WASHINGTON — Maine joined a sweeping lawsuit from the Justice Department’s against Apple on Thursday, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors and stifles innovation.
The lawsuit, filed in federal court in New Jersey, alleges that Apple has monopoly power in the smartphone market and uses its control over the iPhone to “engage in a broad, sustained, and illegal course of conduct.” It specifically seeks to stop Apple from undermining technologies that compete with its own apps in areas including streaming, messaging and digital payments.
The lawsuit — which was also filed with 16 state attorneys general including Democrat Aaron Frey of Maine — is the latest example of the Justice Department’s approach to aggressive enforcement of federal antitrust law that officials say is aimed at ensuring a fair and competitive market, even as it has lost some significant anticompetition cases.
“Apple knows that people rely on its products and we believe it used that reliance to lock in consumers and limit their options,” Frey said in a statement. “This type of behavior violates all the principles of a competitive marketplace and ultimately hurts consumers.”
Apple called the lawsuit “wrong on the facts and the law” and said it “will vigorously defend against it.”
President Joe Biden has called for the Justice Department and the Federal Trade Commission to vigorously enforce antitrust statutes. The increased policing of corporate mergers and business deals has been met with resistance from some business leaders who have said the Democratic administration is overreaching, but it’s been lauded by others as long overdue.
The case is taking direct aim at the digital fortress that Apple Inc., based in Cupertino, California, has assiduously built around the iPhone and other popular products such as the iPad, Mac and Apple Watch to create what is often referred to as a “walled garden” so its meticulously designed hardware and software can seamlessly flourish together.
The strategy has helped make Apple the world’s most prosperous company, with annual revenue of nearly $400 billion and, until recently, a market value of more than $3 trillion.
But Apple’s shares have fallen by 7 percent this year even as most of the stock market has climbed to new highs, resulting in longtime rival Microsoft — a target of a major Justice Department antitrust case a quarter-century ago — to seize the mantle as the world’s most valuable company.
Apple has defended the walled garden as an indispensable feature prized by consumers who want the best protection available for their personal information. It has described the barrier as a way for the iPhone to distinguish itself from devices running on Google’s Android software, which isn’t as restrictive and is licensed to a wide range of manufacturers.
“Apple claims to be a champion of protecting user data, but its app store fee structure and partnership with Google search erode privacy,” Consumer Reports senior researcher Sumit Sharma said in a statement.
The lawsuit complains that Apple charges as much as $1,599 for an iPhone and that the high margins it earns on each is more than double what others in the industry get. When users run an internet search, Google gives Apple a “significant cut” of the advertising revenue those searches generate. The company’s app store also charges developers up to 30 percent of the app’s price for consumers.
Critics of Apple’s anticompetitive practices have long complained that its claim to prioritize user privacy is hypocritical when profits are at stake. While its iMessage services is sheathed from prying eyes by end-to-end encryption, that protection evaporates the moment someone texts a non-Apple device.
With the attempt to rein in Apple’s dominance, the Biden administration is escalating an antitrust siege that has already triggered lawsuits against Google and Amazon accusing them of engaging in illegal tactics to thwart competition, as well as unsuccessful attempts to block acquisitions by Microsoft and Facebook parent Meta Platforms.
Story by Michael Liedtke, Lindsay Whitehurst and Mike Balsamo. BDN writer Michael Shepherd contributed to this report.