Justice Department accuses Apple of illegal monopoly in sweeping antitrust lawsuit

The Department of Justice on Thursday formally accused Apple Inc. of exercising an illegal monopoly over smartphones in an expansive antitrust lawsuit that incorporates long-standing complaints from consumers and rival technology firms.

The Justice Department and 15 state attorneys general filed the lawsuit in U.S. District Court in New Jersey. They said the tech giant maintains its monopoly not by creating better products but by making rival products worse.

“Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from developers,” the Justice Department said in a statement. “Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers.”

Apple said the lawsuit is “wrong on the facts and the law” and would set a dangerous precedent.

“This lawsuit threatens who we are and the principles that set Apple products apart in the fiercely competitive markets,” the company said in a statement. “If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect.”

The lawsuit mentions five ways that Apple’s alleged antitrust violations have manifested: by restricting the functionality of rival apps, blocking the development of cloud-streaming apps and services, reducing the quality of cross-platform messaging so customers keep buying iPhones, diminishing the functionality of non-Apple smartwatches and limiting third-party digital wallet development.

“We allege that Apple has maintained monopoly power in the smartphone market, not simply by staying ahead of the competition on the merits but by violating federal antitrust law,” U.S. Attorney General Merrick Garland said at a press conference. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly. The Justice Department will vigorously enforce antitrust laws that protect consumers from higher prices and fewer choices.”

The Justice Department is asking the court to stop Apple from blocking innovative apps and to block the company’s restrictions that make it harder for third-party hardware and apps to integrate with Apple smartphones.

The Justice Department’s focus on Apple’s digital wallet technology follows a European Union crackdown on the company earlier this month. European regulators fined Apple $2 billion for violating antitrust laws and forced the company to give other companies access to the iPhone’s tap-to-pay chip to foster competing digital wallets.

Mr. Garland said the company’s Apple Wallet strategy is a privacy risk that forces customers to share their financial information with Apple.

Apple is fighting a lawsuit from customers who claim stalkers used the firm’s AirTags to track them. The devices are typically attached to valuable belongings such as luggage to track them in transit.

Although Apple claimed to have taken steps to stop bad actors from using AirTags, the judge rejected the company’s attempt to dismiss the case.

Meanwhile, Apple is paying out parts of a $500 million settlement to customers as a result of a class-action lawsuit. In August, a federal court ruled that the company had illegally made older iPhone models slower to encourage customers to buy the newest model.

Apple also is in a legal battle over its cut of in-app purchases in its app store. In 2020, Fortnite creator Epic Games sued Apple over its 30% cut of in-app purchases it forces onto third-party developers. Although Apple has since made small changes to its App Store policies, federal courts ruled that the company is not running an illegal monopoly.

Some Apple Watch models came under scrutiny from federal regulators last year after health tech company Masimo accused Apple of violating patent law.

In October, the Federal Trade Commission issued an import ban on Apple’s Series 9 and Ultra 2 Apple watches after finding the company had illegally included patented technology in the devices. After several attempts to avoid the ban, Apple announced it would begin selling altered versions of the watches without the patented technology. The company is lobbying to change the FTC’s import ban practices.

Federal regulators and rival companies have long accused Apple of operating a monopoly with aggressive policies that stifle competition. The lawsuit filed Thursday is the first real challenge to Apple’s standing in the market.

Although Android dominates the worldwide share of smartphones, Apple leads in the U.S. with more than 60% of the market share. Apple is one of five companies worth more than $1 trillion. The others are tech giants Google, Microsoft, Nvidia and Amazon.

The lawsuit is the latest example of the Justice Department’s approach to aggressive enforcement of antitrust law.

President Biden has directed the Justice Department and the Federal Trade Commission to increase policing of corporate mergers and business deals. Some business leaders say the Democratic administration is overreaching, but others say the strenuous antitrust law enforcement is long overdue.

Under Mr. Biden, the Justice Department and the Federal Trade Commission aggressively pursued technology companies. Although regulators have sued Google over antitrust violations, the lawsuit filed Thursday is the first against Apple.

Lina Khan and Jonathan Kanter, heads of the antitrust divisions of the Justice Department and FTC, respectively, have led the charge in antitrust cases during the Biden administration. They filed to block a record number of corporate mergers last year.

Federal regulators recently killed a high-profile merger between JetBlue and Spirt airlines and are challenging a merger of grocery chains Kroger and Albertson. Other massive mergers from the past year, such as Microsoft and Activision-Blizzard, have gone forward despite objections from regulators.

Both departments lost most of their challenges last year. Critics say the regulators’ aggressive antitrust challenges could have a chilling effect on further technology expansion even if they lose in court.

Additionally, the Justice Department is anticipating a ruling in its landmark case against Google. The department filed antitrust lawsuits against Google in 2020, during the Trump administration, and in 2023 over its prominent search position and its expansive advertising business.

The Justice Department claims Google is trying to monopolize the internet through exclusive contracts and buying its competition. Closing arguments for the case are expected to start in early May.

The department’s antitrust case against Meta from 2021 is still pending. In its complaint, the Justice Department accused Meta, the parent company of Facebook, of systematically acquiring rivals such as Instagram and WhatsApp to institute a social media monopoly.

The Justice Department sued Facebook for operating a social media monopoly in 2021.

The states and districts participating in the Justice Department’s lawsuit against Apple are Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin and the District of Columbia.

• This article is based in part on wire service reports.