Apple’s Monopoly Power ‘Likely Will Increase,’ Says 4th Antitrust Suit in as Many Days

Apple uses anticompetitive practices “to illegally maintain monopoly power over the smartphone market,” plaintiffs Richard Dwyer and Aimen Halim alleged in their class action Monday (docket 5:24-cv-01844) in U.S. District Court for Northern California in San Jose.

The complaint demands a jury trial and seeks equitable relief “sufficient to remedy Apple’s past and ongoing restraints of trade.” It’s the fourth antitrust class action against Apple in four days (see 2403250004), coming after a suit from DOJ and the attorneys general of 15 states and the District of Columbia challenged Apple’s alleged monopoly power in the smartphone market (see 2403210042).

Instead of competing on the merits through innovation and price, Apple “sought to trap consumers on its platform, locking them into iPhone usage and forestalling competing products,” said the latest class action, borrowing language from DOJ’s complaint. By locking in customers, Apple “cripples competition from actual and would-be smartphone manufacturers,” resulting in higher prices, lower quality, reduced innovation and choice and lower quality output, it said.

Apple’s conduct “stifles new paradigms” that threaten its smartphone dominance, said the complaint. The cloud, if unrestrained by Apple’s anticompetitive tactics, “could enable high-end functionality on a lower-priced smartphone, or make users device-agnostic,” it said. Apple has “exploited its monopoly power” to overcharge hundreds of millions of smartphone consumers, “resulting in historic returns.”

Apple protects its monopoly with a “series of restraints” that it couldn’t impose in a competitive market, the complaint said. When customers buy coffee or groceries, Apple charges a fee for every tap-to-pay transaction, “imposing its own costly interchange fee on financial institutions,” it said.

When an iPhone user runs an internet search, “Google shares some of the advertising revenue generated by the search with Apple,” said the complaint. Consumers like plaintiffs Dwyer and Halim, who purchased iPhones at "supracompetitive prices" and were deprived of innovation in a competitive smartphone market, “suffered harm from Apple’s anticompetitive practices,” it said. Dwyer, a Californian, and Halim, an Illinois resident, bought their iPhone 15 Pro Max devices directly from Apple, it said.

Apple has monopoly power in the smartphone and performance smartphone markets because it “has the power to control prices or exclude competition,” said the complaint. Moreover, the company holds “substantial and durable market shares” in those markets. Its market shares “likely underestimate Apple’s power,” it said.

That’s because Apple’s shares “are protected by significant barriers to entry, network effects, and switching costs,” said the complaint. The company “recognizes and exploits” those barriers “to repel competition from rival platforms and innovations, products, and services that may diminish consumer reliance on the iPhone.”

Apple’s power “likely will increase,” the complaint predicted. Its smartphone market shares “understate Apple’s dominance and probable growth in key demographics, including among younger American consumers,” it added. A third of all American iPhone users were born after 1996, compared with just 10% for Samsung, Apple’s closest smartphone competitor, it said. Surveys show that up to 88% of U.S. teenagers expect to purchase an iPhone for their next smartphone, it said.