A bite of Apple: Why is the Biden administration suing the tech giant?
The US claims the tech giant’s power has gone largely unchecked after years of allegations by critics that Apple has harmed competition by choking access to many of its features by Android users.
The Biden administration announced on Thursday that it is suing Apple for allegedly creating a monopoly in the smartphone market. / Photo: Reuters
Apple, the maker of the iconic iPhone, has lost more than $100 billion in stock market value after the US announced it would sue the tech giant for “broad, sustained and illegal conduct."
And based on Apple’s pledge to “vigorously defend against” the lawsuit, the stage appears set for a fierce legal battle that could mirror the 1998 case that ended Microsoft’s stranglehold on desktop software.
So, what is going on
The Biden administration announced on Thursday that it is suing Apple for allegedly creating a monopoly in the smartphone market.
The lawsuit was filed by the US Department of Justice (DOJ) in federal court in New Jersey, along with 15 other states and the District of Columbia.
The US “allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits, but by violating federal antitrust law,” Attorney General Merrick Garland said.
One way it claims Apple maintains this monopoly is by blocking competitors from accessing some features of the iPhone and, therefore, giving their own users a better experience.
An example that most smartphone users are familiar with is the “green bubble” feature in cross-platform messaging. Apple allows iPhone customers to easily send high-quality media to one another through blue bubble texts or its Airdrop feature.
However, the same messages sent to Android smartphones are of lower quality, delivered slower and marked in a green box instead of blue – creating what some critics call a “class divide”.
To help Android users message iPhone users without physical and psychological limitations, tech entrepreneur Eric Migicovsky had created an app dubbed Beeper Mini.
But he told CNN that Beeper Mini was swiftly struck down by Apple, only lasting three days.
“Technologically, they worked very hard to take actions to penalise Beeper Mini users by knocking the connection offline or by making it progressively more unreliable.”
Migicovsky is among several tech creators who have called Apple out for blocking their "super apps" aimed at making it easier for consumers to switch between smartphone platforms.
In addition, Apple allegedly blocks the development of cloud-streaming apps, which would enable high-quality video gameplay without requiring additional hardware expenses.
Apple also receives a 30 percent commission on most sales through its app store, which subscription-selling companies say creates an extremely high commission due to its smartphone dominance.
Another example of stifling competitors is the ease with which Apple smartwatches, digital wallets or other products like the simple AirTags can work with iPhones but non-Apple products face more restrictions.
“Apple creates barriers that make it extremely difficult and expensive for both users and developers to venture outside the Apple ecosystem,” Garland said. “Consumers should not have to pay higher prices because companies break the law.”
“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly. But there’s a law for that,” he added.
What is the US law Apple is up against?
The tech company, founded by Steve Jobs in the 1970s, stands accused of applying a strategy that relies on “exclusionary anticompetitive conduct” i.e., monopolising.
This violates section 2 of the Sherman Antitrust Law that was passed in 1890 and states that “Every person who shall monopolise, or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”
It also says that if convicted, those responsible “shall be punished by (a) fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding ten years, or by both said punishments, in the discretion of the court.”
Apple has condemned the lawsuit strongly, saying it “threatens who we are and the principles that set Apple products apart in fiercely competitive markets."
"We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it," the company said in a statement.
This move against Apple is the latest in the Biden administration’s strong push to rein in unlawful anticompetitive behaviour by some of the country’s biggest tech companies.
In 2020, Apple was also included in a report on companies that hold “monopoly power,” alongside Meta, Google, and Amazon.
All companies have now been sued for alleged antitrust violations and called upon to make changes that could alter their business models.
What is the lawsuit calling for?
The lawsuit against Apple is asking the court for three major changes:
1. Bar Apple from using its app store to block innovative new apps
2. Block Apple-imposed restrictions that prevent other messaging apps, smartwatches, digital wallets and other technologies from integrating with the iPhone.
3. Prevent Apple from using its contractual terms to “obtain, maintain, extend, or entrench” the company’s alleged monopoly.
Like in most monopoly cases, the lawsuit doesn’t explicitly call for Apple's breakup but does ask for “relief as needed to cure any competitive harm.”
Garland credited Apple's dominance — its market capitalisation is larger than the GDP of more than 100 countries — to "exclusionary" tactics rather than superior products.
It has achieved its monopoly power “not by making its own products better, but by making other products worse”.
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