US sues Apple in antitrust lawsuit

California Attorney General Rob Bonta said in a news conference Thursday that the landmark lawsuit filed against Apple will ultimately be good for business and consumers.

California is one of the states participating in the DOJ action against Apple. As the largest state by population and the home state of Apple and many other Big Tech companies, California’s participation was notable.

“We need to make sure that consumers and competition in a fair market exist, and that’s what this lawsuit is about,” Bonta said. He noted that investigators have spent years building the case against Apple. And the bench trial in the US District Court in New Jersey may go on for roughly three years. 

Apple iPhone 15 models are displayed at a store on the products’ release day in Los Angeles on September 22.

As the case moves forward, expect Apple to challenge a vital component of the government’s lawsuit: How it defines the markets that Apple has allegedly monopolized.

The US government claims Apple has monopolized two distinct markets: A market for smartphones, and a separate market for “performance smartphones.”

Market definitions are critically important to antitrust lawsuits, because the courts can only rule on illegal monopolization claims with respect to specific, well-defined geographic and product markets.

The Justice Department describes “performance smartphones” as phones that are made with premium materials such as metal and glass; boast faster and better processors, or bigger storage sizes; and have advanced communications tech inside such as tap-to-pay chips. Performance smartphones are distinct from basic, entry-level devices that don’t have these same features, according to the complaint.

Defining the market this way allows the DOJ to make specific claims about Apple’s marketshare.

“Apple’s share of the US performance smartphone market exceeds 70% and its share of the entire US smartphone market exceeds 65%,” Attorney General Merrick Garland said at a press conference.

Apple, for its part, accuses the DOJ of using the wrong frame of reference, telling reporters Thursday the market for smartphones is global, not restricted to the US, and that by this measure Apple’s marketshare is closer to 20%.

Sen. Amy Klobuchar speaks during a hearing at the Capitol in Washington, DC, on January 31.

Minnesota Democratic Sen. Amy Klobuchar is one of several lawmakers who have increased focus and pressure on Big Tech companies in recent years. On Thursday, Klobuchar said she views the DOJ suit against Apple as a key part of Washington’s effort to rein in the tech industry:

Klobuchar said the case is a bellwether for Washington’s increased focus on competition and regulation of the broader technology sector. Klobuchar and other lawmakers are pushing for new regulations on social media, curbing its harms. And she sees regulatory oversight on Big Tech platforms as part of Washington’s current efforts.

Klobuchar is an architect of the American Innovation and Choice Online Act, a bill that aims to force US app stores to be more open. While it has cleared the Senate Judiciary Committee in the past, the legislation has yet to be passed by the full Senate amid stiff industry opposition.

The Apple lawsuit contains “damning” internal communications, a former top antitrust official with the Justice Department told CNN.

During Thursday’s press conference, Attorney General Merrick Garland referenced a 2013 internal communication in which a senior Apple executive acknowledged that improving how Apple works with third-party messaging platforms would “simply serve to remove [an] obstacle to iPhone families giving their kids Android phones.”

He also referenced a 2022 event at which Apple CEO Tim Cook was confronted about Android-to-iPhone messaging compatibility. Cook responded with the recommendation to “buy your mom an iPhone” to resolve the issue.

On a call with reporters Thursday, Apple representatives dismissed those internal messages as old and taken out of context, vowing to provide full context in litigation.

Apple claims the Justice Department has had to modify the legal theories underpinning its case at least six times over the course of a four-year investigation, as other court rulings have emerged undercutting the government’s case.

For example, on a call with reporters Thursday, Apple said an appeals court ruling last year finding that the company didn’t violate US antitrust laws with its app store was a major blow to the DOJ.

Apple declined to say how it knew the Justice Department was shifting its arguments, citing the need for confidentiality.

Apple also claimed DOJ is trying to make iPhones work more like Android devices — which Apple customers do not want — and would turn the US government into a de facto technology designer.

Although the lawsuit intends to break down Apple’s so-called walled garden and make its products and services more open, some experts worry about the potential downsides.

Michael Santoro, a professor of management at the Leavey School of Business at Santa Clara University, said he believes the user experience could change for consumers.

He also said if the lawsuit is successful, prices of an iPhone could potentially drop if the final product is “less robust.” 

“Customers may be less willing to pay for one,” he said.

A new iPhone 14 Pro is displayed during an Apple event in Cupertino, California, on September 7, 2022.

Not all consumers and organizations appreciated the action against Apple. Under founder Steve Jobs, Apple pioneered a sleek design for its hardware and a disciplined user experience for its software. Its products found early, loyal adoption among designers, graphic artists and other creatives in the 1980s and 1990s before expanding to broader mainstream appeal. Some of Apple’s most loyal fans see the DOJ’s action as an assault on good taste and high design.

The Computer & Communications Industry Association says it has advocated for sound competition and consumer protection principles that support innovation in tech for more than 50 years.

CCIA President & CEO Matt Schruers criticized the DOJ’s action:

A customer looks at products at an Apple store in Berkeley, California, on August 4.

If successful, the lawsuit’s impact could potentially ripple across Apple’s products, services and business model. 

Fees: Apple may need to lower developer fees which could ultimately impact its services revenue.

App Store: The company could be forced to allow access to other app stores or direct app installations, called “side-loading.” But interoperability and compatibility could raise some concerns; Tim Cook previously said its strict platform policies and oversight of app makers ensure that iOS apps are safe and trustworthy. “If we are forced to let unvetted apps onto the iPhone, the unintended consequences will be profound,” he said in 2022.

Greater support for cross-platform messaging: Apple lets iPhone users send high-quality photos and videos to one another but similar texts to Android phones are slower and grainy. It also famously maintains those messages in green bubbles, creating a kind of class divide, critics argue. The company may be required to provide equal support across platforms.

Wallet compatibility: Apple currently blocks third-party developers from offering tap-to-pay functionality. The lawsuit could force the company to allow more digital wallets.

And more: Other changes could come to compatibility with Apple Watches – which currently requires users to own an iPhone – and its mobile cloud service services, which could allow users to access games and other cloud-based apps without having to pay for pricey hardware.

US Attorney General Merrick Garland announces an antitrust lawsuit against Apple at the Justice Department in Washington, DC, on March 21.

Attorney General Merrick Garland announced a landmark lawsuit against tech giant Apple over a variety of allegations, including that it:

Garland claimed that Apple has a monopoly over the smartphone market, but not because of the value of its own products.

But, it will take some time to know whether Apple has, in fact, breached the antitrust laws. The case could take years to play out as it moves through the justice system.

The DOJ complaint points to remedies that could include:

People walk by the New York Stock Exchange on March 20.

Apple’s stock fell 3.6% on Thursday to about $172.27 a share just before noon, after the Department of Justice filed a historic antitrust lawsuit against the tech behemoth. But the iPhone maker’s stock has already been hammered this year.

Apple shares have fallen more than 10% so far this year on worries about falling sales in China. That’s a reversal from last year, when the iPhone maker’s stock surged 49% as part of the “Magnificent Seven” tech darlings — also including Nvidia, Amazon, Microsoft, Alphabet, Meta Platforms and Tesla — whose monster rally helped launch a powerful bull market.

The decline in Apple shares has weighed down the Dow Jones Industrial Average index, which includes 30 stocks of so-called blue chip companies including Apple.

Still, the Dow has notched repeated record highs this year and is in striking distance of the 40,000 level milestone.

Attorney General Merrick Garland cited a key principle of US antitrust law in today’s news conference — one that is little-known but is a critical part of today’s suit.

It is not illegal to hold a monopoly, Garland said.

That may sound counterintuitive in a case intended to fight monopolies. But under US antitrust law, it is only illegal when a monopolist resorts to anticompetitive tactics, or harms competition, in an effort to maintain that monopoly.

That is what the US Justice Department alleges Apple has done.

Among other things, the DOJ says Apple has used its control over iOS, the iPhone operating system, to block innovative new apps and cloud streaming services from the public; degrade how Android messages appear on iPhones; restrict how competing smartwatches can work with iPhones; and hinder rival payment solutions.

The Justice Department’s top antitrust official compared Thursday’s Apple lawsuit to such historically significant cases as the DOJ’s breakup of Standard Oil in 1911 and AT&T in the 1980s, as well as its landmark case against Microsoft in the 1990s.

Assistant Attorney General Jonathan Kanter said at a press conference that the DOJ has “an enduring legacy, taking on the biggest and toughest monopolies in history,” including those companies.

Attorney General Merrick Garland said Apple undermines products that would enable customers to be less reliant on its product.

Announcing the US’s blockbuster antitrust lawsuit against the tech giant, Garland said that Apple’s entire share of the US smartphone market exceeds 65% and “charges as much as nearly $1,600 for an iPhone.”

But, Garland claims, that monopoly over the smartphone market was not gained “simply by staying ahead of the competition on the merits, but by violating federal antitrust law.”

 “Apple creates barriers that make it extremely difficult and expensive for both users and developers to venture outside the Apple ecosystem,” he said.

US Attorney General Merrick Garland announces an antitrust lawsuit against Apple at the Justice Department in Washington, DC, on March 21.

In a news conference announcing the landmark lawsuit against Apple, US Attorney General Merrick Garland slammed Apple’s alleged anti-competitive conduct related to how the company handles messages from Android devices.

“For example, if an iPhone user messages a non-iPhone user in Apple messages, the text appears not only as a green bubble, but incorporates limited functionality,” Garland added. “The conversation is not encrypted. Videos are pixelated and grainy, and users cannot edit messages or see typing indicators. As a result, iPhone users perceive rival smartphones as being lower quality because the experience of messaging friends and family who do not own iPhones is worse.” 

The US Attorney General Merrick Garland has formally announced to reporters that the federal government is filing an antitrust lawsuit against tech giant Apple. 

Attorney General Merrick Garland is speaking about the US government’s antitrust lawsuit against Apple.

You can watch the announcement in the video player at the top of this page, and we’ll bring you updates on his comments as we get them.

Although the Justice Department is accusing Apple of running an illegal monopoly today, the courts have previously held that Apple is not a monopolist.

In a court case involving “Fortnite”-maker Epic Games, a federal judge and a US appeals court have both ruled Apple did not illegally monopolize the market for iOS app distribution.

In light of that ruling, the Justice Department could face a tough road as it seeks to prove its case. But there is a key distinction between the Epic Games case and this one: The Justice Department has accused Apple of monopolizing smartphone markets, a different allegation.

Shares of Apple fell 3.3% on Thursday morning after the US Justice Department announced a blockbuster antitrust lawsuit against the iPhone maker. The stock is down more than 10% so far this year.

Still, Wall Street had been anticipating the filing for some time and were prepared for the news, analysts said. The risk is prolonged scrutiny for Apple and what happens to other tech stocks in its wake, they said.

“The headline risk is added to the Apple story as this case will not be resolved in the short term and Cupertino will be under a further microscope both in the Beltway and Brussels as well as other Big Tech stalwarts caught in this complex spider web,” wrote Dan Ives at Wedbush in a note to investors.

Shares of Google were trading 0.9% lower on Thursday. A DOJ antitrust case targeting the company’s ad-tech business will go to trial in September.

Apple CEO Tim Cook, center, and Deirdre O'Brien, senior vice president of retail for Apple, left, attend the opening of the company’s new store in Shanghai, China, on March 21.

Today’s news that the US Justice Department filed a blockbuster antitrust lawsuit against Apple comes as CEO Tim Cook is making a high-profile visit to China.

The visit, which is timed with the opening of a huge new store in Shanghai, is part of a push by the company to reverse a decline in iPhone sales in its most important international market.

The new $11.6 million outlet — located in Shanghai’s central district of Jing’an, which is named after a historic temple — is the biggest in China and the second only to Apple’s flagship store on New York’s Fifth Avenue, Chinese state media reported.

“Nonghao Shanghai!” Apple CEO Cook said in a Weibo post on Wednesday, which means “hello” in Shanghainese. “I’m always so happy to be back in this remarkable city.”

In 2023, Apple grabbed the top spot in China’s smartphone market for the first time ever, with a record 17.3% market share, according to IDC Research.

Some context: The push in China comes as Apple (AAPL) tries to fend off competitors and revive sales in a rocky market with growing headwinds, ranging from an economic slowdown to geopolitical tensions and rising nationalist sentiment.

Now the Justice Department’s landmark suit is expected to challenge a broad range of Apple’s practices, and the legal action could weigh on the company’s stock price.

Cook’s visit, his third to the country in a year, underscores China’s significance to Apple as its biggest overseas market and a critical part of its manufacturing supply chain.

An Apple iPhone 15 model is displayed on the day of its release in Los Angeles on September 22.

The Department of Justice (DOJ) says that Apple “undermines apps, products and services that would otherwise make users less reliant on the iPhone,” in a press release.

After announcing it would bring a lawsuit against the tech giant under antitrust laws, the DOJ release said that Apple uses its “monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”

The lawsuit also claims that Apple has illegally monopolized smartphone markets by using a complex web of contractual terms that harm everything from text messaging to mobile payments. Among other things, the DOJ says, Apple has used its control over iOS, the iPhone operating system, to block innovative new apps and cloud streaming services from the public; degrade how Android messages appear on iPhones; restricted how competing smartwatches can work with iPhones; and hindered rival payment solutions.