Apple sued by US over smartphone market ‘monopoly’

Apple has been accused of using the iPhone to build a monopoly that pushed up prices for users and crushed competition, in a lawsuit filed by the US justice department.

The lawsuit alleges that Apple, the world’s second-most-valuable company after Microsoft, reached its “astronomical valuation” by “making it harder or more expensive for its users and developers to leave, than by making it more attractive for them to stay”.

Apple did this, lawyers argued, by stopping competitors from offering rival services like digital wallets on its iPhone, suppressing mobile cloud streaming services and making it more expensive and difficult for its users to switch to rival smartphone operating systems, such as Google’s Android.

Lisa Monaco, the US deputy attorney-general, said Apple had “smothered an entire industry”. There are 250 million Apple devices in the US and it has more than 65 per cent of the country’s smartphone market.

Shares in Apple closed $7.30, or 4.1 per cent, lower at $171.37 last night, down 7.7 per cent so far this year.An Apple spokeswoman said: “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple, where hardware, software and services intersect.

“It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”

This is the latest US government action against some of the country’s most successful businesses, with federal suits against Amazon, Facebook and Google.

The clampdown started with the launch of a Washington investigation into Amazon, Apple, Facebook and Google in 2019, which found that “companies that once were scrappy, underdog start-ups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons” and called for reform.

Apple has also been reprimanded by regulators in Europe, where it has been forced to change its operating system to comply with new competition rules around digital markets.

This has included opening up its app store system and allowing rival stores on to phones, something Apple argues makes users more vulnerable to scams and cyberattacks.

The UK has a similar digital markets bill going through the House of Lords and there is speculation that British users may also see similar changes on their Apple devices.