Fast Facts
- The U.S. Department of Justice on Thursday filed an antitrust lawsuit against Apple, alleging that the company has built a smartphone monopoly.
- Apple said in a statement that it disagrees with the premise and the suit and will fight it "vigorously."
- Deepwater Management's Gene Munster thanks that the suit will "prove to be noise."
More than 20 years ago, the U.S. Department of Justice sued Microsoft (MSFT) , alleging that the company — with a greater than 80% share of the personal computer operating system market — had engaged in anti-competitive practices in building up a monopoly in the computer business, and in attempting to build an internet-browsing monopoly as well.
Microsoft lost the suit in 2001. Though it was not forced to break up, the Justice Department enforced several constraints on its operating system business.
Now, Apple (AAPL) has claimed that the Department of Justice is attempting to recreate that landmark case — this time, with Apple as the defendant.
Related: Justice Department sues Apple, charges 'smartphone monopoly'
U.S. vs Apple
The Department of Justice filed an antitrust lawsuit against Apple Thursday, alleging that the company has built up a smartphone monopoly. The case represents the government's latest challenge to Big Tech; it has antitrust suits in process against Amazon, Meta and Google parent Alphabet.
Attorney General Merrick Garland said that Apple, with a greater than 70% share of the smartphone market, has engaged in "exclusionary, anticompetitive conduct that hurts consumers and developers."
The lawsuit was filed in U.S. District Court for the District of New Jersey.
Part of the complaint points to the massive App Store fees imposed by Apple on third-party developers, though Garland said that the complaint goes beyond the iPhone and the App Store, touching on issues of cross-platform messaging, among others.
Apple, however, said that, contrary to the complaint's claims, it is not the same as Microsoft circa 1999; the company claimed that its share of the global smartphone market is around 20%, adding that its actions are all intended to improve the quality of its devices, not stifle competition.
This may go unnoticed but it is a fundamental shift in understanding how privacy and competition interrelate which scares the bejesus out of big tech who have long tried to keep privacy and antitrust in separate lanes to use as defense arguments. pic.twitter.com/Dxwj5YmLfa
— Jason Kint (@jason_kint) March 21, 2024
Data from Statista, meanwhile, shows that Apple held an approximate 50% share of the smartphone market in the U.S. in recent quarters, though confirmed a share of around 20% globally.
Apple refuted the complaint's claims regarding cross-platform messaging functionality, a closed App Store ecosystem, an anti-competitive smartwatch and an anti-competitive Apple Wallet.
"This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets," Apple said in a statement. "If successful ... It would set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law."
Related: Epic Games CEO explains how it fought Apple and won
Analysts: It's just noise
Deepwater Management's Gene Munster said in a post that, while the case will likely "weigh on Apple's multiples" for the foreseeable future, it will "prove to be noise."
"Consumers just want the best tech for the money, and Apple deliveries that today and will in three years," Munster said. "Yes, Apple will likely be forced (to) make some small changes to 'delight' the regulators, but those tweaks won't change the loyalty the company has from its 1.4B and growing customer base."
His perspective is shared by Wedbush's Dan Ives, who said in a note that does not "expect any business model changes for now," adding that he does not view the case as a "thesis changer" for the company.
"Apple clearly has to find a way to eventually settle this case, pay a hefty fine and ultimately find some compromise with developers on the App Store structure down the road," Ives added.
Shares of Apple opened flat Friday morning, after closing down 4% Thursday.
Contact Ian with tips and AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
