The many challenges Apple faces
For more than a decade, Apple could do virtually nothing wrong. The iPhone made it the most valuable company in the world. The App Store helped launch companies like Uber and Airbnb. And the company’s new products made it a player in healthcare, Hollywood and finance.
Now the difficulties are piling up. The Justice Department on Thursday filed an antitrust lawsuit against Apple for giving its own products benefits that it took away from competitors. The lawsuit is the latest in a series of lawsuits brought against the company by regulators on three continents.
The problems are testing the resilience of the Apple brand and undermining its business dominance, even as Apple products remain popular and continue to power a highly profitable business. The company reported a profit of $97 billion on revenue of $386 billion last year.
Here’s a look at the challenges ahead.
US v Apple
The Justice Department filed a sweeping antitrust lawsuit against Apple on Thursday, directly targeting the company’s most important business: the iPhone. The government argued in an 88-page lawsuit that Apple violated antitrust laws by preventing other companies from offering applications that compete with Apple products, such as its digital wallet.
The lawsuit follows a yearslong investigation into Apple that focused on the ways the company controlled the user experience on iPhones and other devices to create what critics call an uneven playing field. It has given its own products and services access to core features like the NFC chip and notification system that it denies to competitors like PayPal and Garmin smartwatches.
It could take months before the case comes to trial.
European regulators against Apple
On March 4, the European Commission fined Apple 1.8 billion euros ($1.95 billion) for thwarting competition by preventing music streaming rivals from offering users promotions and subscription upgrades. Because Apple is the sole gatekeeper controlling developers’ access to iPhone customers, European regulators said it wrote the rules for the App Store in a way that allowed Apple Music to offer benefits that it denied to rivals like Spotify.
“From now on, Apple will have to let music streaming developers communicate freely with their own users,” said Margrethe Vestager, executive vice president of the European Commission in charge of competition policy. The size of the fine, she added, “reflects both Apple’s financial power and the harm Apple’s behavior has caused to millions of European users.”
Since the fine, Apple has postponed a request from Spotify to inform users about offers on its website, Spotify said. The European Commission has said Apple could face additional fines if it doesn’t comply with the orders.
South Korea and the Netherlands against Apple
Apple is also facing fines from regulators in the Netherlands and South Korea.
In 2021, Dutch regulators ruled that Apple violated competition laws in the dating app market by preventing services like Tinder from using payment systems other than Apple’s. Rather than allow other payment systems to take that money, Apple lowered its commission from 30 percent to 27 percent on the price paid per user. But Dutch regulators said the move was inconsistent with the law and fined Apple €50 million ($53 million) last year.
A similar situation is playing out in South Korea, where lawmakers were among the first in the world to respond to developer complaints about App Store commissions by passing legislation forcing Apple to allow alternative payment systems. Apple has relaxed its requirement 26 percent. The country’s telecom regulator said this Apple could be fined $15.4 million for ‘unfair practices’.
Apple said it disagreed with the findings of Dutch and South Korean regulators. It is appealing against the Dutch fine and is awaiting the results of a South Korean investigation.
Japan, Australia and Great Britain against Apple
Several other countries are exploring legislation or regulations that could force Apple to loosen its grip, including Japan, Australia and Britain. The regulatory changes they are discussing could require Apple to offer alternative payment options and reduce its commissions. After seeing how Apple has complied with similar laws elsewhere, lawmakers may choose to be more prescriptive in their regulations.
The rules would be the latest to split what was once one App Store into a tangle of digital stores across national borders.
China vs Apple
Last fall, China began telling government agency employees not to use iPhones for work. Authorities made no public statements other than to say there were “media reports” about security flaws in iPhones. But the directive has spread throughout the country’s smartphone market.
iPhone sales in China fell 24 percent in the first six weeks of the year, according to Counterpoint Research, which tracks the smartphone industry. At the same time, sales of Huawei, once China’s largest smartphone maker, rose 64 percent after introducing a new phone with 5G wireless capabilities.
Epic vs. Apple
Apple largely triumphed over Epic Games, the maker of Fortnite, after the video game company sued Apple in 2020 over its App Store. But a federal judge has dealt a major blow to Apple’s control of the App Store, ruling that Apple violated California competition laws by preventing app makers from offering alternative ways to pay for services.
After the Supreme Court decided not to hear the case, Apple said it would comply with the ruling, just as it did in the Netherlands: by lowering the commission to 27 percent for developers who use alternative payment options.
Last week, Epic filed a motion in court challenging Apple’s compliance, saying the new fees and rules undermine the judge’s order. Meta and Microsoft have filed a brief in support of Epic, prompting the court to once again decide whether Apple is violating California law.
Developers vs. Apple
Before European regulators this month began enforcing a new competition law to give customers more choice, app makers complained that Apple’s response to the law broke the rules. The company would open the iPhone to alternative app stores and payment systems, but added these capabilities alongside new commissions and requirements.
On Monday, developers met with Apple in Europe and questioned how the fees complied with the law, which has several “free” provisions. Apple has insisted that its policies comply with the new rules.
European regulators could open a formal investigation into Apple’s plans. The lawsuit could spark a protracted legal battle that could force Apple to change or face fines of up to 10 percent of its annual global revenue, which was nearly $400 billion last year.
Wall Street vs. Apple
Apple’s investors are calling to jump into the world of generative artificial intelligence. The technology, which can answer questions, create images and write code, is being praised for its potential to create trillions of dollars in economic value.
But at a time when peers like Microsoft and Google are starting to build generative AI companies, Apple has yet to introduce a product. Apple CEO Tim Cook has assured investors that something is coming later this year. The company has been in talks with Google about adding its AI model called Gemini to iPhones.
Investors have sent Apple shares down more than 3.75 percent this year. At the same time, the Nasdaq Composite Index, packed with technology stocks, rose nearly 11 percent.