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Apple wields iPhone power to thwart competition, U.S. suit says

Company promises to defend itself 'vigorously'

Attorney General Merrick B. Garland accused Apple of  "exclusionary anticompetitive conduct."
Attorney General Merrick B. Garland accused Apple of "exclusionary anticompetitive conduct." (Tom Williams/CQ Roll Call file photo)

The Justice Department and attorneys general of 15 states and the District of Columbia jointly filed a lawsuit Thursday against Apple Inc., alleging the company violated antitrust laws by using its dominant iPhone platform to freeze out competitors.

“Apple has maintained monopoly power for the smartphone market not simply by staying ahead of the competition on merits, but by violating federal antitrust law,” Attorney General Merrick B. Garland said at a news conference. “Apple has employed a strategy that relies on exclusionary anticompetitive conduct that hurts both consumers and developers.”

Apple’s market share for smartphones in the United States exceeds 65 percent, the company charges as much as $1,600 for an iPhone, and company’s annual net income exceeds the “individual gross domestic product of more than 100 countries,” he noted.

The lawsuit is the latest step by the Biden administration to take on Big Tech. The Federal Trade Commission has pending antitrust suits against Amazon and Facebook, while the Justice Department has sued Google on antitrust grounds relating to its search engine dominance.

Garland detailed how Apple imposes restrictions on developers to keep them from creating certain features, while it “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.”

Meanwhile, Apple has collected a “tax” in the form of a 30 percent commission on the price of any app downloaded from the Apple app store as well as on in-app purchases, he said.

Garland said the lawsuit is not intended to stop Apple from vetting apps that are featured on its app store, but rather to ensure that Apple does not engage in “exclusionary” actions that affect competitors.

“Rather than respond to competitive threats by offering lower smartphone prices to consumers or better monetization for developers, Apple would meet competitive threats by imposing a series of shapeshifting rules and restrictions in its App Store guidelines and developer agreements that would allow Apple to extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives,” the lawsuit, filed in the U.S. District Court for the District of New Jersey, says.

Apple said it would vigorously defend against the suit.

“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” the company said in a statement. “If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

Deputy Attorney General Lisa Monaco said at the news conference that “Apple has gone from revolutionizing the smartphone market to stalling its advancement,” with its app store rules.

Acting Associate Attorney General Benjamin Mizer compared Apple’s behavior to tactics by Microsoft that led to a 2001 lawsuit, in which the U.S. accused Microsoft of using its Windows Explorer web browser to shut out competition.

Although the U.S. District Court for the District of Columbia ruled that Microsoft’s actions amounted to unlawful monopoly, the decision was partially overturned on appeal. The two sides later reached a settlement and Microsoft agreed to change some of its practices.

Apple itself was a beneficiary of that lawsuit, Assistant Attorney General Jonathan Kanter said at the news conference, saying it paved the way for the launch of “iTunes, iPod, and eventually the iPhone, free from anti-competitive restrictions, excessive fees, and retaliation.”

Along with the District of Columbia, the states joining the lawsuit are Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, and Wisconsin.

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