Apple faces years of distractions after DOJ antitrust suit
Apple CEO, Tim Cook, testifies before the Senate Homeland Security and Governmental Affairs Committee’s Investigati
Getty Images
The U.S. Department of Justice sued Apple on Thursday, accusing it of using the iPhone’s market power to cut off rivals, kicking off a multiyear process involving hundreds of lawyers and threatening Apple’s “walled garden” business model.
If the DOJ wins, it could seek a range of changes to Apple’s business, and U.S. officials didn’t rule out the possibility that Apple could face “structural remedies” or be broken up.
If Apple’s arguments prevail, a court could rule that its estimated 64% of U.S. smartphone share isn’t a monopoly, or that its conduct wasn’t illegal, giving Apple new tools to fight off future regulation.
But before any of that happens, we’ll likely see years of legal wrangling, during which Apple will be forced to defend its business in public, distract its executives with legal meetings, produce internal documents for the government and potentially face bad headlines that could hurt its brand or image.
The DOJ’s lawsuit still needs to be assigned to a judge. In the short term, Apple could ask for a change of trial location away from New Jersey, and it will likely ask to dismiss the case entirely.
All these steps take varying amounts of time, and it’s realistic the trial will be scheduled for 2025, and the appeal won’t wrap up until 2027, depending on which judge is assigned the case, said William Kovacic, director of the Competition Law Center at George Washington University.
Often, companies accused of antitrust violations like Apple like to drag out the trial, said John Newman, a professor of law at the University of Miami and a former DOJ attorney.
“In general, defendants love to drag their heels forever,” Newman said. “Is the judge going to go with what the defendant proposes, which is inevitably years and years, tons and tons of discovery? Drag it out forever? Or they can actually step up and try to control that?” he continued.
For example, Google was sued by the DOJ in a similar case in October 2020, and it took nearly three years before it went to trial. Remedies haven’t been decided and it hasn’t gone through appeals. The DOJ case against Apple was inspired by a historic case against Microsoft filed in 1998. It went to trial later that year and an appeal was decided by 2001.
A potential distraction
Like the Microsoft trial, the Justice Department lawsuit against Apple is attempting to erect a new landmark decision for antitrust in the U.S., mostly by focusing on Apple’s entire ecosystem, not just a product, and whether how it functions represents anti-competitive conduct.
In a statement provided to CNBC on Thursday, Apple said that the lawsuit “threatens who we are” and that it could hurt its ability to make competitive tech products.
Apple provides more details about why it doesn’t like this kind of litigation in its SEC filings. The company says that when laws and regulations change, including antitrust litigation, it has to spend money to comply. “Imposed” changes can hurt customer demand, according to the filing, and when laws or regulations change, it creates uncertainty for Apple.
Another challenge for Apple may be that a big, public trial like this one competes for executive time and attention, and more decisions inside Apple may have to go through legal review before going forward.
Companies facing antitrust cases often need to loop employees who have nothing to do with trials into meetings, to sort through company documents, or help guide how the company will present evidence or technical arguments, Kovacic, a former FTC commissioner, said.
“In past major antitrust cases, the real danger for the company is that the focus of attention becomes winning the antitrust lawsuits instead of winning customers and doing your job,” Kovacic said. “It slows you down. It’s a real drag.”
For Apple, it’s not just the DOJ suit, but also new regulations in Europe, and investigations in other countries around the world that it has to deal with.
The U.S. government hasn’t said what it wants Apple to do to fix its allegations, but its initial filing on Thursday left the matter open, with a broad request for overall remedy.
One possibility includes forcing Apple to open the iPhone to third-party stores like it has in Europe. Many of the DOJ’s other allegations, like Apple’s alleged restrictions on third-party smartwatches and “super apps” don’t have close recent parallels in other countries or markets. The DOJ could also find remedies that aim to reorient the entire technology industry or future products.
“If and when this thing gets to trial, I would expect that it will not just be about smartphones, even though that’s the core of the story. This is really a case about the future of smart devices,” Newman said.
Apple may, as it has in the past, choose to preemptively make changes or tweaks to targeted products to head off additional scrutiny. For example, in January, Apple partially opened its App Store to cloud gaming services, one of the key kinds of competitors that the Justice Department alleged that Apple cuts off.
Discovery and deposition
Government lawyers will request internal, confidential Apple documents to bolster their case in a process called discovery. Apple’s business partners may also get requests to show the government their own confidential documents. Generally, companies fear discovery, because it’s unclear what will turn up, and Apple is particularly secretive about its internal documentation and strategy.
Documents unearthed through discovery are often posted publicly during the trial, exposing private deliberations.
The government will likely move to depose Apple’s executives, including CEO Tim Cook, or even call them to the witness stand during the trial. Cook took the stand during a recent antitrust trial against Epic Games, for example.
But executive depositions or testimony can still be risky for technology companies, especially if executives cannot control their egos — former Microsoft CEO Bill Gates was famously petulant and showed utter contempt for the process during a videotaped deposition by David Boies in 1998 that was played during the trial.
“A lesson that the Gates deposition experience taught is that if you’re a CEO, there is a real art and skill to doing a good deposition,” Kovacic said. “It requires you to suppress some of your ‘Master of the Universe’ impulses for the sake of doing a good job, and in this case, listening very carefully to the coaching of your lawyers.”
Apple and the DOJ could also come to a settlement, where Apple makes some changes and the government drops the suit before further discovery or depositions. However, there are no public signs of reconciliation.
Apple declined to comment on Thursday when asked if there had been settlement talks.
Technology
Nvidia positioned to weather Trump tariffs, chip demand ‘off the charts,’ says Altimeter’s Gerstner
Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.
“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.
President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.
The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.
Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.
Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”
He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.
“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”
Jaque Silva | Nurphoto | Getty Images
YouTube on Thursday announced new video creation tools for Shorts, its short-form video feed that competes against TikTok.
The features come at a time when TikTok, which is owned by Chinese company ByteDance, is at risk of an effective ban in the U.S. if it’s not sold to an American owner by April 5.
Among the new tools is an updated video editor that allows creators to make precise adjustments and edits, a feature that automatically syncs video cuts to the beat of a song and AI stickers.
The creator tools will become available later this spring, said YouTube, which is owned by Google.
Along with the new features, YouTube last week said it was changing the way view counts are tabulated on Shorts. Under the new guidelines, Shorts views will count the number of times the video is played or replayed with no minimum watch time requirement.
Previously, views were only counted if a video was played for a certain number of seconds. This new tabulation method is similar to how views are counted on TikTok and Meta’s Reels, and will likely inflate view counts.
“We got this feedback from creators that this is what they wanted. It’s a way for them to better understand when their Shorts have been seen,” YouTube Chief Product Officer Johanna Voolich said in a YouTube video. “It’s useful for creators who post across multiple platforms.”
WATCH: TikTok is a digital Trojan horse, says Hayman Capital’s Kyle Bass
CEO of Meta and Facebook Mark Zuckerberg, Lauren Sanchez, Amazon founder Jeff Bezos, Google CEO Sundar Pichai, and Tesla and SpaceX CEO Elon Musk attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. president in the U.S. Capitol Rotunda in Washington, Jan. 20, 2025.
Saul Loeb | Via Reuters
Technology stocks plummeted Thursday after President Donald Trump’s new tariff policies sparked widespread market panic.
Apple led the declines among the so-called “Magnificent Seven” group, dropping nearly 9%. The iPhone maker makes its devices in China and other Asian countries. The stock is on pace for its steepest drop since 2020.
Other megacaps also felt the pressure. Meta Platforms and Amazon fell more than 7% each, while Nvidia and Tesla slumped more than 5%. Nvidia builds its new chips in Taiwan and relies on Mexico for assembling its artificial intelligence systems. Microsoft and Alphabet both fell about 2%.
Semiconductor stocks also felt the pain, with Marvell Technology, Arm Holdings and Micron Technology falling more than 8% each. Broadcom and Lam Research dropped 6%, while Advanced Micro Devices declined more than 4% Software stocks ServiceNow and Fortinet fell more than 5% each.
The drop in technology stocks came amid a broader market selloff spurred by fears of a global trade war after Trump unveiled a blanket 10% tariff on all imported goods and a range of higher duties targeting specific countries after the bell Wednesday. He said the new tariffs would be a “declaration of economic independence” for the U.S.
Companies and countries worldwide have already begun responding to the wide-sweeping policy, which included a 34% tariff on China stacked on a previous 20% tax, a 46% duty on Vietnam and a 20% levy on imports from the European Union.
China’s Ministry of Commerce urged the U.S. to “immediately cancel” the unilateral tariff measures and said it would take “resolute counter-measures.”
The tariffs come on the heels of a rough quarter for the tech-heavy Nasdaq and the worst period for the index since 2022. Stocks across the board have come under pressure over concerns of a weakening U.S. economy. The Nasdaq Composite dropped nearly 5% on Thursday, bringing its year-to-date loss to 13%.
Trump applauded some megacap technology companies for investing money into the U.S. during his speech, calling attention to Apple’s plan to spend $500 billion over the next four years.
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