Feds sue Apple for monopolizing smartphone market

Apple faces a new lawsuit from the U.S. Department of Justice and over a dozen states alleging the tech giant is illegally monopolizing the smartphone market. 

The lawsuit alleges that Apple has maintained its market power by violating federal antitrust law and harming competition through restrictive app store terms, high fees, and its “walled-garden” approach to its hardware and software.

The big picture: Attorney General Merrick Garland said at a press conference that Apple has violated federal antitrust law, allowing the company to maintain its monopoly power not simply by staying ahead of the competition. 

• The “walled-garden” allegation refers to Apple tightly restricting how other companies interact with its products and services. 
• That includes how the company’s control over iOS, the iPhone operating system, has been used to block new apps, degrade Android messages on iPhones, restrict smartwatch compatibility and hinder rival payment solutions.
• “Apple creates barriers that make it extremely difficult and expensive for both users and developers to venture outside the Apple ecosystem,” Garland said. 
• The lawsuit also highlights Apple’s 30% commission on most app store sales, which has been a frequent complaint from companies arguing that it creates an unnecessarily high cost.

Why it matters: Apple could be forced to change many of its policies, strategies, products and applications if the company loses the lawsuit. 

• Apple could also be required to even divest from some of its attests. 
• The lawsuit will test the extent to which antitrust laws can be applied to the modern digital economy. 

The other side: “We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it,” Apple said in a statement. 

• Apple argued that the lawsuit would set a dangerous precedent. 
• “At Apple, we innovate every day to make technology people love – designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” Apple said. “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets.”