The U.S. Department of Justice (DOJ) is reportedly preparing to file a broad antitrust lawsuit against Apple over policies related to its App Store, according to sources cited in top news articles from Friday. If filed, the case could have major implications for Apple’s services business, which generated $85 billion in revenue last fiscal year.
DOJ Believes Apple Unlawfully Maintains iOS App Monopoly
According to a CNBC article, the DOJ believes Apple has unlawfully maintained a monopoly over the distribution of iOS apps through stringent policies and onerous fees. App developers currently have no choice but to abide by Apple’s various rules and pay its 30% commission in order to reach the large iOS user base.
The expected lawsuit would likely accuse Apple of violating federal antitrust laws through anticompetitive conduct designed to suppress innovation and consumer choice. It may call for remedies aimed at promoting greater competition on iOS, such as allowing alternative app stores or sideloading.
“The Justice Department plans to sue Apple for parts of its App Store policies, aiming to give app developers more options,” reported Tripp Mickle, in a tweet.
Years-Long Antitrust Investigation Reaches Climax
For years, Apple has faced complaints from app developers and scrutiny from regulators over policies related to its App Store. But now, a Justice Department probe into potential antitrust violations appears to be reaching its climax.
“The Justice Department’s antitrust investigation of Apple’s App Store policies is firing on all cylinders going into 2024,” reported AppleInsider, in a post this week.
According to The Verge, the DOJ has recently asked Apple’s competitors and app developers to provide information and evidence to be used in an antitrust case. This suggests federal prosecutors are putting the finishing touches on a complaint.
Lawsuit Could Force Changes to App Store, Impact Services Revenue
If filed and successful, the DOJ’s lawsuit could force major changes in how Apple operates its App Store.
Potential outcomes analysts have proposed include:
- Allowing third-party app stores on iOS
- Letting developers use alternate payment systems
- Removing prohibitions on apps directing users to web signups
- Reducing Apple’s 30% commission rate
|Alternate iOS App Stores
|Reduce Apple’s control over app distribution; enable more pricing competition
|Alternate Payment Systems
|Bypass Apple’s 30% cut on in-app purchases and subscriptions
|Web Signup Allowance
|Let developers avoid commissions by directing users to websites
|Lower Commission Rate
|Improve developer profit margins; potentially stimulate more app innovation
Such changes could negatively impact the profitability of Apple’s services segment. As noted by a Morningstar analyst:
“Apple’s services business…could take a hit in 2024 depending on the outcomes of these cases.”
Services like the App Store, Apple Music, iCloud, and Apple Pay accounted for about 20% of Apple’s $394 billion revenue in fiscal 2023.
Apple Criticizes Complaint as “Meritless”
Apple has defended its App Store practices and criticized complaints as being without merit. A company spokesperson provided the following statement, quoted by Engadget:
“We believe the case is meritless and will vigorously defend ourselves.”
Apple argues that its App Store distribution model provides developers easy access to an audience of over 1 billion while keeping users safe from malware. It says the vast majority of apps pay no commission at all.
However, regulators counter that Apple makes it impossible for developers to reach iOS users without accepting its terms and commissions.
Next Steps: Filing, Trial, Remedies
The DOJ antitrust division will likely finalize and file its complaint against Apple within weeks or months.
In response, Apple may file a motion to dismiss the case before it reaches trial. But the suit seems poised to proceed given evidence cited.
If it goes to trial, it could be a lengthy legal battle given the stakes involved for Apple. After Judge Yvonne Gonzalez Rogers sided mostly with Epic Games in an earlier lawsuit, Apple may be less confident of a favorable verdict this time.
Ultimately, the court may order changes aimed at opening up iOS app distribution and reducing Apple’s market control. But the scope of any such remedies remains uncertain.
As the Justice Department edges closer to an antitrust filing, Apple faces increased legal risks that could reshape its services business in 2024. With billions in App Store revenue at stake, expect Apple to mount an aggressive response.
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