US Government Takes on Apple Inc With Antitrust Lawsuit

The US government has sued Apple Inc, alleging that it manipulated strong demand for its iPhone and other goods to raise prices for its services and harm smaller competitors.

The federal Department of Justice and 15 states launched the action on Thursday, marking the Biden administration’s first significant antitrust move against the smartphone maker.

Apple Inc has joined a list of large digital companies sued by US regulators, which includes Google, Meta Platforms, and Amazon.com under the administrations of both former President Donald Trump and President Joe Biden.

“Consumers should not have to pay higher prices because businesses break antitrust laws,” Attorney General Merrick Garland said in a statement. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”

The Justice Department claims that Apple exploits its market advantage to extract more money from customers, developers, content creators, artists, publishers, small companies, and retailers.

The 88-page lawsuit, filed in US federal court in Newark, New Jersey, stated that it was focused on “freeing smartphone markets from Apple’s anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future”.

Apple Inc responded in a statement, stating, “This action challenges who we are and the principles that distinguish Apple products in intensely competitive marketplaces. If successful, it would limit our capacity to produce the type of technology that customers expect from Apple — where hardware, software, and services come together.”

Apple has already faced antitrust investigations and orders in Europe, Japan, and Korea, as well as litigation from corporate competitors like Epic Games.

One of Apple’s most profitable companies, the App Store, which charges developers up to 30% commission, has already weathered a lengthy court fight under US law from Epic. While the complaint concluded that Apple did not break antitrust rules, a federal judge ordered Apple to allow users to pay for apps using links and buttons rather than Apple’s in-app payment fee.

EU Destroys Apple Inc App Store

In Europe, a new rule known as the Digital Markets Act, which went into force earlier this month, has destroyed Apple’s App Store business model. Apple Inc intends to let developers to create their own app shops — and, more significantly, pay no commissions — but rivals such as Spotify and Epic claim Apple is still making it difficult to offer alternative app stores.

The verdicts on Apple’s App Store compelled the Justice Department to investigate Apple’s other practices for potential complaints, such as how Apple enables outside corporations access to the CPUs and sensors in the iPhone.

Consumer hardware companies, such as Tile Inc, which makes smart trackers, have long complained that Apple has limited the methods in which they may work with the iPhone’s sensors while competing goods have more access.

Several years after Tile launched a comparable device, Apple began offering AirTags, which can be attached to items such as vehicle keys to assist customers find them when they are misplaced.

Similarly, Apple Inc has blocked access to the iPhone’s chip, which allows for contactless payments. Apple Pay is the only way to add credit cards to the iPhone.

Apple has also received criticism over its iMessage service, which only works on Apple devices.

Apple has long stated that third-party developers have limited access to some user data and iPhone hardware for privacy and security reasons.

iPhone Sales in China Tank

Meanwhile, iPhone sales in China declined 24% year on year in the first six weeks of 2024, according to research firm Counterpoint, as the US corporation faced heightened rivalry from Chinese rivals like Huawei.

According to the research, Huawei, the US tech giant’s main competitor in China for luxury handsets, saw unit sales increase by 64% during the period.

This could raise concerns about a slowdown in demand for the US corporation, whose revenue forecast for the current quarter was $6 billion lower than Wall Street expected.

Shares of the iPhone maker closed 2.8% lower on Tuesday and have lost almost 12% of their value this year, trailing their big tech peers in the US.

According to Counterpoint’s analysis, Apple’s share of the Chinese smartphone market fell to 15.7%, putting it in fourth place, down from second place the previous year when it had 19%.

Huawei climbed to second position, increasing its market share to 16.5% from 9.4% a year ago. The whole smartphone market in China dropped by 7%, according to the research.

Apple “faced stiff competition at the high end from a resurgent Huawei while getting squeezed in the middle by aggressive pricing from the likes of OPPO, Vivo, and Xiaomi,” Counterpoint’s senior analyst Mengmeng Zhang said.

Apple started subsidizing specific iPhone models by up to 1,300 yuan ($180.68) last week via flagship stores on Tmall, Alibaba’s main shopping platform.
It previously provided iPhone discounts of up to 500 yuan on its official websites last month.