and merchants.

The 88-page lawsuit, filed in US federal court in Newark, New Jersey, said it was focused on “freeing smartphone markets from Apple’s anti-competitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future”.

In the lawsuit, the US accused Apple of making its products worse for consumers to block competitors and cited five examples where Apple used mechanisms to suppress technologies that would have increased competition among smartphones: so-called “super apps,” cloud stream game apps, messaging apps, smartwatches and digital wallets.

For example, the US alleges Apple made it more difficult for competing messaging apps and smartwatches to work smoothly on its phones.

They also allege that Apple’s app store policies around streaming services for games have hurt competition.

The Justice Department quoted an email chain from Steve Jobs, the Apple co-founder who died in 2011, saying that it was “not fun to watch” how easily consumers could switch from iPhones to Android phones and vowing to “force” developers to use its payment systems in an effort to lock in both developers and consumers.

Apple disagreed in a statement, saying: “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple - where hardware, software and services intersect.”

It is unclear what specific changes the Justice Department seeks.

The complaint asks a court to prevent Apple from using its control of app distribution, contracts and use of private software interfaces to undermine rivals and to order anything else necessary “to restore competitive conditions in the markets affected by Apple’s unlawful conduct”.

Apple has already been subject to antitrust probes and orders in Europe, Japan and South Korea as well as lawsuits from corporate rivals such as Epic Games.

One of Apple’s most lucrative businesses - its App Store, which charges developers commissions of up to 30 per cent - has already survived a lengthy legal challenge under US law by Epic.

While the lawsuit found that Apple did not violate antitrust laws, a federal judge ordered Apple to allow links and buttons to pay for apps without using Apple’s in-app payment commission.

Apple has restricted access to a chip in the iPhone that allows for contactless payments.

Credit cards can only be added to the iPhone by using Apple’s own Apple Pay service.

Apple has long argued that it restricts access to some user data and some of the iPhone’s hardware by third-party developers for privacy and security reasons.