The United States Department of Justice has slapped tech giant Apple with an extensive antitrust lawsuit claiming its app market rules and “monopoly” illegally throttled competition and suffocated innovation.
The March 21 complaint in a New Jersey federal court — supported by 16 state attorney generals — alleged Apple has a monopoly in the smartphone market that it has used to “‘force’ developers to use its payment system to lock in both developers and users on its platform.”
Apple’s App Store guidelines and developer agreements impose “a series of shapeshifting rules and restrictions” that allow the company to take “higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives,” the DOJ alleged.
The issue could be the reason that many crypto-based apps today offer only limited functionality on iOS devices.
“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.”
Apple policies have ousted alternative payment systems “in ways that were anticompetitive and exclusionary,” the DOJ said.
It also highlighted the 30% Apple tax — a fee the company charges for apps and in-app payments whose “content, product, or service it did not create.”
The fee and Apple payment systems are fiat-compatible only and have walled off the use of crypto in apps or made it not economically viable for a crypto-based app to offer in-app purchases.
Apple offers ”certain enterprise and public sector customers” the ability to offer their own apps through custom app stores, but iPhone users and developers are restricted from such alternative app stores as they would compete with the Big Tech player’s fees, the DOJ said.
“Apple often enforces its App Store rules arbitrarily. And it frequently uses App Store rules and restrictions to penalize and restrict developers that take advantage of technologies that threaten to disrupt, disintermediate, compete with, or erode Apple’s monopoly power.”
Some nonfungible token (NFT) marketplaces, such as OpenSea, have disabled functionality on their iOS apps as NFT sales are subject to the 30% fee.
The Bitcoin (BTC)-friendly social app Damus also had to kill a BTC tipping feature after Apple delisted its app because it wasn’t routed through its in-app payments function, where it takes a cut.
Web apps — those based online, available through a web browser and outside the App Store — are still under Apple’s control as the firm requires all iOS web browsers to use its WebKit browser engine.
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The DOJ also alleged Apple had denied access to competing digital wallets that would provide a “wide variety of enhanced features” and barred developers from providing their own payment services to their customers.
In the European Union, the Digital Markets Act has forced Apple to offer alternative browser engines, payment functions and app stores, although the company still has an approval process in place as it claims the new options threaten user privacy and security.
Apple (AAPL) shares fell 4% on the day to around $171 and have stayed flat in after-hours trading, according to Google Finance.
Apple did not immediately respond to a request for comment.
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