It was an unsurprising outcome. On Thursday, the Department of Justice (DOJ) sued Apple for violating antitrust law, alleging that it has exerted monopoly power over the smartphone market and favors its own products. In the lawsuit, the DOJ concluded that Apple sustains its market dominance not through the superiority of its own products, but through practices that unlawfully restrict competition.
In a public statement discussing the ruling, Attorney General Merrick Garland attributed Apple’s dominance in the smartphone market to its concerted efforts around making other products worse, and not improving its own:
Apple has maintained monopoly power in the smartphone market not simply by staying ahead of the competition on the merits, but by violating federal antitrust law. Consumers should not have to pay higher prices because companies break the law. We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts both consumers and developers. For consumers, that has meant fewer choices; higher prices and fees; lower quality smartphones, apps, and accessories; and less innovation from Apple and its competitors. For developers, that has meant being forced to play by rules that insulate Apple from competition. And as outlined in our complaint, we allege that Apple has consolidated its monopoly power not by making its own products better, but by making other products worse.
Here, the core accusation from the DOJ is that Apple has demonstrated monopolistic behavior by undermining the competitive marketplace and curtailing innovation, challenging the principles of fair and open markets. This has knock-on effects for both producers and consumers, who experience increased costs and fewer choices.
The assertion is not without its merits. Without intervention, Garland claims, Apple’s control over the smartphone market will grow even stronger. The DOJ asserts its commitment to enforcing antitrust laws to prevent such outcomes and protect consumers by ensuring competitive prices and a diversity of options. This enforcement is described as both a legal responsibility and an expectation of the American populace.
According to the lawsuit, Apple carries out this practice in two key ways:
- Contractual restrictions and fees: The DOJ contends that Apple limits the features that developers offer iPhone users, conditionally restricting developers’ access to the interface. The clearest example here is interoperability across devices. For instance, not only are Apple Watches only compatible with iPhones, but Apple has various technical and contractual controls that limit iPhone users’ ability to use non-Apple smartwatches. This exclusionary conduct extends to other features and functionalities, like digital wallets.
- Points of access between the iPhone’s OS and third-party apps are restricted: In this instance, the lawsuit argues that Apple degrades the experience and functionality of non-Apple apps, which manifests itself in the 30% commission Apple collects on the price of any app downloaded from the App Store or in-app purchases.
The DOJ argues that this anticompetitive conduct is most evidenced by the “green bubble stigma” and grainy videos that have become characteristic of iPhone users’ interactions with non-iPhone users over SMS. Here is the relevant snippet from the above video:
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. 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—even though Apple is the one responsible for breaking cross-platform messaging.
Apple’s strategy to address the issue primarily involves reducing the features of messaging applications, including both its proprietary and third-party ones, while emphasizing its brand’s role in the solution, thus sidelining interoperability. This is what the DOJ’s lawsuit comes down to: whether Apple is intentionally compromising its functionalities, which in turn has broader repercussions for privacy and security.
Nature v. Nurture
In the landmark antitrust case of the 1990s, U.S. v. Microsoft, the DOJ claimed that Microsoft held a monopoly over the market for PC operating systems, and had engaged in a similar set of anti-competitive practices. The lawsuit gave the example of Microsoft bundling Internet Explorer with Windows and excluding other browsers, harming both competitors and users. There have already been parallels drawn between the two cases, with the filing going so far as to claim that “Apple deploys privacy and security justifications as an elastic shield that can stretch or contract to serve Apple’s financial and business interests.”
The problem is that these are fundamentally different cases. As antitrust is political by nature, it is never possible to fully determine if claims of anti-competitive practices (e.g. above) originate from a partisan or technological nature. That said, there are two important differences:
- Market dominance: Microsoft held more than 90% of the PC market at the time of U.S. v. Microsoft, whereas Apple’s position in the mobile phone market is closer to a duopoly with Android, exhibiting lower—but still very real—costs of switching. To increase Apple’s share of the market to approximately 65-70%, the DOJ narrowed the scope of the case to “performance smartphones,” which in turn removed cheaper entry-level devices from consideration and artificially inflated Apple’s market share.
- Anti-competitive behavior: This comes down to intentionality. The DOJ claims in its suit that Apple has always had a preference for expensive and high-end design, yet it consistently “struggled to compete against rivals that offered lower prices and more programs”—including, it argues, Windows PCs. This is revisionist history. Microsoft’s longstanding attempts to make iTunes available on Windows and Apple’s frictionless (and wildly successful) launch of the first-generation iPod both suggest otherwise.
One of the more credible criticisms of the DOJ’s suit is that it fails to consider Apple’s history around interoperability. In other words, the burden of proof is on the DOJ to explain how Apple’s behavior has either shifted or always been anti-competitive. In a candid blog post on the ruling, Steven Sinofsky, former president of the Windows division at Microsoft, put it plainly:
A key part of the US antitrust law that the DOJ has to overcome is not just to prove Apple has a monopoly, but that it acted illegally to maintain the monopoly. When a company has consistent behavior as it rose from 0% to 50% share, the burden will be on the DOJ to argue that the same behavior is now anticompetitive in a specific legal sense. In other words, a lot of what the DOJ will be arguing is that product choices Apple clearly made to up-level the iPhone offering in terms of security, privacy, reliability, battery life, and more since the introduction of the App Store when the phone was at 10% share today are anticompetitive. The existence of another type of smartphone or ideas for how another type of smartphone should be ideally designed is not enough to prove Apple is being anticompetitive. These design points are not about what you might do today, but what Apple has been doing since the inception of their products.
There is no shortage of bad takes around antitrust. Aaron Levie, the CEO of Box, once stated in response to the proposed Microsoft / Activision Blizzard merger and investigations of OpenAI for consumer harm that “the only doctrine at the FTC appears to be that they hate technology.” That is overblown. But the case against Apple nonetheless demands a nuanced understanding of the technological underpinnings of Apple’s decisions, rather than stating that Apple has a dominant position and walking backwards into a conclusion that their practices challenge the principles of fair and open markets.
In its suit, the DOJ has drastically simplified this. The U.S. v. Microsoft case represented not just a wildly different market structure, but an alternate technological culture. This is a culture based not on standalone products, but integrated ecosystems across devices and services. Offering a distinct value proposition is inherently an exclusionary practice—and not one unique to Apple.
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