U.S. accuses Apple of illegally maintaining monopoly in broad lawsuit

Driving the news: The lawsuit, filed in U.S. District Court in New Jersey, specifically accuses Apple of violating Section 2 of the Sherman Antitrust Act, with 16 state and district AGs joining the DOJ in accusing Apple of "broad-based, exclusionary conduct" hurting both consumers and competitors.

• The suit is the Justice Department's third against Apple since 2009.

"Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone," and has consolidated its monopoly "not by making its own products better, but by making other products worse," Attorney General Merrick Garland said at a press conference.

• "Apple has gone from revolutionizing the smartphone market to smothering it," said deputy attorney general Lisa Monaco.
• "Today's lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets," said assistant attorney general Jonathan Kanter in a release.
• "Each step in Apple's course of conduct built and reinforced the moat around its smartphone monopoly," the complaint reads. "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."

What's inside: The expansive lawsuit accuses Apple of illegal behavior covering everything from news subscriptions to automotive services, preventing third-party apps from offering things like tap-to-pay and blocking the creation of third-party digital wallets.

• Officials also accuse Apple of degrading the market of cross-platform messaging and blocking the growth of apps with "broad functionality" that would make it easier to switch smartphones.
• The suit also says Apple has suppressed mobile cloud streaming services in markets like gaming and "diminished" the functionality of non-Apple smartwatches.
• The DOJ release says that in fiscal year 2023, Apple generated net revenues of $383 billion and a net income of $97 billion, exceeding any other company in the Fortune 500.

"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 hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people's technology."
• The case is wrong on the facts and law, the company said Thursday, and Apple will move to dismiss the suit.
• A government victory would end up making iPhones look and feel like Android phones, Apple argued.
• Other companies have been lobbying against Apple for years because they want to enjoy Apple's services for free, Apple said, and other cases involving alleged monopolization by Apple have failed.

The intrigue: Apple's behavior borrows from Microsoft's playbook, acting associate attorney Benjamin C. Mizer said at the press conference — making a direct comparison between today's suit and the DOJ's epic antitrust siege of Microsoft that started in the late 1990s.

• One "big hurdle" for DOJ in making Microsoft comparisons will be that Microsoft's market share for operating systems then was "much, much higher" that Apple's smartphone market share today, Adam Kovacevich, CEO of Chamber of Progress, said on X.

Catch up quick: DOJ enforcers have been investigating Apple since 2019, starting under the Trump administration, when regulators at the DOJ and FTC divvied up competition cases around Google, Apple, Amazon and Meta.

• Apple committed in January to allowing in-app purchases such as subscriptions to be processed outside of Apple's ecosystem, in response to a separate Supreme Court ruling.
• Meta, Microsoft, X and Match Group on Wednesday joined Fortnite video game maker Epic Games in demanding that Apple be held in contempt failing to honor the in-court injunction demanding changes to payment options for apps in its App Store.

The big picture: Apple is also under heavy scrutiny in Europe.

• The company was hit with a $2 billion fine Mar. 4 for preventing music streaming rivals such as Spotify from offering cheaper deals.
• The EU has designated Apple as one of a handful of internet "gatekeepers" and forced changes to how the company operates its App Store, under threat of further multi-billion dollar fines.
• Rivals have complained Apple's EU changes don't go far enough.
• A congressional effort to pass EU-like antitrust laws that would impact Apple fizzled out a few years ago.

Editor's note: This story has been updated with additional comments from the Justice Department and Apple.