Why is Apple being sued? The US antitrust monopoly case explained

American government lawyers are suing Apple, claiming that the technology company has created a monopoly with the iPhone, in an antitrust case that has been in the pipeline for years.

Prosecutors from the Department of Justice (DoJ) paint a picture of a self-interested company that is only after financial gain; of a stitched-up Apple ecosystem that pulls users and developers into its fold and makes it difficult for them to leave.

While this has benefited shareholders, it has cost consumers dearly, they allege.

The lawsuit claims that this way of working came directly from Steve Jobs, the co-founder, in 2010 when he put out a message that “Apple would ‘force’ developers to use its payment system to lock in both developers and users on its platform”, the court filing reads.

Prosecutors claim its monopoly was affecting industries from financial services and fitness to gaming, social media, news and entertainment. Apple’s forays into content, such as through music, only increased the “moat” around its castle, they argue.

In an 88-page legal document, the DoJ lays out a number of complaints against one of the world’s most valuable public companies, which include:

Limiting smartwatch use

Smartwatches are synced to smartphones in order to provide their full functionality to users, such as data displays and receiving emails or messages. Apple does not allow all of the functionality of non-Apple watches to sync with iPhones.

“Apple has denied users access to high-performing smartwatches with preferred styling, better user interfaces and services, or better batteries”, the lawsuit says. It also limits the use of Apple watches to iPhones, so Apple watch users are compelled to buy iPhones or buy a different watch.

Restricting messaging apps

Apple’s messaging system makes it clear when one iPhone user sends a message to another — it appears as a blue bubble. Anyone not using an iPhone sends a green bubble and pictures sent from an iPhone to a non-iPhone can be grainy or pixelated, the lawyers say.

This means, the DoJ claims: “Apple is knowingly and deliberately degrading quality, privacy and security for its users and others who do not have iPhones.” Allegedly, this has a particularly detrimental effect on teenagers who do not own iPhones and can experience social stigma and exclusion as a result.

Controlling “digital wallets”

Apple’s wallet is a digital wallet, only available on the iPhone, and is used to store sensitive information, from credit cards to plane tickets. However, the suit says Apple’s monopoly on smartphones means it is often not economically viable to create alternatives to this digital wallet because they cannot be used by the vast numbers of iPhone users. “Apple itself has less incentive to innovate because it has insulated itself from competition”, it says.

Restricting innovation among developers

According to the DoJ, Apple invites as many people as possible to use its platforms, charges them “substantial” fees, but makes it nigh on impossible for them to negotiate on the price because the company restricts competition, for example by not allowing alternative app stores.

The lawsuit says customers could hypothetically enjoy a better experience on a cheaper phone, but instead Apple “delays, degrades and blocks” development of the technology that would increase competition and deliberately makes it difficult to switch to other types of phones.

“Apple repeatedly chooses to make its products worse for consumers to prevent competition from emerging,” it says, claiming Apple has a policy of only doing things to be “good enough” rather than anything new or costly.

What does Apple say?

Apple says the case threatens to have a chilling effect on innovation and that it intends to fight it, believing it is “wrong on the facts” and the law, as well as being potentially harmful for users.

Apple says the way it builds products for its phones, such as a watch, was a business, security and technical decision to offer the best service to customers.

The company says it is an open space for developers and has created a flourishing, growing market with ioS apps generating 85 per cent more income than Android ones.

Apple says it is welcoming “rich communication services” in its messaging system, which will allow iPhone users to exchange messages with non-Apple devices, including features, higher-resolution photos and better group texting.

It argues its payments systems are simply safer for users.

It says it has loyal and highly satisfied customers. The changes requested by the DoJ, it says, would make its user experience worse and the iPhone would become less secure and private. It warns that users would see more inappropriate content and malware.

What happens now?

Apple plans to contest the case. Some of the issues raised by the case have already been challenged in Europe, where new laws have forced Apple to alter its business model. It is possible that these changes would be rolled out more widely if that becomes necessary