Apple Sued by State of Maine, U.S. DOJ, and Others for Alleged iPhone Monopoly

The U.S. Department of Justice (DOJ), alongside 16 states — including Maine — have filed a civil anti-trust lawsuit against Apple, accusing the tech company of illegally monopolizing the smartphone market by implementing restrictions that stifle innovation and make it unfeasible for many users to move outside of the Apple ecosystem.

Also joining the lawsuit are the states of New Hampshire, New Jersey, Arizona, California, Connecticut, Michigan, Minnesota, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin, and the District of Columbia.

Click Here to Read the DOJ’s Full Press Release

According to the lawsuit, Apple’s efforts to “protect and exploit its smartphone monopoly” can be broken down into three primary categories: controlling app distribution and creation, increasing the cost and friction associated with switching to another smartphone brand, and extracting “monopoly rents” from third parties.

“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” the lawsuit states. “The cumulative effect of this course of conduct has been to maintain and entrench Apple’s smartphone monopoly at the expense of the users, developers, and other third parties who helped make the iPhone what it is today.”

It is alleged in the lawsuit that Apple places burdensome and unnecessary restrictions on a number of technologies in order to maintain its dominance and make it harder for users to move beyond the Apple ecosystem.

“Rather than respond to competitive threats by offering lower smartphone prices to consumers or better monetization for developers, Apple would meet competitive threats by imposing a series of shapeshifting rules and restrictions in its App Store guidelines and developer agreements that would allow Apple to extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives,” the lawsuit says.

The filing points toward a number of specific ways in which Apple has allegedly suppressed competition and innovation, including the exclusion of cross-platform messaging apps, diminishing the functionality of non-Apple smartwatches, and limiting the usage of third-party digital wallets.

The attorneys general also accuse Apple of engaging in anti-competitive practices by severely constricting the development of “super apps” that allow for improved cross-platform functionality, as well as suppressing the development of mobile cloud streaming services that would allow users to run intensive programs on subpar hardware by utilizing the computing power of remote servers.

“The exclusionary and anticompetitive acts described above are part of Apple’s ongoing course of conduct to build and maintain its smartphone monopoly,” the filing argues. “They are hardly exhaustive. Rather, they exemplify the innovation Apple has stifled and Apple’s overall strategy of using its power over app distribution and app creation to selectively block threatening innovations.”

It is also argued that the impact of these allegedly monopolistic tactics stretches beyond the smartphone market, negatively impacting a number of different economic spheres.

“Apple’s anticompetitive conduct not only limits competition in the smartphone market, but also reverberates through the industries that are affected by these restrictions, including financial services, fitness, gaming, social media, news media, entertainment, and more,” the attorneys general argue. “Unless Apple’s anticompetitive and exclusionary conduct is stopped, it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy.”

The lawsuit also alleges that “as technology evolves, Apple continues to evolve and shift its anticompetitive behavior to protect its monopoly power,” pointing toward its recent move to offer a host of subscription services that may “increase switching costs among iPhone users,” as they could “experience significant costs, time, lost content, and other frictions if they attempt to switch to a non-Apple smartphone or subscription service.”

“In a competitive market, Apple would compete aggressively to support the development of popular apps and accessories for iPhone users, which would in turn make iPhone more attractive to users and more valuable,” the filing concludes. “But Apple takes steps to delay or suppress cross-platform technologies that it recognizes would be popular with users.”

Click Here to Read the Full Lawsuit Filed Against Apple

“Apple knows that people rely on its products and we believe it used that reliance to lock in consumers and limit their options,” said Maine Attorney General Aaron Frey in a statement Thursday. “This type of behavior violates all the principles of a competitive marketplace and ultimately hurts consumers.”

Click Here to Read Attorney General Frey’s Full Press Release

This lawsuit was filed Thursday in the U.S. District Court for the District of New Jersey.