The Justice Department is in the final stages of an investigation into Apple and could file a broad antitrust case targeting the company’s strategies to protect iPhone dominance as early as the first half of this year, three said people familiar with the matter. matter.
The agency is focusing on how Apple used its control over its hardware and software to make it harder for consumers to abandon the company’s devices, as well as competition from rivals, the sources said. who spoke anonymously because the investigation was active.
Specifically, the researchers looked at how the Apple Watch works better with the iPhone than other brands, as well as how Apple excludes competitors from its iMessage service. They also examined Apple’s payment system for the iPhone, which prevents other financial companies from offering similar services, the sources said.
Senior leaders in the Justice Department’s antitrust division are currently reviewing the results of the investigation, two of the people said. Agency officials met with Apple several times, including in December, to discuss the investigation. No final decision has been made on whether a lawsuit should be filed or what it should include, and Apple has not had a final meeting with the Justice Department in which it could make make its case to the government before legal action is taken.
The Justice Department is moving closer to what would be the most consequential federal antitrust trial against Apple, which is the world’s most valuable technology company. If the lawsuit is filed, U.S. regulators will have prosecuted four of the largest technology companies for monopolistic business practices in less than five years. The Justice Department is currently facing Google in two antitrust cases, focusing on its search and ad tech businesses, while the Federal Trade Commission has sued Amazon and Meta for stifling competition.
Apple’s suit would likely be even broader than previous challenges to the company, attacking its powerful business model that pairs the iPhone with devices like the Apple Watch and services like Apple Pay to attract and retain consumers to its products. Competitors said they were denied access to key Apple features, like the Siri virtual assistant, prompting them to argue the practices were anticompetitive.
A Justice Department spokesperson declined to comment for this article. Apple also declined to comment.
The company has previously said its practices do not violate antitrust law. By defending its business practices against past criticism, Apple said that his “approach has always been to grow the pie” and “create more opportunities not only for our business, but also for artists, creators, entrepreneurs and all the “crazy people” with a big idea.”
The company prides itself on how iPhone integrates hardware and software to create a seamless customer experience. In 2020, Tim Cook, Apple’s chief executive, said in testimony before a congressional antitrust committee, the company redefined mobile phones with its “effortless user experience, simplicity of design, and high-quality ecosystem.” He added that Apple competes with Samsung, LG, Google and other smartphone makers, who offer a different approach.
“Apple does not have a dominant market share in any of the markets where we operate,” Mr. Cook said at the time. “This is not just true for the iPhone; “This is true for any product category.”
This case would add to the growing regulatory pressure, both domestically and abroad, weighing on Apple’s business, currently valued at $2.83 trillion.
This year, European regulators are expected to force Apple to accommodate app stores other than its own under the Digital Markets Act, a law passed in 2022 to rein in tech giants. Similar actions against the App Store have been taken or are being considered in South Korea and Japan.
Additionally, the European Commission said in 2021 that Apple violated its antitrust laws by imposing app store fees on competitors of its Apple Music product. The commission’s investigation into this matter continues.
The resolution of the Justice Department’s investigation could be affected by the details of how Apple complies with European regulations, said two people familiar with the matter, who spoke anonymously because the investigation was ongoing.
Apple faces increased regulatory pressure as its business slows. Last year, the company reported that its annual revenue fell 2.8% to $383 billion, its first full-year decline since 2019, as sales of iPhone, iPad and Macs have slowed down. Yet the company has sold more than 200 million iPhones and represented almost three quarters of smartphones sold worldwide at a price above $600, analysts estimate.
When the Justice Department began its technical investigations in 2019, it prioritized its antitrust review of Google over Apple because it lacked the financial resources and personnel to fully evaluate both companies, according to two people with knowledge of the subject. This changed in 2022 after the department’s budget was increased.
The investigation covered a broader range of Apple’s business interests than previously reported, six people with knowledge of the meetings said. This includes how Apple blocked cloud gaming apps, which allow users to stream a multitude of titles to their phones, from being offered in its App Store.
Investigators spoke with executives at Tile, the Bluetooth tracking service, about Apple’s competing AirTag product and the company’s third-party restrictions on access to iPhone location services. Executives at Beeper, a startup that made iMessage available on Android phones, told investigators how Apple blocked it from allowing messaging on competing smartphone operating systems. Investigators have also had conversations with banks and payment apps about how Apple is preventing them from accessing the tap-to-pay feature on iPhones.
Tile and Beeper declined to comment for this article.
They also looked at how the Apple Watch works better with the iPhone than other competing smartwatches. Garmin device users have complained on Apple’s support forums that they can’t use their watch to respond to certain text messages from their iPhone or change notifications they receive from the iPhone they have. connected to their watch.
Apple’s new privacy tool, App Tracking Transparency, which lets iPhone users explicitly choose whether an app can track them, has attracted attention because of its reduction in advertisers’ collection of user data. Advertising companies have declared this tool anti-competitive.
Meta, which owns Facebook and Instagram, encouraged the Justice Department to look into the issue in its conversations with the agency, two of the people said. The company — which makes most of its money from advertising — said in 2022 it could lose about $10 billion in revenue that year because of the changes. Meta declined to comment. Investigators also looked into Apple’s policy of charging fees for purchases made in iPhone apps, which companies like Spotify and dating app giant Match Group say is anticompetitive.
In 2020, Epic Games, the creator of the popular game Fortnite, sued Apple over the App Store’s requirement that developers use the tech giant’s payment system. A federal judge ruled that Apple does not have a monopoly on mobile games, dealing a major blow to Epic’s claims.
When Epic Games sued Google over similar allegations, the result was different. A jury ruled in December that Google’s app store policies violated antitrust laws. Google plans to appeal the verdict.
The Justice Department last sued Apple in 2012, accusing it of conspiring with book publishers to raise the price of digital books. Apple lost the case and paid a $450 million settlement.
