US moves closer to filing a sweeping antitrust case against Apple

The Justice Department is in the late stages of an investigation into Apple and could file a sweeping antitrust lawsuit targeting the company’s strategies to protect its iPhone dominance as early as the first half of this year, three said people with knowledge of the iPhone. matter.

The agency is focusing on how Apple has used its control over its hardware and software to make it harder for consumers to ditch the company’s devices and for rivals to compete, said the people, who spoke anonymously because it research was active.

Specifically, researchers examined how the Apple Watch works better with the iPhone than with other brands, and how Apple excludes competitors from its iMessage service. They also scrutinized Apple’s payment system for the iPhone, which prevents other financial companies from offering similar services, these people said.

Senior leaders of the Justice Department’s antitrust division are reviewing the results of the investigation so far, two people said. Agency officials have met with Apple several times, including in December, to discuss the investigation. No final decision has been made on whether to file a lawsuit or what it might entail, and Apple has not yet had a final meeting with the Justice Department in which it can present its case to the government before filing a lawsuit .

The Justice Department is nearing what would be the most consequential federal antitrust case against Apple, the world’s most valuable technology company. If the lawsuit is filed, U.S. regulators will have charged four of the largest tech companies with monopolistic business practices in less than five years. The Justice Department is currently facing Google in two antitrust cases targeting its search and ad tech businesses, while the Federal Trade Commission has charged Amazon and Meta with stifling competition.

The lawsuit against Apple would likely be even more expansive than previous challenges to the company, attacking the powerful business model that brings together the iPhone, devices like the Apple Watch and services like Apple Pay to attract and keep consumers loyal to its Products. Rivals have said they have been denied access to key Apple features such as Siri’s virtual assistant, prompting them to claim the practices are anti-competitive.

A Justice Department spokesperson declined to comment for this article. Apple also declined to comment.

The company has previously said its practices do not violate antitrust law. In defending its business practices against past critics, said Apple that her “approach has always been to make the pie bigger” and “create more opportunities, not just for our company, but for artists, makers, entrepreneurs and anyone who is ‘crazy’ with a big idea.”

The company takes pride in the way the iPhone integrates hardware and software to create a seamless customer experience. In 2020, That’s what Tim Cook, CEO of Apple, said during testimony before a Congressional antitrust committee that the company redefined mobile phones with “its effortless user experience, its simplicity of design and a high-quality ecosystem.” He added that Apple was competing with Samsung, LG, Google and other smartphone makers, which offer a different approach.

“Apple does not have a dominant market share in any market where we do business,” Cook said at the time. “That doesn’t just apply to the iPhone; this applies to every product category.”

The case would add to mounting regulatory pressure at home and abroad, hurting Apple’s business, which is currently valued at $2.83 trillion.

This year, European regulators are expected to force Apple to move app stores outside its own store under the Digital Markets Act, a law passed in 2022 to rein in tech giants. Similar actions against the App Store have been taken or are being considered in South Korea and Japan.

Additionally, in 2021, the European Commission said that Apple had violated its antitrust laws by imposing app store fees on competitors for its Apple Music product. The committee’s investigation into this matter continues.

The outcome of the Justice Department’s investigation could be influenced by the details of how Apple complies with European regulations, said two people with knowledge of the matter, who spoke on condition of anonymity because the investigation was ongoing.

Apple is facing increased regulatory pressure as business slows. Last year, the company reported that annual revenue fell 2.8 percent to $383 billion, the first fiscal year decline since 2019, when sales of iPhones, iPads and Macs slowed. Yet the company sold more than 200 million iPhones and… accounting for almost three quarters of smartphones sold worldwide at a price above $600, analysts estimate.

When the Justice Department began its tech investigations in 2019, it prioritized Google’s antitrust review over Apple because it lacked the financial resources and personnel to fully evaluate both companies, according to two people with knowledge of the matter . That changed in 2022 after the department budget was increased.

The investigation included a broader scope of Apple’s business interests than previously reported, six people with knowledge of the meetings said. That includes how Apple has blocked cloud gaming apps, which allow users to stream a wide range of titles to their phones, from being offered on the App Store.

Researchers spoke with executives from Tile, the Bluetooth tracking service, about Apple’s competing AirTag product and the restrictions the company places on third parties’ access to the iPhone’s location services. Executives at Beeper, a startup that made iMessage available on Android phones, spoke to researchers about how Apple blocked making it possible to offer messages through competing smartphone operating systems. Researchers also had conversations with banks and payment apps about how Apple is preventing them from accessing the tap-to-pay feature on iPhones.

Tile and Beeper declined to comment for this article.

They also looked at how the Apple Watch works better with the iPhone than other competing smartwatches. Users of Garmin devices have complained on Apple’s support forums that they cannot use their watches to respond to certain text messages from their iPhones or customize the notifications they receive from the iPhone they have connected to their watch .

Apple’s new privacy tool, App Tracking Transparency, which allows iPhone users to explicitly choose whether an app can track them, has received a lot of attention due to its limitations on advertisers’ collection of user data. Advertising companies have said the tool is anti-competitive.

Meta, the owner of Facebook and Instagram, encouraged the Justice Department to look into the issue in discussions with the agency, two of the people said. The company — which makes most of its money from advertising — said in 2022 that it could lose about $10 billion in revenue that year as a result of the changes. Meta declined to comment. Researchers also examined Apple’s policy of charging fees for purchases made in iPhone apps, which companies including Spotify and dating app giant Match Group say is anti-competitive.

In 2020, Epic Games, the maker of the popular game Fortnite, sued Apple over the App Store’s requirement that developers use the tech giant’s payment system. A federal judge ruled that Apple did not have a monopoly in mobile games, dealing a major blow to Epic’s claim.

When Epic Games sued Google over similar claims, it got a different result. A jury ruled in December that Google’s app store policies violated antitrust laws. Google plans to appeal the ruling.

The Justice Department last sued Apple in 2012, accusing it of conspiring with book publishers to raise the price of digital books. Apple lost the case and paid a $450 million settlement.