Apple's Legal Woes Mushroom As The DOJ Now Is Also Taking Actions Against The Company
On Thursday, the U.S. Department of Justice formally sued Apple for alleged monopolization of the smartphone market, marking the Biden administration's first major antitrust lawsuit against the company.
At the close of the day, Apple's stock price fell by more than 4%, vaporizing over $110 billion in market value overnight, reducing it to $2.6 trillion and narrowing the gap with NVIDIA, which follows closely in market cap.
U.S. Attorney General Merrick Garland said in a statement: Apple has maintained monopoly power in the smartphone market not simply by staying ahead of the competition on the merits but by violating federal antitrust law.
The Department of Justice's specific charges against Apple include using its market power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants.
The DoJ also stated that Apple charges up to $1,599 per iPhone, with profits higher than any other company in the industry. Apple charges various business partners behind the scenes, from software developers to credit card companies and even competitors like Google, ultimately raising consumer prices and Apple's own profits.
In the lawsuit, the DoJ accuses Apple of making it harder for consumers to block competitors and cites five examples where Apple used mechanisms to suppress technologies that could intensify competition in the smartphone market: super apps, cloud gaming apps, messaging apps, smartwatches, and digital wallets.
The Department focuses its allegations on Apple's monopoly in the smartphone field, with most analysts considering that Apple holds just over half of the smartphone market share in the United States. However, Apple intends to convince the court to define the market as the global smartphone market, where the iPhone only holds a fifth of the market share worldwide.
Apple claims that compliance with regulatory regulations would cost a significant sum, potentially prevent the launch of new products or services, and possibly harm customer demand.
In its latest statement, Apple claims that the lawsuit is untenable, both factually and legally. Apple believes that the litigation threatens the company's foundation, and if successful, it would hinder Apple's cross-technology abilities across hardware, software, and services, setting a dangerous precedent.
It is unclear what specific changes the Department of Justice is seeking from Apple. But in the aforementioned lawsuit, the Department of Justice asks the court to prevent Apple from using its control over app distribution, contractual terms, and private software interfaces to weaken competitors and orders other necessary measures to restore competitive conditions in the market affected by Apple's illegal conduct.
Before this, Apple had already been subject to antitrust investigations in Europe, Japan, and South Korea and is currently in litigation with companies like Epic Games.
In Europe, Apple's App Store business model is being challenged by the newly effective Digital Markets Act. On March 4th, the European Commission fined Apple over 1.8 billion euros for abusing its dominant market position by distributing music streaming applications to iPhone and iPad users (iOS users) through its Apple Store App Store.
The European Commission deems it necessary to impose a one-time fine on Apple, sufficient to prevent Apple from repeating the current or similar infringing actions and to deter other companies of similar scale and resources from committing the same or similar infringements.