The U.S. Department of Justice on Thursday sued Apple, accusing the consumer electronics giant of violating antitrust laws with its restrictive iPhone and App Store policies. The news added to the list of woes weighing on Apple stock lately.
The lawsuit alleges that Apple's conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, and imposes extraordinary costs on developers, businesses and consumers.
The Justice Department filed the lawsuit in the U.S. District Court for the District of New Jersey. Also, 16 state and district attorneys general joined the federal government in the complaint.
The civil antitrust lawsuit accuses Apple of monopolizing smartphone markets in violation of Section 2 of the Sherman Act.
Apple Stock Falls On Antitrust Suit News
On the stock market today, Apple stock dropped 4.1% to close at 171.37. Year to date, Apple stock is down 11%.
The Justice Department alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers. Those restrictions mostly pertain to Apple's App Store.
The lawsuit is "seeking relief to restore competition" in the smartphone market.
Apple did not respond to a request for comment.
Apple's 'Whac-A-Mole' Response To Threats
"Consumers should not have to pay higher prices because companies violate the antitrust laws," Attorney General Merrick Garland said in a news release. "We 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."
The Justice Department contends that many of Apple's App Store policies are anticompetitive. It also argues that Apple has suppressed the emergence of cloud streaming apps and "super apps" that could reduce user dependence on Apple's hardware and software.
"Monopolies like Apple's threaten the free and fair markets upon which our economy is based," Garland said in a written statement. "They stifle innovation; they hurt producers and workers; and they increase costs for consumers."
Assistant Attorney General Jonathan Kanter said Apple has responded to competitive threats over the years "by imposing a series of 'Whac-A-Mole' contractual rules and restrictions."
Those actions "allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies," Kanter said in a statement.
Government Crackdown On Big Tech
Other issues weighing on Apple stock include weak iPhone sales in China and the lack of a strategy for artificial intelligence. Apple also faces legal issues over its App Store policies in Europe.
Apple is the latest Big Tech firm to face antitrust scrutiny by U.S. regulators.
The Justice Department has a pending suit against Google parent Alphabet for alleged abuses of its online advertising dominance.
Meanwhile, the Federal Trade Commission is pursuing antitrust cases against Amazon.com and Facebook parent Meta Platforms.
Apple stock has a mediocre IBD Composite Rating of 64 out of 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Also, Apple is one of the so-called Magnificent Seven stocks.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
