The US Justice Department sued Apple in an antitrust case, claiming that the iPhone maker has a monopoly over the phone market that has harmed consumers, developers, and rival companies.
The government claims that Apple’s ecosystem, from the Apple Watch to Apple Pay, supports that monopoly.
Apple shares fell more than 4% during trading Thursday, wiping more than $US11 billion from the company’s value.
It’s value peaked at nearly $US3.08 trillion in mid December, 2023 and Thursday’s close put that figure at around $US2.6 trillion.
Apple vowed in a statement to fight the case ( – great for the lawyers).
The challenge strikes at the near of Apple’s walled-garden model and comes as regulators worldwide scrutinise tech companies- the US government’s court case against Google over online advertising is due to start in early September, if there is not a settlement before then.
Amazon is being sued by the US Government and 17 US states over claims the company abused its powers to squeeze merchants and thwart rivals — resulting in higher prices and lower-quality goods for the tens of millions of American households who regularly shop at the company’s online superstore.
But the Apple action is the biggie as it strikes at the heart of the leading operator in the smartphone and devices markets.
The US Justice Department claimed in its action that Apple’s iPhone ecosystem is a monopoly that drove its “astronomical valuation” at the expense of consumers, developers and rival phone makers.
That could mean seeking the break up of Apple, if the government was to win. A Justice Department official told a briefing call that structural relief (break up) was on the table if the government was to win, according to US media reports.
The lawsuit claims Apple’s anti-competitive practices extend beyond the iPhone and Apple Watch businesses, citing Apple’s advertising, browser, FaceTime and news offerings.
“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” according to the suit, filed by the DOJ and 16 attorneys general in New Jersey federal court.
A breakup of Apple if successful would be one of only a handful of breakups under the Sherman Act (the key anti-trust law in the US). The DOJ has considered using it in other antitrust cases, but has not done so since the breakup of the Bell System in 1982.
The Justice Department said in a release that to keep consumers buying iPhones, Apple moved to block cross-platform messaging apps, limited third-party wallet and smartwatch compatibility, and disrupted non-App Store programs and cloud streaming services.
The challenge represents a significant risk to Apple’s walled-garden model. The company says that complying with regulations costs it money, could prevent it from introducing new products or services, and could hurt customer demand.
The lawsuit could force Apple to make changes in its most valuable businesses: The iPhone, in which Apple reported more than $200 billion in sales in 2023, the Apple Watch, part of the company’s $40 billion wearables business, and its profitable services area, which reported $85 billion in revenue and has grown faster than any other part of the business.
Apple has boasted it has more than a billion subscribers to its various services with most of those in the US and this is where any successful court action would have the biggest impact because it has been clear for a while that Apple sees services as its future business model with its regular, monthly revenue streams.
