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Core of the Issue: Apple Lawsuit Highlights Antitrust Problems

Kathryn Thomason

Edited by Ruth Yao, Roohie Sheikh, and Vedanth Ramabhadran


Apple was founded in 1976 by Steve Jobs and Steve Wozniak in an effort to change the consumer landscape for computers.  Today, Apple is well known for pioneering the technology landscape with the development and improvement of the iPhone, iPad, Apple Watch, and many more, making it one of the most valuable and well-known companies internationally [1]. Apple’s variety of innovative products with excellent consumer response increased the demand for products, giving Apple immense pricing power and driving company shares up. In August of 2020, Apple’s market cap rose to surpass $2 trillion. This increase solidified Apple’s global prominence, as merely 7 countries had 2021 GDP figures larger than Apple’s market cap [2]. Apple’s market takeover and prestige on the worldwide financial stage makes the company a powerhouse that is impossible to ignore. However, a recent lawsuit by the U.S. Department of Justice places Apple’s success under scrutiny, as the company’s practices have contributed to a monopolization of the smartphone and other technological markets. 

In a corporate context, a trust is a substantial alliance of businesses holding considerable market influence. Antitrust law relates to governmental efforts to ban unlawful mergers and promote uninhibited trade across financial markets. The first antitrust law, entitled the Sherman Act, was passed by Congress in 1890 to promote economic liberty by outlawing successful or attempted unreasonable monopolization in trade and business as well as creating a legal foundation for antitrust legislation[3]. Later in 1914, Congress passed the Federal Trade Commission Act and the Clayton Act. The Federal Trade Commission Act created the Federal Trade Commission to “protect the public from deceptive or unfair business practices and from unfair methods of competition” [4]. Accordingly, The Federal Trade Commission Act also banned “deceptive acts or practices” in business and “ unfair methods of competition” [3]. The Clayton Act targets certain practices not explicitly covered by the Sherman Act, such as mergers, discriminatory pricing, or unethical dealings between merchants. The basis of these three pieces of legislation is the democratic belief in an open market that utilizes competition for the benefit of the consumer to result in fair prices for high quality products[3]. 

The landmark 2001 antitrust case of the United States v. Microsoft Corporation serves as potential precedent in the new Department of Justice’s lawsuit against Apple and as a cautionary tale for Apple’s legal trouble. In the United States v. Microsoft Corporation, the U.S. claimed that Microsoft had violated the Sherman Act in its monopolization of the personal computer market. The Department of Justice claimed that Microsoft’s browser, Internet Explorer, was difficult to uninstall on Microsoft personal computers while competing software browsers were incredibly hard to install. Winning the case, the Department of Justice successfully proved the consolidation of market share, Microsoft increasing its ownership over the personal computer market, and large monopoly formed by the cooperation[5]. This lawsuit formed a precedent for confronting modern big tech monopolies, resulting in the current Apple case feeling like déjà vu for many. On Thursday March 21st, 2024, the Department of Justice released a statement announcing its lawsuit of Apple over claims relating to a monopoly in the smartphone market, showcasing its concerns over the high prices Apple has charged because of their elimination of competitors in the smartphone market. The Justice Department, in addition to 16 other attorney generals, filed a lawsuit claiming that Apple has violated Section 2 of the Sherman Act, pigeonholed Americans into switching products, and undermined innovation across the sector. Further, it claims that Apple has solidified its monopoly by blocking the emergence of apps that would allow consumers to switch between smartphone platforms and cloud-streaming apps that don’t require Apple hardware, diminishing the quality of messaging apps across platforms, and slowing the innovation of outside digital wallets. The complaint attacks Apple’s multifaceted actions that have allowed them to maintain a monopoly, entirely control prices, and slow innovation that might bring harm to the inter-product dependency of the Apple ecosystem [5].

The U.S. still considers breaking up Apple as a possible solution, but may change its stance as the lawsuit develops. Shortly after the lawsuit was announced, Apple shares began to drop and an Apple spokesperson released a statement expressing Apple’s discontent with the lawsuit, claiming that it creates a problematic precedent for government involvement in the technology sector and would create barriers for Apple’s high quality creation of technology. Opponents of the lawsuit believe that this case will bring a starkly different result from the 2001 Microsoft case. Further, opponents believe this lawsuit stifles innovation by creating a fear among tech companies of the potential penalties to becoming successful, and that Apple’s monopoly reflects the quality of their products and consumer satisfaction [7].

Reflective of global concerns surrounding big tech, the Apple lawsuit could create a landmark American precedent for tech monopolization, specifically in the smartphone market. Still, the United States could struggle to balance the enforcement of antitrust laws. An overly aggressive precedent could penalize success and slow economic growth, while a lenient ruling could stifle innovation and result in prince gouging. As the delicate balance of government intervention in trusts re-emerges, it is important to both understand and contextualize the nuance of the lawsuit. 

 

[1]Ellen Terrell, Research Guides: This Month in Business History: The Founding of Apple Computer, Inc., https://guides.loc.gov/this-month-in-business-history/april/apple-computer-founded (last visited Mar 22, 2024).

[2]At $2.08 Trillion, Apple Is Bigger Than These Things, Investopedia, https://www.investopedia.com/news/apple-now-bigger-these-5-things/ (last visited Mar 22, 2024).

[3]The Antitrust Laws, Federal Trade Commission (2013), https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws (last visited Mar 22, 2024).

[4]Mission, Federal Trade Commission (2021), https://www.ftc.gov/about-ftc/mission (last visited Mar 22, 2024).

[5]Antitrust Division | U.S. V. Microsoft: Court’s Findings Of Fact, (2015), https://www.justice.gov/atr/us-v-microsoft-courts-findings-fact (last visited Mar 22, 2024).

[6]Office of Public Affairs | Justice Department Sues Apple for Monopolizing Smartphone Markets | United States Department of Justice, (2024), https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets (last visited Mar 22, 2024).

[7]Kif Leswing Goswami Rohan, DOJ Sues Apple over iPhone Monopoly in Landmark Antitrust Case, CNBC (2024), https://www.cnbc.com/2024/03/21/doj-sues-apple-over-iphone-monopoly.html (last visited Mar 22, 2024).


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