A federal lawsuit accuses Apple of unlawful monopolization of the smartphone market

Washington State Attorney General Bob Ferguson today announced a partnership with the U.S. Department of Justice and a bipartisan coalition of 20 attorneys general in an antitrust lawsuit against Apple, accusing the tech giant of monopolizing the smartphone market.

The federal lawsuit, originally filed on March 21 in the U.S. District Court for the District of New Jersey, alleges that Apple exercises an unlawful monopoly position in the smartphone market. This dominance allows Apple to dictate how users, developers and businesses can use the iPhone, thereby stifling innovation and keeping prices high.

The lawsuit alleged that Apple’s alleged monopoly harms consumers in a variety of ways beyond the initial purchase of a smartphone. For example, by restricting iPhone users to only use Apple-authorized banking apps for their digital wallets, Apple retains full control over both the users and the revenue generated by these apps. Additionally, Apple prohibits the creation and use of alternative app stores that could provide consumers with greater security, privacy and other values ​​tailored to their preferences. These restrictions prevent consumers from making informed choices about which smartphones to buy and which apps to use, maintaining Apple’s monopoly.

In 2010, then-CEO Steve Jobs talked to other Apple executives about how to “lock customers even more into our ecosystem” and “make the Apple ecosystem even stickier.”

“An open market encourages competition and creativity,” Ferguson said. “Apple’s smartphone monopoly generates profits at the expense of users, developers and companies. Ending the illegal monopolization of smartphones will level the playing field for everyone.”

A coalition of states and the Department of Justice are asking the court to order Apple to stop weakening technologies that compete with its own apps, such as streaming, messaging and digital payments. They also want Apple to stop making deals with developers, accessory makers and consumers that would allow it to maintain and strengthen its monopoly.

According to the Attorney General’s Office (AGO), Apple’s share of the high-performance smartphone market exceeds 70 percent, with a particularly strong presence among teenagers, where the iPhone’s market share is 85 percent. The lawsuit notes that nearly 90 percent of iPhone owners in the U.S. replace their iPhones, illustrating the tight control Apple exercises over its users. In fiscal year 2023, Apple generated net revenues of $383 billion, which is net income greater than that of any other Fortune 500 company and greater than gross domestic product in more than 100 countries.

The lawsuit alleges that Apple violates antitrust laws in several ways:

• Message restrictions: Apple limits the functionality of third-party messaging apps on iPhone, making them less effective compared to Apple’s messaging app. This degradation in quality, privacy and security discourages users from switching to third-party smartphones.

• Blocking cloud streaming apps: Apple is preventing the development of cloud-based streaming apps and services that would allow consumers to enjoy high-quality video games and other applications without the need for expensive smartphone hardware.

• Limiting Smartwatch functionality: Apple limits the functionality of third-party smartwatches, making switching from an Apple Watch to a third-party smartwatch expensive and inconvenient for users.

• Blocking digital wallets: Apple prevents third-party apps from offering the same functionality as its digital wallet, thereby denying users access to alternative digital wallets with potentially improved features.

• Skipping Super Apps: Apple is disrupting the development of super apps, which could offer broad functionality in a single app and increase competition by providing consistent user experiences across devices.

The AGO claims that Apple promotes itself as a guardian of consumer privacy and security, but the lawsuit alleges that Apple jeopardizes those interests when it serves its financial purposes. The lawsuit seeks to eliminate Apple’s alleged monopolistic practices in order to create a more competitive and innovative market that benefits consumers, developers and businesses alike.