DOJ sues Apple over iPhone monopoly in landmark antitrust case
The Department of Justice sued Apple on Thursday, saying its iPhone ecosystem is a monopoly that drove its “astronomical valuation” at the expense of consumers, developers and rival phone makers.
The lawsuit claims that Apple’s anti-competitive practices extend beyond the iPhone and Apple Watch businesses, citing Apple’s advertising, browser, FaceTime and news offerings.
“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” says the suit, filed by the DOJ and 16 attorneys general in New Jersey federal court.
Apple shares fell over 2% during trading on Thursday.
The Justice Department said in a release that to keep consumers buying iPhones, Apple moved to block cross-platform messaging apps, limited third-party wallet and smartwatch compatibility and disrupted non-App Store programs and cloud-streaming services.
The challenge represents a significant risk to Apple’s walled-garden business model. The company says that complying with regulations costs the company money, could prevent it from introducing new products or services, and could hurt customer demand.
The lawsuit could force Apple to make changes in some of its most valuable businesses: The iPhone, in which Apple reported over $200 billion in sales in 2023, the Apple Watch, part of the company’s $40 billion wearables business, and its profitable services line, which reported $85 billion in revenue.
“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” U.S. Attorney General Merrick Garland said in the release.
Apple said in a statement that it disagreed with the premise of the lawsuit and that it would defend against it.
“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect,” an Apple spokesperson told CNBC. “It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”
The lawsuit follows years of investigations into Apple’s business practices and two prior DOJ cases against Apple: One over e-book prices and another over allegations that it colluded with other technology companies to depress salaries.
“This anticompetitive behavior is designed to maintain Apple’s monopoly power while extracting as much revenue as possible,” the complaint said.
iMessage, Apple Watch, and cloud gaming
The complaint highlights comments from CEO Tim Cook and other executives. Some users have asked Apple to improve Android-to-iPhone messaging. Developers have gone as far as creating apps that can circumvent the platform limitations, only to be shut down by Apple.
Apple CEO Tim Cook speaks onstage during day 2 of Vox Media’s 2022 Code Conference in Beverly Hills, California.
Jerod Harris | Getty Images Entertainment | Getty Images
Prosecutors highlighted one exchange between Cook and a consumer.
“Not to make it personal but I can’t send my mom certain videos,” the complaint says one user told Cook, referring to a 2022 interview at a Vox Media event.
“Buy your mom an iPhone,” Cook responded.
The DOJ is also focusing on Apple’s smartwatch, Apple Watch, saying the company designed it to only work with iPhones, and not Android devices. The company’s decision means that “users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones,” according to the complaint.
The DOJ said Apple has fought cloud streaming services on its App Store platform, blocking consumer access to high-quality video games on iPhones, echoing complaints from Microsoft and Facebook parent Meta.
Apple has faced several significant antitrust challenges more recently, largely focused on its control over the iPhone App Store. It mostly won in a civil suit against Epic Games in 2021, although it made concessions during the trial and had to make some changes to its policies under California law.
“Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets,” Assistant Attorney General for antitrust Jonathan Kanter said in the release.
The company is currently jockeying with the European Commission over whether it’s complying with a new Digital Markets Act, which forces Apple to open up the iPhone app store to rivals such as Microsoft or Epic Games. Apple plans to charge big companies that eschew its app store 50 cents per download.
Apple was fined $2 billion in the EU over a dispute with Spotify about whether the music streaming service can link to its website and account system inside of its app.
Apple had 64% of the market share for U.S. iPhones in the last quarter of 2023, versus 18% for Samsung, according to Counterpoint Research.
Apple isn’t the only big tech company facing government scrutiny. The DOJ filed an antitrust case against Google in 2020 over its dominant search position and another year over its advertising business. The DOJ also famously sued Microsoft in the 1990s, eventually forcing it to allow users to unbundle the Internet Explorer browser from the Windows operating system.
This is breaking news. Please check back for updates.
Dado Ruvic | Reuters
Elon Musk’s SpaceX, is initiating a secondary share sale that would give the company a valuation of up to $800 billion, The Wall Street Journal reported Friday.
SpaceX is also telling some investors it will consider going public possibly around the end of next year, the report said.
At the elevated price, Musk’s aerospace and defense contractor would be valued above ChatGPT maker OpenAI, which wrapped up a share sale at a $500 billion valuation in October.
SpaceX has been investing heavily in reusable rockets, launch facilities and satellites, while competing for government contracts with newer space players, including Jeff Bezos‘ Blue Origin. SpaceX is far ahead, and operates the world’s largest network of satellites in low earth orbit through Starlink, which powers satellite internet services under the same brand name.
A SpaceX IPO would include its Starlink business, which the company previously considered spinning out.
Musk recently discussed whether SpaceX would go public during Tesla‘s annual shareholders meeting last month. Musk, who is the CEO of both companies, said he doesn’t love running publicly traded businesses, in part because they draw “spurious lawsuits,” and can “make it very difficult to operate effectively.”
However, Musk said during the meeting that he wanted to “try to figure out some way for Tesla shareholders to participate in SpaceX,” adding, “maybe at some point, SpaceX should become a public company despite all the downsides.”
WATCH: What retail investors should know about OpenAI and SpaceX
The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City, U.S., November 17, 2021.
Andrew Kelly | Reuters
A U.S. judge on Friday finalized his decision for the consequences Google will face for its search monopoly ruling, adding new details to the decided remedies.
Last year, Google was found to hold an illegal monopoly in its core market of internet search, and in September, U.S. District Judge Amit Mehta ruled against the most severe consequences that were proposed by the Department of Justice.
That included the proposal of a forced sale of Google’s Chrome browser, which provides data that helps the company’s advertising business deliver targeted ads. Alphabet shares popped 8% in extended trading as investors celebrated what they viewed as minimal consequences from a historic defeat last year in the landmark antitrust case.
Investors largely shrugged off the ruling as non-impactful to Google. However some told CNBC it’s still a bite that could “sting.”
Mehta on Friday issued additional details for his ruling in new filings.
“The age-old saying ‘the devil is in the details’ may not have been devised with the drafting of an antitrust remedies judgment in mind, but it sure does fit,” Mehta wrote in one of the Friday filings.
Google did not immediately respond to a request for comment. The company has previously said it will appeal the remedies.
In August 2024, Mehta ruled that Google violated Section 2 of the Sherman Act and held a monopoly in search and related advertising. The antitrust trial started in September 2023.
In his September decision, Mehta said the company would be able to make payments to preload products, but it could not have exclusive contracts that condition payments or licensing. Google was also ordered to loosen its hold on search data. Mehta in September also ruled that Google would have to make available certain search index data and user interaction data, though “not ads data.”
The DOJ had asked Google to stop the practice of “compelled syndication,” which refers to the practice of making certain deals with companies to ensure its search engine remains the default choice in browsers and smartphones.
The judge’s September ruling didn’t end the practice entirely — Mehta ruled out that Google couldn’t enter into exclusive deals, which was a win for the company. Google pays Apple billions of dollars per year to be the default search engine on iPhones. It’s lucrative for Apple and a valuable way for Google to get more search volume and users.
Mehta’s new details
In the Friday filings, Mehta wrote that Google cannot enter into any deal like the one it’s had with Apple “unless the agreement terminates no more than one year after the date it is entered.”
This includes deals involving generative artificial intelligence products, including any “application, software, service, feature, tool, functionality, or product” that involve or use genAI or large-language models, Mehta wrote.
GenAI “plays a significant role in these remedies,” Mehta wrote.
The judge also reiterated the web index data it will require Google to share with certain competitors.
Google has to share some of the raw search interaction data it uses to train its ranking and AI systems, but it does not have to share the actual algorithms — just the data that feeds them.” In September, Mehta said those data sets represent a “small fraction” of Google’s overall traffic, but argued the company’s models are trained on data that contributed to Google’s edge over competitors.
The company must make this data available to qualified competitors at least twice, one of the Friday filing states. Google must share that data in a “syndication license” model whose term will be five years from the date the license is signed, the filing states.
Mehta on Friday also included requirements on the makeup of a technical committee that will determine the firms Google must share its data with.
Committee “members shall be experts in some combination of software engineering, information retrieval, artificial intelligence, economics, behavioral science, and data privacy and data security,” the filing states.
The judge went on to say that no committee member can have a conflict of interest, such as having worked for Google or any of its competitors in the six months prior to or one year after serving in the role.
Google is also required to appoint an internal compliance officer that will be responsible “for administering Google’s antitrust compliance program and helping to ensure compliance with this Final Judgment,” per one of the filings. The company must also appoint a senior business executive “whom Google shall make available to update the Court on Google’s compliance at regular status conferences or as otherwise ordered.”
This is breaking news. Check back for updates.
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