I got my first iPhone around senior year of high school. It was an iPhone 6, skinny and sleek and in the cool space grey. Before that, I thought I was some sort of rebel and tried my hardest to stay away from Apple products. I had a motorola pebble, then a samsung side-flip phone with a keyboard, a windows phone (yikes), a galaxy s3, and a galaxy note 3. Then I finally gave in. Once I entered the Apple ecosystem there was no going back. I quickly traded in my HP Envy laptop for rose gold MacBook air and never looked back. Today, I write this on my starlight M2 MacBook air and wouldn’t want it any other way. However, while I have flirted with the idea of going back to Windows, the switching costs are just too high. What a hassle it would be to revert back — wait a minute, is that anticompetitive?
Complaints
First, let’s take a look at the specific portion of the antitrust laws that apply here:
The Sherman Act also makes it illegal to monopolize, conspire to monopolize, or attempt to monopolize a market for products or services. An unlawful monopoly exists when one firm has market power for a product or service, and it has obtained or maintained that market power, not through competition on the merits, but because the firm has suppressed competition by engaging in anticompetitive conduct. - DOJ Website
The DOJ's complaint against Apple accuses the company of maintaining a dominant position in the smartphone market through anticompetitive and exclusionary conduct. Apple's practices are alleged to have stifled innovation, increased smartphone prices for consumers, and imposed higher fees on developers. The complaint highlights how Apple has responded to competitive threats not by improving its products but by imposing restrictive rules and guidelines in its App Store and on developers, thereby locking in users and developers to its platform. That last point is the crux of the complaint — is Apple abusing its market power?
The complaint further cites 5 specific areas of anticompetitive behavior:
Super Apps: Apple has allegedly blocked the development of super apps, which can host a variety of mini-programs within a single app. This restriction is said to have limited user choice and innovation, preventing a consistent user experience across different devices and making it harder for users to switch from iPhone to Android. While I agree with the argument that the lack of super apps makes switching costs higher, I find it odd that the DOJ would want to point to super apps which could potentially pose their own anticompetitive risks. Just look at popular super apps abroad like WeChat (China) or Tata Neu (India) that have massive control over their respective markets. One theory from the Vergecast would fit:
I think they're talking about super apps so much 'cause they know Elon Musk wants X to be a super app. And so if they get Elon Musk to say Apple's the monopoly, like that's good for them. - Apple’s antitrust fight begins, Vergecast
Cloud Streaming Apps: Within the world of gaming, hardware is becoming more and more obsolete for the user. Many game developers are now offering cloud streaming, allow gamers to play any game from any device. Apple sees this as a threat, since, they believe, they won’t be able to push their hardware more and more. We’ve already seen this play out with Apple vs. Epic:
The lawsuit between Epic Games and Apple began in 2020 when Epic introduced a way for users to purchase in-game currency for Fortnite without Apple's 30% cut. Apple removed Fortnite from the App Store and suspended Epic's developer account. Epic then sued Apple, alleging that it monopolized the market for software on iPhones. This does show anticompetitive behavior where Apple is essentially bullying Epic, with the consumer being harmed by keeping them away from games they’d want to play.
Messaging Apps: The pesky green bubble. The complaint alleges that Apple has degraded third-party messaging apps on the iPhone, making them less attractive compared to Apple's own messaging app. Another good example of increased switching costs for users and limited competition. I also enjoy how they cited a one off comment from Tim Cook for this:
In 2022, Apple’s CEO Tim Cook was asked whether Apple would fix iPhone-to Android messaging. “It’s tough,” the questioner implored Mr. Cook, “not to make it personal but I can’t send my mom certain videos.” Mr. Cook’s response? “Buy your mom an iPhone.” - par. 92 pg. 39, Complaint
Smartwatches: Apple is accused of impeding the development of cross-platform smartwatches by limiting their functionality when paired with an iPhone. This action allegedly reinforced the iPhone's dominance by making it more costly for users to switch to a different smartphone brand. While I can see the case being made, it’s a bit of a stretch. Apple watches working better with Apple iPhones, yeah that makes sense. Now if you want to use another smartwatch with your iPhone, then yes I guess you could say the consumer is harmed here.
Digital Wallets: The DOJ claims that Apple has restricted the functionality of digital wallets on the iPhone, limiting users' access to advanced features and preventing digital wallet developers from providing comprehensive services to their customers. While I’ve never thought of wanting to use a different wallet app over the apple wallet, it is ridiculous to not only limit access, but to also charge the bank for access.
There are strong claims here of Apple abusing its market power. In defense, Apple has already argued that its actions are aimed at ensuring the security and privacy of its users, maintaining the quality and integrity of the iOS ecosystem. Apple has also previously argued that the App Store guidelines and developer agreements are necessary to protect consumers from malicious software and to provide a consistent user experience. Essentially, everything they do is to protect the user, not harm them.
Precedent
The complaint also spends a lot of time citing the original tech monopoly, United States v. Microsoft Corp. Quick recap: Microsoft was accused of monopolizing the PC operating system market by engaging in anticompetitive practices, specifically the bundling of the Internet Explorer browser with Windows OS. Filed in 1998, the case argued that this bundling stifled competition and innovation. The trial court ruled that Microsoft's actions constituted unlawful monopolization and ordered the company to be split, but this decision was reversed on appeal in 2001. The case was settled in 2002, with Microsoft agreeing to share its APIs and allow more flexibility in Windows configuration, aiming to restore market competition. The Apple complaint credits much of Apple’s success as a result of this decision, holding up the mirror for Apple to realize they’ve lived long enough to become the villain.
This brings me back to the idea of a monopoly. Focusing on the U.S. smartphone market, Apple makes up 60% of the Mobile Vendor Market Share. While indicative of a monopoly, other factors play into the definition: the ability to control prices (check), the lack of viable substitutes or competitors (I’d say no), barriers to entry for other firms (within phones, not really), and the company’s power to hinder competition (check). So about 3/5 on the monopoly scale. But there’s one important point from the Microsoft case we need to keep in mind:
“There’s nothing wrong or illegal with exclusive deals per se, but when you’re a monopolist, and you use your monopolist power, which is the first screen, the operating system, the guts of the computer, and you condition the sale of the essential element to make the computer run on an exclusion of any competitors products in another market, that’s illegal.” — Microsoft vs. The Justice Department: Playing Monopoly (1998-99)
Given the precedent set by the Microsoft case, where the company was found to have engaged in anticompetitive behavior but was not ultimately broken up, it's possible that Apple may face significant legal scrutiny and could be required to make changes to its business practices, particularly regarding the App Store and its treatment of third-party developers. But I don’t see a breakup happening. This case will probably play out for years in court, but I think this could finally be some sort of win for the DOJ.
Thank you
As a business, you’d think reaching monopoly status would be the endgame. I’ve worked so hard, I’ve come so far, how heavy is the head that wears the crown. Apple, once at the brink of bankruptcy, stands tall alongside former giant, Microsoft. Does the threat of antitrust dissuade business success? I don’t think so. Microsoft had this very problem 20 years ago, and they will have it again if they continue down this AI warpath. But it doesn’t matter. Whether the company is broken up or not, the shareholders win either way. Isn’t that who it’s all for? As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Instagram, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with. This article is written with AI assistance.