Author | Yun Peng Xue Chun
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Apple has been sued by the U.S. government!
Zhidong reported on March 22 that just last night, the U.S. Department of Justice officially issued a document announcing that it would jointly sue Apple with 16 state and district attorneys general, accusing Apple of monopoly.
▲U.S. Department of Justice indictment statement, source: U.S. Department of Justice
The U.S. Department of Justice also officially released the 88-page indictment document.
▲ Catalogue of prosecution documents, source: U.S. Department of Justice
As for the reason for the U.S. Department of Justice's lawsuit, it can be summed up that Apple's ecosystem is too closed, resulting in competitors' products not being able to integrate into the iPhone, and ultimately making consumers pay more money for these competitors' products or services.
It's not new for Apple to be sued, and it's not new for Apple to be sued by the European Union, but it's the first time Apple has been sued by the government of its hometown for such a formal prosecution with 88 pages of prosecution documents.
In this regard, Apple also immediately gave a "voice-warming" response:
"At Apple, we're innovating every day to make people fall in love with technology – designing products that work seamlessly, protect people's privacy and security, and create magical experiences for our users. This lawsuit threatens us and the principles on which Apple products stand out in a fiercely competitive market. If successful, it will prevent us from creating the convergence of the technical capabilities that people expect from Apple – hardware, software and services. It would also set a dangerous precedent for governments to take a hard-nosed approach when designing people's tech products. We believe that this lawsuit is factually and legally wrong, and we will defend it aggressively. ”
According to MacRumors, Apple's response may be submitted to the media privately, and there is no official release address at this time.
From an objective point of view, technology giants such as Amazon, Google, Microsoft, and Apple are often subject to antitrust prosecutions or various investigations, but the seriousness of the prosecution, the wide scope of the impact, and the attention it has attracted from Apple are far greater than in the past.
The Wall Street Journal reported that this is a landmark antitrust lawsuit that could disrupt Apple's business model and affect the way billions of consumers use iPhones.
At present, Apple's stock price has fallen by about 11% this year.
As of the close of U.S. stocks on Thursday, Apple's stock price fell 4.09%, and its market value shrank by $93.4 billion (672.4 billion yuan) to $2.64 trillion, the worst performance in seven months.
▲ U.S. stock market on Thursday Apple and Microsoft stock price changes comparison
Just when Apple was in a turbulent situation, Microsoft launched its first AI PC product, and its market value climbed to $3.19 trillion, which is $544.1 billion (equivalent to 3.9 trillion yuan) more than Apple's market capitalization, and the difference is more than the combined market value of Alibaba and Tencent.
▲Comparison of the market value changes of Apple and Microsoft in 2002~2024 (Source: Zhidong)
While Apple still earns tens of billions of dollars in profits every quarter and remains the world's second-largest company by market capitalization, the challenges are not small for Apple.
1. How did Apple monopolize it? The US Department of Justice lists five typical "crimes"
U.S. Attorney General Merrick Garland said that Apple has always maintained its rights, but not because he has anything unique about it, but simply because Apple has been illegally exclusive.
How to exclude, the Ministry of Justice's statement mainly lists five typical behaviors:
First, the U.S. Department of Justice mentioned that Apple's restriction of cloud gaming and cloud streaming apps as a threat is a prime example of how these apps allow users to play these games and enjoy these high-quality videos without having to buy expensive Apple devices.
Second, Apple refuses to integrate standard text messaging with its own iMessage app. This can lead to errors and unsatisfactory experiences on Apple and other Android phones when sending videos or messages of any kind.
Someone reportedly complained to Cook about the problem, saying that he couldn't send videos to his mom who uses Android, but Cook's answer was: "Buy your mom an iPhone." ”
Apple has also restricted the functionality of third-party cross-platform video apps, resulting in more FaceTime use by people.
Third, the U.S. Department of Justice also pointed out that Apple has been blocking so-called "super apps", which is the key to Apple's locking users into its ecosystem.
The U.S. Department of Justice specifically mentioned WeChat, which they call a "super app" that inherits multiple micro-apps into one app, where people can communicate, pay, and socialize in one app.
Fourth, the lawsuit mentions that Apple is also clearly a monopoly by preventing banks and credit unions from offering products that compete with the iPhone's digital wallet.
Fifth, Apple has imposed some functional restrictions on third-party smartwatches that are not Apple Watch, and as a result, users who buy Apple Watch will face huge out-of-pocket costs if they don't buy an iPhone.
Second, the DOJ cited a long list of technologies with barriers to entry, such as sourcing expensive components, designing complex hardware and software, and obtaining distribution agreements. There is also plenty of circumstantial evidence, such as Apple's huge and long-lasting profit margins on iPhone sales.
In recent years, Apple has relied on the rapid growth of the App Store and related services, where Apple takes a 30% commission on app transactions, which of course Apple believes is to protect users from viruses and information security.
Oppenheimer analyst Martin Yang estimates that Apple's App Store has a profit margin of up to 80%.
One of the most common things we hear from Cook on quarterly earnings calls is, "The service business is once again generating record revenues." "On the contrary, the revenue growth of iPhone, iPad, Mac computer, and wearable has begun to slow down significantly, and some have even begun to decline.
▲Apple's financial report data for the fourth quarter of 2023, source: Apple
Professor Daniel Francis of New York University School of Law believes that the core idea of the U.S. government's lawsuit against Apple is that Apple has a responsibility and obligation to deal with rival software and hardware suppliers to make these products work more seamlessly with the iPhone.
According to the Wall Street Journal, the U.S. Department of Justice essentially wants Apple to open source its own systems and increase interoperability like Google. But apparently, this is unlikely.
Currently, Apple's market share of the U.S. smartphone market exceeds 65%.
Second, Apple has responded that it will make a strong defense, Apple: We rely on strength
Of course, Apple also responded immediately to the prosecution, saying that they would make a strong defense against the prosecution.
According to a statement released by an Apple spokesperson, Apple believes that they stand out in a competitive market on their own, and if they win the lawsuit, it will prevent Apple from creating these excellent technologies, products and services.
But in terms of barriers to entry, Apple may argue that product differentiation and integration are not the same as excluding competition. Apple is a fully integrated platform with built-in apps for specific features. Customers choose it because they like it, not because they want to move to Android but are artificially hindered.
In addition to Apple's own response, there are also many voices supporting Apple overseas. Another Wall Street Journal report mentions that in the Apple vs. Epic case, the court found that Apple's dominance did not stem from "lockdown" or "coercion," but rather from "overall satisfaction with existing devices."
In other words, it is the user who is willing to choose, not the Apple to force it. Apple's excellent privacy and security protection is something that many people value.
As for the instant messaging "bug" on iPhone and Android phones, Apple said in the fall of 2023 that it will launch a new secure instant messaging system to solve this problem, allowing iPhone and Android users to communicate securely in apps such as WhatsApp, Signal, and Discord.
3. Apple has become a "frequent visitor" in the dock of antitrust prosecutions, and the EU has issued a $2 billion fine, 98% of which is used for "deterrence"
In fact, this is not the first time Apple has been sued by antitrust.
On March 5, the European Union announced a fine of 1.84 billion euros ($2 billion) against Apple for abusing its dominant position in the music streaming app distribution market, imposing restrictions on app developers from offering cheaper music subscriptions outside of apps to iOS users.
According to the EU Antitrust Commissioner Margarethe Vestager, the fine consists of a basic fine of 40 million euros, plus 1.8 billion euros as a "deterrent". The reason is that the amount of the former is as insignificant as a "parking ticket" for a giant like Apple. Even the total of 1.84 billion euros is only 0.5 percent of Apple's global turnover, she said.
The lawsuit stems from the accusations made by European streaming giant Spotify against Apple in 2019. The company claims that Apple's App Store operates in a way that forces it to increase the price of its subscription services with a 30% commission. In addition, Spotify has also disputed the App Store's regulations, saying that it limits communication with customers and the ability to market and promote deals. EU regulators immediately launched an investigation.
After the EU issued the fine, Apple quickly issued a long statement on its official website, saying that while it respected the European Commission's decision, it must be pointed out that the decision "was made after the Commission failed to find any credible evidence that harmed the interests of consumers, and ignored the reality of a thriving, highly competitive and fast-growing market", so it will appeal.
However, before the final results are known, if Apple wants to maintain the normal operation of the App Store, iPhone sales and other businesses in the EU, it must comply with the requirements put forward by the EU Antitrust Committee, including the order to remove App Store restrictions.
Fourth, Apple, Microsoft, "difficult brothers", what are the similarities and differences between the lawsuits of the two?
Some professional analysts have pointed out that, leaving aside the details and legality of monopoly methods, there are many similarities between the case in which Apple was sued and the antitrust lawsuit filed by the U.S. Department of Justice against Microsoft in the 90s of the last century.
▲比尔盖茨（左）与乔布斯（右）（图源：Getty Image）
This was also pointed out by US Attorney General Merrick Garland: "Apple has used its market position to undermine technology that would have made it easier for users to choose different operating systems. According to the lawsuit, Apple has adopted many of the same tactics as Microsoft. ”
But there's a key difference between the two cases: Microsoft has a clear monopoly in the PC operating system market, while Apple's monopoly in the smartphone market is less so.
Garland also pointed out at the press conference that having a monopoly is not illegal in itself. However, it is illegal to use certain means to maintain or maintain a monopoly position. But to prove this, the plaintiff must first prove that the defendant has sufficient market power to exclude competitors.
Microsoft's Windows operating system has more than 90% of the market share in the PC operating system market and has been dominant until the era of smartphones. Goldman Sachs estimates that in 2000 Microsoft's operating system accounted for 97 percent of all computing devices.
▲The share of consumer computer suppliers from 2000 to 2016 (Source: Goldman Sachs)
And purely by the numbers, Apple's market share is much lower.
In the lawsuit, the Justice Department alleges that Apple's market share in the U.S. smartphone market is more than 70 percent when measured by revenue. This is not the same as a result measured by shipments. According to statistics from Counterpoint Research, as of the last quarter of 2023, Apple's market share is close to 64%, well ahead of second-place Samsung's 18%.
However, the DOJ argues that there are other indicators that prove the dominance of the iPhone, such as the fact that the majority of young users choose the iPhone over phones running Google's Android operating system such as Samsung.
Fifth, the results may have to wait until next year, and the opening of the apple ecology seems to be a general trend
It is worth mentioning that it is currently during the presidential election in the United States, and according to the Wall Street Journal, according to the usual practice, the outcome of this indictment will most likely wait until after the election.
In fact, the U.S. government's lawsuit against Apple has been advancing for many years, beginning with an investigation beginning in 2019 and picking up speed in 2021 when U.S. Assistant Attorney General Jonathan Kanter, an antitrust lawyer with more than 20 years of experience, took office.
Apple itself says the Justice Department has changed its legal rationale for prosecuting them at least six times in the past four years.
It is worth mentioning that on January 26 this year, Apple officially announced that it will support "sideloading" in Europe, that is, allowing users to download apps outside the App Store, while users can also use other payment systems and choose a default browser other than Safari.
There is no doubt that this is Apple's "historic overhaul" of iOS, Safari and the App Store, and the first time since the birth of the App Store in 2008 that Apple has made concessions to open third-party downloads.
It seems that the Apple ecosystem is gradually getting rid of "complete closure", which seems to be a general trend.
Conclusion: How does Apple, which is "attacked internally and externally", get out of the trough?
This incident can be said to be one of the most serious antitrust lawsuits that Apple has received in recent years, and if the lawsuit is established, Apple's business model may face huge challenges, and the ecological experience of billions of iPhone users around the world will also be affected, and the global smartphone market pattern will inevitably be affected.
From the sharp drop in revenue in China and the weaker-than-expected iPhone sales, to the continuous decline in the stock price this year, the growing distance from the $3 trillion market capitalization, and then to the "temporary lag" of generative AI, Apple has received a lot of attention recently. The antitrust lawsuit launched by the U.S. Department of Justice and various localities against Apple has once again added some resistance to Apple.
The issue of Apple's closed ecology has been discussed for many years, and we can see from the "loosening" sideload of the EU market that Apple is also gradually adjusting. In the future of generative AI, openness may become mainstream, and in the new era, Apple may have to actively respond to the rapidly changing technology and market.
With Apple formally indicted, the turmoil in the tech industry has intensified. At present, the four US technology giants Apple, Alphabet, Amazon, and Meta are all involved in antitrust lawsuits, and the court proceedings between Musk and OpenAI have also escalated.