The US Justice Department sues Apple, accused of monopolising the smartphone market.
Author: Gwyneth Sim, Research Executive
Editor: Tavisha Jain, Research Director
The Justice Department filed a civil antitrust lawsuit against Apple, in violation of the Sherman Act which prescribes free competition in the US. Apple is accused of creating contractual restrictions on developers. In doing so, Apple gains more control to undermine apps and services that would have made users less reliant on the iPhone otherwise. This control over app developers has transcended into control over the market, enabling the tech giant to maintain its monopoly power by blocking innovation.
Apple has been accused of the following violations.
Apple Blocks Innovative Super Apps that allow users perform a range of activities within one app. In doing so, Apple restricts competition in the app market. This disincentives innovation and reduces consumer choice, which can result in a less efficient allocation of resources in the economy.
Apple also Suppresses Mobile Cloud Streaming Services, preventing users from having access to alternative, and possibly cheaper content. This may reduce consumer surplus and hinder the growth of a potentially competitive market segment. It also limits the potential for technological advancement and innovation in the streaming services industry.
Similarly, Apple Undermines Cross-Platform Messaging Apps by alienating messages to Android users with green bubbles. This may influence consumer taste and preferences to stigmatise non-Apple phones, strategically strengthening the demand for iPhones at the expense of its competitors.
Spilling into the Smartwatch market, Apple Diminishes the Functionality of Non-Apple Smartwatches on the iPhone, and similarly the Functionality of the Apple Watch with a Non-Apple Smartphone. This discourages users from switching their smartphones and smartwatches out of the Apple ecosystem to avoid the additional costs and lower quality/ functionality of their Apple device should they do so. This reduced demand for non-Apple products solidifies Apple’s pursuit of market share and strengthens its Monopoly status.
Lastly, Apple has Restricted Developers From Creating Digital Wallets, an exclusive feature of the Wallet app in the iPhone. Currently, Wallet is the only app that has access to the NFC chip which allows the innovative tap-to-pay function. Third party apps are blocked from getting access to this NFC chip to provide an alternative to users as this would diminish the Wallet app’s value.
As can be seen, Apple has employed a few strategies within the Apple ecosystem that are anticompetitive. These exemplify the negative outcomes of monopolistic markets. Innovative competitors are driven out of the market, and in doing so monopoly’s may charge prices higher than can be justified due this lack of equal competition. The higher prices are at the expense of consumers, who then demand less quantity, which leads to underconsumption– an inefficient allocation of resources.
Therefore, the Justice Department seeks relief on behalf of the American public as compensation for Apple’s inequitable anticompetitive conduct that creates such negative impacts.
Further Reading
Gilbert, L. (2023, October 19). Commentary: Amazon a monopoly that must be held accountable — Lisa Gilbert. My Journal Courier. https://www.myjournalcourier.com/opinion/article/commentary-18426309.php
Jiménez, M., Jiménez, M., & Jiménez, M. (2024, March 22). ‘Buy your mom an iPhone’: How Apple went from protesting against Microsoft to establishing a monopoly. EL PAÍS English. https://english.elpais.com/economy-and-business/2024-03-22/buy-your-mom-an-iphone-how-apple-went-from-protesting-against-microsoft-to-establishing-a-monopoly.html
References
Justice Department sues Apple for monopolizing smartphone markets. (2024, March 21). https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets
McCabe, D., & Mickle, T. (2024, March 21). U.S. Sues Apple, Accusing It of Maintaining an iPhone Monopoly. The New York Times. https://www.nytimes.com/2024/03/21/technology/apple-doj-lawsuit-antitrust.html