Apple Antitrust Class Action Filed After DOJ Accuses Company of Trapping Consumers in iPhone Ecosystem

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Apple faces a proposed class action lawsuit that alleges the tech giant has effectively locked hundreds of millions of consumers into its increasingly expensive ecosystem of devices, apps and services by unlawfully restricting competition in the smartphone market, making it harder for users to switch devices. 

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The 64-page Apple antitrust class action was filed in California on March 22, a day after the United States Department of Justice (DOJ), joining 16 states and the District of Columbia, sued the company over allegations that it had broken the law in the process of monopolizing the smartphone market. 

In particular, the DOJ alleged that Apple has come to wield a monopoly over the smartphone market by, among other conduct, “selectively imposing contractual restrictions on, and withholding critical access points from, developers” and “[undermining] apps, products and services that would otherwise make users less reliant on the iPhone,” all to “extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants.” 

The proposed class action lawsuit echoes the DOJ complaint, alleging Apple’s “lock-in strategy” over more than the last 15 years has trapped users into the iPhone ecosystem, mainly by “erecting barriers to purchasing a competing device.” 

“By locking in its customer base, Apple cripples competition from actual and would-be smartphone manufacturers, resulting in higher prices, lower quality, stunted innovation, reduced choice, and lower quality-adjusted output in the smartphone market,” the suit summarizes.

The complaint focuses in particular on five technologies Apple has allegedly suppressed, either by controlling app distribution or APIs, to maintain its apparent smartphone monopoly.  

According to the filing, Apple has used an array of technological and contractual restraints to block so-called “super apps,” which act as mini platforms that can host a variety of programs and device features. The suit says super apps can serve as an ostensible “gateway” to a smartphone’s functionality without relying on its proprietary software, thereby facilitating switching devices.

Per the case, Apple has also for years blocked cloud streaming apps on its smartphones “for similar reasons,” as they afford users a way to play games in the cloud and “[decrease] the importance of expensive hardware Apple offers,” the filing says. 

Further, Apple has kept device users tied to its ecosystem by degrading the functionality of third-party messaging apps, specifically because doing so serves as an obstacle toward “iPhone families” giving their children Android devices, the lawsuit claims. 

To further lock in consumers, Apple has purposefully made the Apple Watch incompatible with competing smartphone devices such as Android phones and “strategically [degraded] the functionality” of other cross-platform smartwatches, the case continues. In effect, Apple has steered consumers toward the Apple Watch while making switching to another product “cost prohibitive” as doing so would entail “not just purchasing a new phone, but a new smartwatch as well,” the suit contends. 

Lastly, the lawsuit says Apple has blocked third-party digital wallets from accessing the necessary technologies to perform tap payments from Apple devices, as the company has ensured that only its own app, Apple Pay, can perform this function. 

In a press release, the DOJ alleged that Apple’s conduct “extends beyond these examples, affecting web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more.” The government warned in its lawsuit that Apple “has every incentive to extend and expand its course of conduct to acquire and maintain power over next-frontier devices and technologies.” 

As the case tells it, it was never Apple’s intention to improve its products, and the alleged suppression of innovation on the company’s devices has made them less valuable to users. 

“[E]nhacing the quality of its devices was never the objective of Apple’s lock-in strategy,” the lawsuit charges. “The objective—Apple’s overarching strategic objective—is to make it difficult and costly for consumers to switch to competing devices. And measured against that manifestly anticompetitive goal, Apple’s strategy has been a resounding success.” 

In light of the foregoing, Apple has put itself in a position to charge “supracompetitive prices” for the iPhone, which can cost as much as $1,599, the complaint says, stressing that prices, in a competitive market, would be lower overall. 

The proposed Apple antitrust class action lawsuit looks to represent all persons and entities who, as United States residents, bought an iPhone from Apple. 

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