The US Department of Justice (DOJ) is reportedly on the cusp of filing a sweeping antitrust lawsuit against tech giant Apple over alleged anti-competitive practices regarding its App Store. If filed, it would represent the most significant legal threat to Apple’s services business to date.
Background of Investigation
The DOJ has been investigating allegations of anti-competitive behavior by Apple since 2019. The probe centers around claims that Apple unlawfully favors its own apps and services on the iOS App Store, while disadvantaging third-party providers.
Specific practices under scrutiny include:
- Requiring developers to use Apple’s in-app payment system, under which it takes a 15-30% commission
- Prohibiting app developers from informing users of alternative payment options
- Favoring Apple services like Apple Music over competitors Spotify and Pandora on the App Store
Critics argue these policies entrench Apple’s dominance and stifle competition. Apple maintains its rules provide security and privacy protections for consumers.
DOJ Lawsuit Said to Cover Wide Range of Allegations
Sources indicate the expected DOJ lawsuit will incorporate a broad set of allegations regarding Apple’s app marketplace conduct.
The claims are expected to center not just on policies affecting app developers, but also harms to smartphone users unable to easily switch from iOS due to App Store lock-in effects.
Specific allegations likely include:
- Exclusionary Conduct: Unlawfully restricting rival apps/services and limiting user choice
- Tying arrangements: Forcing use of Apple payment systems for in-app purchases
- Lock-In Effects: Exploiting lack of iOS app transferability to Android platforms
The wide-ranging nature of claims signals DOJ seeks fundamental changes to App Store business model.
Timing and Impact Remains Uncertain
Bloomberg reports the DOJ aims to file the antitrust case against Apple in the first half of 2024. However, the specific timing remains fluid.
It also remains unclear if the incoming Biden administration will maintain pressure on major tech companies. A change in leadership at the DOJ could delay action.
Regardless, Apple faces continued scrutiny of its app marketplace power from regulators worldwide:
| Location | Investigation Status |
|---|---|
| European Union | Probe into App Store rules and mobile payments ongoing |
| Australia | Late stage examination into app market concerns |
| South Korea | Recently levied fines against Apple and Google over billing policies |
While the exact ramifications of a broad US lawsuit remain speculative, most analysts expect it would represent the most serious legal threat to Apple’s booming services segment to date.
Services including App Store commissions, iCloud & Apple Music now generate nearly $85 billion in high margin annual revenue for Apple. Disruption of these businesses through remedies imposed by the court could substantially impact Apple’s future profit trajectories.
Apple’s Response So Far
Apple has pushed back against accusations of anti-competitive practices, arguing its App Store model provides critical security protections.
However, facing mounting regulatory pressure, Apple has instituted select changes to App Store policies over the past year:
- Reduced commissions to 15% for developers making under $1 million
- Agreed to allow external payment links in reader apps
- Provided increased pricing flexibility for certain app categories
Critics argue these changes are insufficient to address core competition concerns in how Apple manages iOS apps.
Apple is simultaneously engaged in various legal battles related to its app policies, including an ongoing dispute with medical device maker Masimo over patented technology related to blood oxygen monitoring.
With the DOJ now potentially entering the fray directly, Apple faces threats on multiple fronts heading into 2024. The ultimate outcomes could reshape app marketplace dynamics and Apple’s services growth trajectory for years to come.
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