Is Apple running a smartphone monopoly?

LAST MONTH the Depart­ment of Justice joined 15 states and the District of Columbia in filing a federal antitrust lawsuit against tech giant Apple. U.S. Attorney General Merrick Garland says Apple has maintained a “monopoly” of the smartphone industry “not simply by staying ahead of the competition on the merits, but by violating federal antitrust law.” Apple says the legal action is misguided and will hurt consumers.

What law did Apple allegedly break? The lawsuit says Apple violated Section 2 of the Sherman Act. The Justice Department claims Apple forced App Store developers to abide by a “series of shapeshifting rules and restrictions” to increase its profits from fees. It says the company acted to “thwart innovation” to avoid lowering prices and also suppressed developments that could have led users to abandon the iPhone for cheaper alternatives.

For example? The agency accuses Apple of charging app developers fees of up to 30 percent for apps that Apple did not create, and of taking similar cuts for in-app purchases. It says Apple undercuts competing messaging apps, banking or “digital wallet” apps, and other apps by restricting their access to Apple’s application programming interface, or API.

What’s Apple’s response? The company said in a statement, “We innovate every day to make technology people love—designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users.” Whereas the Justice Department characterized Apple’s iPhone empire as “dominant,” Apple called the smartphone market “fiercely competitive.” Apple said that if the department’s lawsuit succeeded, it would limit the company’s ability to make products its customers have come to expect.

Is having a monopoly illegal? Section 2 of the Sherman Act, an antitrust law first passed in 1890, says individuals are guilty of a felony if they “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations.” (For the purposes of the act, “persons” includes corporations and associations.)

What’s the penalty for violators? Corporations found guilty face a “fine not exceeding $100,000,000” and/or “imprisonment not exceeding 10 years.”

Has the Justice Department similarly sued other tech giants? In 1998 the agency sued Microsoft for stifling competition with the company’s Internet Explorer browser software. (The government won.) In January 2023, the agency and several states sued Google, saying it had gained control of the internet advertising market and tried to “neutralize or eliminate ad tech competitors.” That case is still making its way through the courts.