6 ways DOJ says Apple is a monopoly
The Justice Department sued Apple this week, claiming the tech giant’s illegal monopolization of smartphone markets has hiked costs for users, developers, and others.
The DOJ and attorneys general from more than a dozen states accuse Apple of violating antitrust law across its mobile business by withholding key features of its iPhone at the expense of rival developers. The $2.6 trillion company enforces these restrictions through contractual provisions with software developers, their case argues.
“For years, Apple responded to competitive threats by imposing a series of ‘Whac-A-Mole’ contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division on Thursday.
At the core of the case is the allegation that because of Apple’s dominant role as a conduit for business, it has a so-called “duty to deal” with its competitors. Apple denies this, and such cases face significant hurdles, but if the DOJ wins, it could change how major companies across the economy operate.
“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” Apple said in a statement. “It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”
Here are six ways the DOJ says Apple stifles its competition — and Apple’s defense.
1. The App store
The DOJ and states claim that only apps designed specifically for iPhones can be downloaded through the App Store. That lets Apple set the rules and exert control over outside developers. According to the complaint, Apple wields these rules as a sword to block apps that would “erode” its monopoly power.
Apple has long called third-party app stores a privacy and security risk.
2. Super apps
The DOJ says Apple has long barred super apps, or platforms that host a broad combination of mini functions out of concern that as users use a super app more, they depend less on the smartphone’s proprietary software. The DOJ says Apple’s restrictive policies have throttled developers from offering super apps in the U.S., a move that it says stifles innovation and narrows user choice.
Apple claims that super apps are allowed on its phones, citing WeChat in China and Tata Neu in India, and says they have not proved popular in the U.S.
3. Cloud streaming
For years, Apple blocked cloud streaming gaming apps, which, like Netflix, allow users to stream many different games in the same app. The complaint says that lets Apple protect its monopoly and limit consumer access to content. If cloud gaming was more widely allowed, the DOJ says consumers would be less reliant on Apple’s pricey hardware.
Apple says it continues to add to the gaming options on iPhones including recent rule changes to allow HTML5 mini apps.
4. Smartwatches
The case says Apple has limited Apple Watches to only function with iPhones, effectively making them exclusive to the iPhone ecosystem and discouraging users from switching to other smartphone or smartwatch brands.
Apple argues that competing smartwatches do work with iPhones. It says it decided to not build an Apple Watch for Android because of security concerns.
5. Digital wallet
Apple forces third-party payment services to use its own digital wallet rather than offering their services in separate apps. This enables it to charge a fee for each transaction, which the DOJ says adds significant costs for banks issuing cards, as well as consumers, businesses and developers. Absent this tight control, digital wallets could work across different devices and also handle subscriptions and in-app purchases, bypassing Apple’s systems.
Apple says it limits access to the payment chip in its phones for security reasons and that it faces many competing payments companies.
6. The green bubbles
When iPhone users message non-iPhone users, their texts show up as green bubbles in iMessage. Android users also suffer from pixelated videos, unencrypted messages, and a lack of editing features. The DOJ and states argue that Apple has deliberately disrupted cross-platform messaging and avoided creating iMessage for Android, so that customers perceive rival smartphones as inferior.
Apple says it hasn’t developed iMessage for other phones because of usability and security concerns, but it is working with standards bodies to improve cross-platform messaging.
