5 ways prosecutors say Apple created a smartphone monopoly

by Rebecca Klar - 03/21/24 4:48 PM ET

Apple is facing a wide-ranging antitrust lawsuit from the Department of Justice and 16 state and district attorneys general focused on its dominance in the smartphone market.

The lawsuit alleged Apple limited competition and harmed both consumers and developers through control of its App Store and how its devices and services operate with third parties.

“Apple has consolidated its monopoly power not by making its own products better, but by making other products worse,” Attorney General Merrick Garland said Thursday.

Apple pushed back strongly on the allegations in the lawsuit and said if the lawsuit is successful, it would “hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect.”

An Apple spokesperson said the suggested changes to how it operates would make the iPhone less useful, less private and less secure for users.

Here are the five ways prosecutors said Apple created a smartphone monopoly.

‘Degrading and undermining’ cross-platform messaging apps

iPhone 15 phones are shown during an announcement of new products on the Apple campus in Cupertino, Calif., Sept. 12, 2023. The Justice Department announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of having an illegal monopoly over smartphones in the U.S. (AP Photo/Jeff Chiu, File)

One of the key allegations laid out in the complaint centers on how Apple allows for messaging between users with and without an iPhone.

The government accuses Apple of “degrading and undermining cross-platform messaging apps and rival smartphones,” chiefly through how users of Apple’s message platform can message users without an iPhone.

For example, the complaint calls out how Apple shows users a “green bubble” for texts from non-iPhone users in its default messaging app, and how it limits the functionality of messages to non-iPhone users through nonencrypted messages, “pixelated and grainy” videos, and the inability to edit messages or see typing indicators.

“This signals to users that rival smartphones are lower quality because the experience of messaging friends and family who do not own iPhones is worse—even though Apple, not the rival smartphone, is the cause of that degraded user experience,” the complaint alleges.

The government’s complaint adds that “many non-iPhone users also experience social stigma, exclusion, and blame for ‘breaking’ chats where other participants own iPhones.”

The complaint also alleges that Apple makes third-party messaging apps on the iPhone “worse generally and relative to Apple Messages,” through actions like prohibiting third-party developers from including certain features into their apps that Apple messages incorporates.

The complaint alleges Apple prohibits other messaging apps from accessing the iPhone camera to let users preview their appearance on video before answering a call, and does not allow other messaging apps to continue operating the background when the app is closed.

Limiting Apple Watch to iPhones

A person tries on an Apple Watch during an announcement of new products on the Apple campus in Cupertino, Calif. (AP Photo/Jeff Chiu)

Another key component of the government’s case against Apple centers on the exclusive compatibility of the Apple Watch, Apple’s smartwatch, with the iPhone.

The complaint alleges that Apple uses the “costly accessory” to “prevent iPhone customers from choosing other phones.” An Apple Watch costs up to $799 on the Apple website.

“Apple recognizes that driving users to purchase an Apple Watch, rather than a third-party cross-platform smartwatch, helps drive iPhone sales and reinforce the moat around its smartphone monopoly,” the complaint states.

The complaint cites a 2019 email with the Vice President of Product Marketing for Apple Watch that stated that the watch “may help prevent iPhone customers from switching.”

Preventing cross-platform digital wallets

The Apple Pay app is shown on an iPhone in New York. (AP Photo/Jenny Kane)

The complaint alleges that Apple has used its control over the App Store to “effectively block” third-party developers from creating digital wallets on the iPhone with tap-to-pay functionality, which Apple’s digital wallet allows users to do to make payments.

Digital wallets can hold credit cards, movie tickets, car keys and even personal identification in one app and can be used to make payments in mobile apps and websites.

The Apple Wallet incorporates Apple’s proprietary payment system Apple Pay, the complaint states, and lets users make payment using their iPhone.

Blocking ‘super apps’

The App Store icon displayed on a phone screen is seen on an iPhone. (Photo by Jakub Porzycki/NurPhoto)

The complaint alleged that Apple blocked “super apps,” or apps that would provide a “multitude of mini programs.”

A developer could create one mini program that works whether a user has an iPhone or another smartphone, like the ones that are popular in Asia, the complaint stated.

The super apps would make users “rely less on the smartphones proprietary software and more on the app itself” and allow users to be more “willing to choose a different” smartphone because they would be able to access the same interface and apps, the complaint stated.

“Apple did not respond to the risk that super apps might disrupt its monopoly by innovating. Instead, Apple exerted its control over app distribution to stifle others’ innovation,” the government alleged.

The complaint accused Apple of creating, broadening and enforcing its App Store guidelines to block apps from hosting mini programs.

Suppressing mobile cloud streaming services

The Apple logo is shown on a screen during an announcement on the Apple campus Sept. 12, 2023, in Cupertino, Calif. (AP Photo/Jeff Chiu, File)

Another key allegation the complaint raises also centers on apps, over accusations that Apple blocked cloud gaming apps that would have allowed users access to desirable content without needing to pay for “expensive Apple hardware.”

“In Apple’s own words, it feared a world where “all that matters is who has the cheapest hardware” and consumers could ‘buy a [expletive] Android for 25 bux at a garage sale and … have a solid cloud computing device’ that ‘works fine,’” the complaint sated.

Cloud streaming apps allow users to run programs through a network of services that host and deliver the content without having to process or store it on the smartphone itself.

The complaint states that cloud streaming benefits both the users, by making hardware “unnecessary,” and developers, by avoiding re-writing the same game for multiple operating systems.

The government alleged that for years, Apple “imposed the onerous requirement” that any cloud streaming game or update had to be submitted as a standalone app for approval by Apple, which would leave developers to delay their software updates or only update on non-iOS platforms.

And “until recently,” Apple required users to download cloud streaming software separately for each game and install app updates for each game individually through “repeated trips to Apple’s App Store,” the complaint alleged.

In January, Apple opened its App Store to allow game streaming apps and services, like Xbox Cloud Streaming, The Verge reported.

The government alleged that “Apple’s conduct made cloud streaming apps so unattractive to users that no developer designed one for the iPhone.”

Tags antitrust Apple Big tech Department of Justice Merrick Garland