It’s not illegal to hold a monopoly in the US. It’s illegal to use harmful tactics to preserve one
From CNN’s Brian Fung
Attorney General Merrick Garland cited a key principle of US antitrust law in today’s news conference — one that is little-known but is a critical part of today’s suit.
It is not illegal to hold a monopoly, Garland said.
That may sound counterintuitive in a case intended to fight monopolies. But under US antitrust law, it is only illegal when a monopolist resorts to anticompetitive tactics, or harms competition, in an effort to maintain that monopoly.
That is what the US Justice Department alleges Apple has done.
Among other things, the DOJ says Apple has used its control over iOS, the iPhone operating system, to block innovative new apps and cloud streaming services from the public; degrade how Android messages appear on iPhones; restrict how competing smartwatches can work with iPhones; and hinder rival payment solutions.
“We allege that Apple has consolidated its monopoly power, not by making its own products better, but by making other products worse,” Garland said in a news conference.
The Justice Department’s top antitrust official compared Thursday’s Apple lawsuit to such historically significant cases as the DOJ’s breakup of Standard Oil in 1911 and AT&T in the 1980s, as well as its landmark case against Microsoft in the 1990s.
Assistant Attorney General Jonathan Kanter said at a press conference that the DOJ has “an enduring legacy, taking on the biggest and toughest monopolies in history,” including those companies.
Attorney General Merrick Garland said Apple undermines products that would enable customers to be less reliant on its product.
Announcing the US’s blockbuster antitrust lawsuit against the tech giant, Garland said that Apple’s entire share of the US smartphone market exceeds 65% and “charges as much as nearly $1,600 for an iPhone.”
But, Garland claims, that monopoly over the smartphone market was not gained “simply by staying ahead of the competition on the merits, but by violating federal antitrust law.”
“Apple creates barriers that make it extremely difficult and expensive for both users and developers to venture outside the Apple ecosystem,” he said.
“Consumers should not have to pay higher prices because companies break the law.”
“As any iPhone user who has ever seen a green text message, or received a tiny, grainy video can attest, Apple’s anti-competitive conduct also includes making it more difficult for iPhone users to message with users of non-Apple products,” the attorney general said. “It does this by diminishing the functionality of its own messaging app, and by diminishing the functionality of third-party messaging apps.”
“For example, if an iPhone user messages a non-iPhone user in Apple messages, the text appears not only as a green bubble, but incorporates limited functionality,” Garland added. “The conversation is not encrypted. Videos are pixelated and grainy, and users cannot edit messages or see typing indicators. As a result, iPhone users perceive rival smartphones as being lower quality because the experience of messaging friends and family who do not own iPhones is worse.”
Attorney General Merrick Garland is speaking about the US government’s antitrust lawsuit against Apple.
You can watch the announcement in the video player at the top of this page, and we’ll bring you updates on his comments as we get them.
Courts have previously ruled that Apple isn’t a monopolist
From CNN’s Brian Fung
Although the Justice Department is accusing Apple of running an illegal monopoly today, the courts have previously held that Apple is not a monopolist.
In a court case involving “Fortnite”-maker Epic Games, a federal judge and a US appeals court have both ruled Apple did not illegally monopolize the market for iOS app distribution.
In light of that ruling, the Justice Department could face a tough road as it seeks to prove its case. But there is a key distinction between the Epic Games case and this one: The Justice Department has accused Apple of monopolizing smartphone markets, a different allegation.
Shares of Apple fell 3.3% on Thursday morning after the US Justice Department announced a blockbuster antitrust lawsuit against the iPhone maker. The stock is down more than 10% so far this year.
Still, Wall Street had been anticipating the filing for some time and were prepared for the news, analysts said. The risk is prolonged scrutiny for Apple and what happens to other tech stocks in its wake, they said.
“The headline risk is added to the Apple story as this case will not be resolved in the short term and Cupertino will be under a further microscope both in the Beltway and Brussels as well as other Big Tech stalwarts caught in this complex spider web,” wrote Dan Ives at Wedbush in a note to investors.
While Apple faces a landmark lawsuit in the US, Tim Cook is on a charm offensive in China
From CNN’s Laura He and Martha Zhou
Apple CEO Tim Cook, center, and Deirdre O’Brien, senior vice president of retail for Apple, left, attend the opening of the company’s new store in Shanghai, China, on March 21. Qilai Shen/Bloomberg/Getty Images
Today’s news that the US Justice Department fileda blockbuster antitrust lawsuit against Apple comes as CEO Tim Cook is making a high-profile visit to China.
The visit, which is timed with the opening of a huge new store in Shanghai, is part of a push by the company to reverse a decline in iPhone sales in its most important international market.
The new $11.6 million outlet — located in Shanghai’s central district of Jing’an, which is named after a historic temple — is the biggest in China and the second only to Apple’s flagship store on New York’s Fifth Avenue, Chinese state media reported.
“Nonghao Shanghai!” Apple CEO Cook said in a Weibo post on Wednesday,which means “hello” in Shanghainese. “I’m always so happy to be back in this remarkable city.”
In 2023, Apple grabbed the top spot in China’s smartphone market for the first time ever, with a record 17.3% market share, according to IDC Research.
Since its early days, Apple has pursued a reputation as an elite, high-design brand. It’s often focused on a premium user experience and design aesthetic, setting its products apart from rivals. That approach worked for years, until a wave of complaints by developers and consumers drew more attention to its potential downsides.
In the era led by founder Steve Jobs, “Apple was a cultural phenomenon that pitted wingtips against sandals; suits against t-shirts,” said James Bailey, a professor of leadership development at the George Washington University School of Business. “Apple relentlessly innovated. They were always steps ahead of the competition.”
Now, however, Apple’s advances are more “incremental” than earth-shattering, Bailey added, noting CEO Tim Cook “has been focused on financial management and expanding market share.”
“Apple’s financially healthy,” Bailey said, but their reputation for innovation is “dimming.”
