Case 2:24-cv-04055

Case Number: 2:24-cv-04055
Plaintiff: United States of America
Defendant: Apple Inc.
Filing Date: March 21, 2024
Original Document: case_2-24-cv-04055_03-21-2024.pdf

This page and all linked pages were all extracted from the original PDF version of the lawsuit document. No changes have been made to the content, but it has been broken up into multiple pages and there has been some cleanup in the formatting to make it easier to read. Information that is not relevant to the lawsuit has been omitted, most specifically information of the Attorney Generals that filed the lawsuit. That information can be easily found in the original document linked above.

In 2010, a top Apple executive emailed Apple’s then-CEO about an ad for the new Kindle e-reader. The ad began with a woman who was using her iPhone to buy and read books on the Kindle app. She then switches to an Android smartphone and continues to read her books using the same Kindle app. The executive wrote to Jobs: one “message that can’t be missed is that it is easy to switch from iPhone to Android. Not fun to watch.” Jobs was clear in his response: Apple would “force” developers to use its payment system to lock in both developers and users on its platform. Over many years, Apple has repeatedly responded to competitive threats like this one by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.

For many years, Apple has built a dominant iPhone platform and ecosystem that has driven the company’s astronomical valuation. At the same time, it has long understood that disruptive technologies and innovative apps, products, and services threatened that dominance by making users less reliant on the iPhone or making it easier to switch to a non-Apple smartphone. Rather than respond to competitive threats by offering lower smartphone prices to consumers or better monetization for developers, Apple would meet competitive threats by imposing a series of shapeshifting rules and restrictions in its App Store guidelines and developer agreements that would allow Apple to extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives. It has deployed this playbook across many technologies, products, and services, including super apps, text messaging, smartwatches, and digital wallets, among many others.

Apple’s conduct also stifles new paradigms that threaten Apple’s smartphone dominance, including the cloud, which could make it easier for users to enjoy high-end functionality on a lower priced smartphone-or make users device-agnostic altogether. As one Apple manager recently observed, “Imagine buying a [expletive] Android for 25 bux at a garage sale and it works fine . . . . And you have a solid cloud computing device. Imagine how many cases like that there are.” Simply put, Apple feared the disintermediation of its iPhone platform and undertook a course of conduct that locked in users and developers while protecting its profits.

Critically, Apple’s anticompetitive conduct not only limits competition in the smartphone market, but also reverberates through the industries that are affected by these restrictions, including financial services, fitness, gaming, social media, news media, entertainment, and more. Unless Apple’s anticompetitive and exclusionary conduct is stopped, it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy. For example, Apple is rapidly expanding its influence and growing its power in the automotive, content creation and entertainment, and financial services industries-and often by doing so in exclusionary ways that further reinforce and deepen the competitive moat around the iPhone.

This case is about freeing smartphone markets from Apple’s anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future. The United States and the States of New Jersey, Arizona, California, Connecticut, Maine, Michigan, Minnesota, New Hampshire, New York, North Dakota, Oklahoma, Oregon, Tennessee, Vermont, Wisconsin, and the District of Columbia, acting by and through their respective Attorneys General, bring this case to address Apple’s anticompetitive and exclusionary conduct and alleviate harm to competition.

• I. Introduction
• II. Defendant Apple
  • A. Apple launched the iPod, iTunes, and the iTunes Store against the backdrop of United States v. Microsoft
  • B. Apple invited third-party investment on the iPhone and then imposed tight controls on app creation and app distribution
• III. Smartphones Are Platforms
• IV. Apple Unlawfully Maintains Its Monopoly Power
  • A. Apple harms competition by imposing contractual restrictions, fees, and taxes on app creation and distribution
    • i. Super Apps: Apple prevented apps from threatening its smartphone monopoly by undermining mini programs that reduce user dependence on the iPhone
    • ii. Cloud Streaming Apps: Apple prevented developers from offering cloud gaming apps that reduce dependence on the iPhone’s expensive hardware
  • B. Apple uses APIs and other critical access points in the smartphone ecosystem to control the behavior and innovation of third parties in order to insulate itself from competition
    • i. Messaging: Apple protects its smartphone monopoly by degrading and undermining cross-platform messaging apps and rival smartphones
    • ii. Smartwatches: Apple protects its smartphone monopoly by impeding the development of cross-platform smartwatches
    • iii. Digital Wallets: Apple restricts cross-platform digital wallets on the iPhone, reinforcing barriers to consumers switching to rival smartphones
  • C. Apple’s “moat” around its smartphone monopoly is wide and deep: it uses a similar playbook to maintain its monopoly through many other products and services
• V. Anticompetitive Effects
  • A. Apple’s conduct harms the competitive process
  • B. Apple has every incentive to use its monopoly playbook in the future
• VI. Privacy, Security, and Other Alleged Countervailing Factors Do Not Justify Apple’s Anticompetitive Conduct
• VII. The Smartphone Industry
  • A. Background
  • B. Smartphone Hardware
  • C. Smartphone Operating Systems, Applications, and Other Software
  • D. Relevant Markets
    • iv. Performance smartphones are a relevant product market
    • v. Smartphones are a broader relevant product market
    • vi. The United States is a relevant geographic market for performance smartphones and smartphones
  • E. Apple has monopoly power in the smartphone and performance smartphone markets
• VIII. Jurisdiction, Venue, and Commerce
• IX. Violations Alleged
  • A. First Claim for Relief: Monopolization of the Performance Smartphone Market in the United States in Violation of Sherman Act § 2
  • B. Second Claim for Relief, in the Alternative: Attempted Monopolization of the Performance Smartphone Market in the United States in Violation of Sherman Act § 2
  • C. Third Claim for Relief: Monopolization of the Smartphone Market in the United States in Violation of Sherman Act § 2
  • D. Fourth Claim for Relief, in the Alternative: Attempted Monopolization of the Smartphone Market in the United States in Violation of Sherman Act § 2
  • E. Fifth Claim for Relief: Violation of the New Jersey Antitrust Act (Monopoly Maintenance)
  • F. Sixth Claim for Relief: Violations of Wisconsin State Law
• X. Request for Relief