The Garden State has signed on to a landmark civil antitrust lawsuit alleging Apple is monopolizing the smartphone market in violation of the Sherman Act and New Jersey law.

The complaint was filed March 20 by the Justice Department and 15 other states in the U.S. District Court for the District of New Jersey.

The lawsuit alleges several key points, including:

• Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers.
• Apple undermines apps, products and services that would otherwise make users less reliant on the iPhone; promote interoperability; or lower costs for consumer and developers.
• Apple exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses and merchants, among others.

The Justice Department and state attorneys general say they seek relief through this action to restore competition to these vital markets on behalf of the American people.

Hampering competition

“As our complaint alleges, 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,” said Attorney General Merrick Garland. “Consumers should not have to pay higher prices because companies break the law. We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts both consumers and developers.”

As a result, Garland says consumers see fewer choices; higher prices and fees; lower quality smartphones, apps and accessories; and less innovation from Apple and its competitors.

“For developers, that has meant being forced to play by rules that insulate Apple from competition,” said Garland. “And as outlined in our complaint, we allege that Apple has consolidated its monopoly power not by making its own products better – but by making other products worse.”

The complaint alleges that “Apple’s anticompetitive course of conduct has taken several forms – many of which continue to evolve today.”

Those include:

• Blocking innovative super apps
• Suppressing mobile cloud streaming services
• Excluding cross-platform messaging apps
• Diminishing the functionality of non-Apple smartwatches
• Limiting third-party digital wallets

‘No company is above the law’

“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” said Garland. “The Justice Department will vigorously enforce antitrust laws that protect consumers from higher prices and fewer choices. That is the Justice Department’s legal obligation and what the American people expect and deserve.”

“No matter how powerful, no matter how prominent, no matter how popular – no company is above the law,” said Deputy Attorney General Lisa Monaco. “Through today’s action, we reaffirm our unwavering commitment to that principle.”

No matter how powerful, no matter how prominent, no matter how popular – no company is above the law.
– Deputy Attorney General Lisa Monaco

“By revenue, Apple has over 70% of the U.S. performance smartphones market, but the company builds its profits on more than just the sale of physical iPhones,” the New Jersey Attorney General’s Office wrote in a press release. “Developers seeking to create a new app, product or service for the Apple App Store must agree to pay up to 30% of the price back to Apple. Then, when consumers make a purchase inside the app, Apple takes another 30% cut.”

“Apple’s dominance in the smartphone market is not an accident,” said New Jersey Attorney General Matthew Platkin. “Instead, Apple has gone to great lengths to create a monopoly that affected not only the smartphone industry, but also the choice of apps, payment systems, smartwatches, and more. The end result is you pay more for an inferior product – all while Apple collects billions in profits. With today’s lawsuit, we are standing up for consumers across the country and putting a stop to this monopolistic behavior.”

Innovating every day

Meanwhile, Apple pushed backed firmly against the allegations in its response. The company said the lawsuit threatens who it is and the principles that set Apple products apart in fiercely competitive markets.

“At Apple, we innovate every day to make technology people love – designing products that work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” the company said in a statement to NJBIZ. “If successful, it would hinder our ability to create the kind of technology people expect from Apple – where hardware, software, and services intersect.

If successful, [this lawsuit] would hinder our ability to create the kind of technology people expect from Apple – where hardware, software, and services intersect.
– Apple

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

The complaint is available here.