On March 21st local time, the US Department of Justice sued Apple on suspicion of monopolizing the smartphone market, marking the first major antitrust lawsuit initiated by the Biden administration against Apple.
At the close of the day, Apple's stock price fell by more than 4%, and its market value evaporated overnight by over $110 billion, shrinking to $2.6 trillion, further narrowing the gap with Nvidia, which closely followed in market value.
"If not challenged, Apple will only continue to strengthen its smartphone monopoly position. Consumers should not pay higher prices because the company violates antitrust laws," said Attorney General Merrick Garland in a statement
The US Department of Justice's charges against Apple specifically involve using its market power to obtain more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants.
The US Department of Justice stated that Apple's iPhone is priced at up to $1599 per unit, with profits higher than any other company in the industry. Apple charges various business partners behind the scenes, from software developers to credit card companies, and even competitors like Google, ultimately raising consumer prices and driving up Apple's profits.
In the lawsuit, the US Department of Justice accused Apple of making it harder for consumers to stop competitors and cited five examples of Apple's use of mechanisms to suppress technologies that may exacerbate smartphone competition: super apps, cloud gaming apps, messaging apps, smart watches, and digital wallets.
The US Department of Justice has heavily accused Apple of monopolizing the smartphone market, with most analysts believing that Apple holds slightly more than half of the smartphone market share in the United States. However, Apple has stated that they will try to persuade the court to define the market as the global smartphone market, where the iPhone only holds a one-fifth share.
Apple claims that complying with regulatory regulations will cost a lot of money, may prevent it from launching new products or services, and may harm customer needs.
In its latest statement, Apple stated that both in fact and in law, the aforementioned lawsuit is untenable. Apple believes that this lawsuit threatens the company's foundation, and if successful, it will hinder Apple's technological capabilities in the intersection of hardware, software, and services, and set a dangerous precedent.
It is currently unclear what specific changes the US Department of Justice is seeking from Apple. But in the aforementioned lawsuit, the US Department of Justice requested the court to prevent Apple from using its control over application distribution, contract terms, and private software interfaces to weaken competitors, and ordered other necessary measures to "restore competitive conditions in markets affected by Apple's illegal behavior.".
Previously, Apple had been subject to antitrust investigations in Europe, Japan, and South Korea, and was currently in litigation with companies such as Epic Games.
In Europe, Apple's App Store business model is also being challenged by the recently enacted Digital Markets Act. On March 4th, the European Commission fined Apple over 1.8 billion euros for abusing its dominant position in the market by distributing music streaming applications to iPhone and iPad users ("iOS users") through its Apple Store App Store.
The European Commission believes that imposing a one-time fine on Apple is necessary to prevent the company from repeating current or similar infringement practices, and to prevent other companies with similar scale and resources from committing the same or similar infringement practices.
"Apple's behavior has been ongoing for nearly a decade and may result in many iOS users paying significantly higher prices for music streaming subscriptions, as Apple charges developers high commissions and passes them on to consumers in the form of higher subscription prices," the European Commission said.