The US Justice Department and 16 state and district Attorneys General filed an antitrust suit against Apple (AAPL), accusing the tech giant of violating antitrust laws with both its hardware and software.
The suit alleges Apple has a monopoly in the smartphone market and uses its position in a way that harms consumers, developers, and competition. The suit alleges that Apple met "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."
For its part, Apple says "This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple... We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”
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Editor's note: This article was written by Stephanie Mikulich.
Video Transcript
SEANA SMITH: Breaking news, the Justice Department alongside 16 attorneys general filing an antitrust lawsuit against Apple just moments ago. The DOJ accusing Apple of violating antitrust laws by blocking its rivals from accessing both hardware and software features on its iPhone devices. Our legal reporter Alexis Keenan joining us now on set with these details. Alexis, what are we learning?
ALEXIS KEENAN: Yeah, so so far this is what Bloomberg is reporting. We're waiting to get a copy of the suit. And what it says is that these AGs and the DOJ have filed antitrust claims against Apple in federal court in New Jersey.
And it's targeting the iPhone ecosystem, saying that the company maintains its dominance over that ecosystem by blocking competition for services like financial services businesses. So think about payment apps, also device trackers, things like the AirTag. And what they're saying is that Apple is stifling innovation, stifling competition, alleging that the company is using its power over this app distribution on the app phone in order to block competition.
Now, in response, Apple is saying this, "The lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. 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," they say, "empowering the government to take a heavy hand in designing people's technology."
Now, this is a major target against Apple because if you take a look at its annual revenues for 2023, you have the iPhone, right, as its biggest driver of revenue, $200 billion last year. So this is a major threat to the company.
And if you go back to the lawsuit that-- the antitrust lawsuit that Epic and Apple were battling out over the course of the last few years that the DOJ joined, that lawsuit it had to do with the App Store. But importantly, it was targeting part of this ecosystem.
Now, you have the iPhones, the App Store, iWatch, iMessage, AirTags, all potentially involved in this suit. But just such a big deal. And during the testimony in that Apple and EPIC trial, Tim Cook got up, took the stand.
And what he was talking about was that Apple needs to produce its products in this way in this ecosystem because they say it protects people's data security, protects their personal privacy. This, Apple said, was of pinnacle importance to the company. They want to be able to produce products this way.
So I would not be surprised if when we hear Apple's response further in this case, if we might hear echoes of that. And that's what I'm seeing here in this statement from Apple saying that it would be a dangerous precedent for the government to have a hand in trying to tell companies how they should do things like protect data.
BRAD SMITH: And precedent is the key word here too because it's not just the US and how they would potentially look at it regulators here. But then also elsewhere around the world, where might they face similar tests? And how could that mindset that now the DOJ and multiple attorneys general that they're moving with-- moving forward with, how could that permeate more broadly and potentially impact Apple as well?
ALEXIS KEENAN: Yeah, it already has, arguably, right? Because you had the EU, the European Commission, its antitrust regulator there, just last week or so, a $2 billion fine against Apple. But it was targeting the way that the company handles music apps within the App Store.
So most of the litigation so far, most of the antitrust complaints have been specifically about the App Store. So what this does is it really broadens that antitrust lens. We still need to take a harder look and a more detailed look at this complaint to get to the actual-- the specifics here. But no doubt, this is a major broadening of what is being targeted in Apple's products.
SEANA SMITH: And, Alex, I'm curious just in terms of what this could also tell us about further pressure for not just Apple but also for some of the other tech competitors out there, very different business models obviously, this specifically targeting the App Store and iPhone. But what this could, I guess, lend to some of the activity that we could see given the focus that we see from the DOJ on Apple at this point.
ALEXIS KEENAN: Yes. And not just DOJ, the FTC as well, right. So Apple's been kind of this late comer getting on the defensive side of these antitrust arguments. You have the DOJ's case against Google in Washington, DC, pending against search and search advertising.
Any minute now, we could get a decision from the judge in that case. That one's being handled by a judge. Big case against Google there. Also you have the FTC going after Amazon, going after Facebook, and unsettled cases.
You have another case with states going after Google on similar grounds. So Apple now being added to this fray. Certainly, the Biden administration making these major pushes on antitrust front against these big tech companies.
But also these investigations, many of them started with the Trump administration, so we can't necessarily say it's attributable to the Biden administration. And look, this case, this Apple case, this will extend long past this current administration. And if the history is any indicator, we could see these cases go out as far as decades, right, in the case of Microsoft. And they can go on quite a long time.
BRAD SMITH: Yeah. Absolutely massive case for us to track going forward. Alexis, thanks so much for joining on the snap here to make sure that we can break this down. Appreciate it.
