Wisconsin joins FEDs in suing Apple over iPhone monopoly

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On Thursday, Wisconsin Attorney General Josh Kaul joined the U.S. Department of Justice and 15 other states in filing antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of the Sherman Act and Wisconsin antitrust law.

The complaint filed in the U.S. District Court for the District of New Jersey, alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers.

“Wisconsin consumers shouldn’t have to pay inflated prices or have their options artificially restricted by anticompetitive conduct,” said Wisconsin Attorney General Josh Kaul.

“Through this case, we are seeking to ensure that to consumer choice and competition aren’t inhibited by unnecessary roadblocks,” Kaul added

According to the complaint obtained by the Wisconsin Law Journal, Apple charges as much as $1,599 for an iPhone while earning “high margins on
each one, more than double those of others in the industry.”

The complaint further alleges, “Rather, to protect its smartphone monopoly—and the extraordinary profits that monopoly generates—Apple repeatedly chooses to make its products worse for consumers to prevent competition from emerging.”

The complaint then discusses how smart watches, Apple Pay and digital wallets play an integral role in Apple’s alleged monopoly.

Apple predicts that it will collect nearly $1 billion in worldwide revenue on Apple Pay fees by 2025.

“Apple also uses its smartphone monopoly to extract payments from banks, which need to access customers that use digital wallets on iPhones. Since Apple first launched Apple Pay … Apple has charged issuing banks 15 basis points (0.15 percent) for each credit card transaction mediated by Apple Pay,” the complaint states.

The complaint also quotes the Tim Cook, CEO of Apple in an exchange between a consumer and Apple executives.

In 2022, Cook was asked whether Apple would fix iPhone-to-Android messaging.

“It’s tough, the questioner implored Mr. Cook, not to make it personal but I can’t send my mom certain videos.”

Cook’s response? “Buy your mom an iPhone.”

According to the lawsuit, Apple undermines apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers.

Apple allegedly exercises its monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others. Through this monopolization lawsuit, the Justice Department and state Attorneys General are seeking relief to restore competition to these vital markets on behalf of the American public.

As alleged in the complaint, Apple has monopoly power in the smartphone and performance smartphone markets, and it uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct. This anticompetitive behavior is designed to maintain Apple’s monopoly power while extracting as much revenue as possible. The complaint alleges that Apple’s anticompetitive course of conduct has taken several forms, many of which continue to evolve today, including:

• Blocking Innovative Super Apps. Apple has disrupted the growth of apps with broad functionality that would make it easier for consumers to switch between competing smartphone platforms.

• Suppressing Mobile Cloud Streaming Services. Apple has blocked the development of cloud-streaming apps and services that would allow consumers to enjoy high-quality video games and other cloud-based applications without having to pay for expensive smartphone hardware.

• Excluding Cross-Platform Messaging Apps. Apple has made the quality of cross-platform messaging worse, less innovative, and less secure for users so that its customers have to keep buying iPhones.

• Diminishing the Functionality of Non-Apple Smartwatches. Apple has limited the functionality of third-party smartwatches so that users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones.

• Limiting Third Party Digital Wallets. Apple has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform third-party digital wallets.

The complaint also alleges that Apple’s conduct extends beyond these examples, affecting web browsers, video communication, news subscriptions, entertainment, automotive services, advertising, location services, and more. Apple has every incentive to extend and expand its course of conduct to acquire and maintain power over next-frontier devices and technologies.

One of the leading attorneys general in antitrust, Wisconsin — along with its co-plaintiffs — is seeking injunctive relief to address this allegedly anticompetitive conduct.

Apple Inc. is a publicly traded company incorporated in California and headquartered in Cupertino, California. In fiscal year 2023, Apple generated annual net revenues of $383 billion and net income of $97 billion. Apple’s net income exceeds any other company in the Fortune 500 and the gross domestic products of more than 100 countries.

Wisconsin is represented by Assistant Attorney General for Antitrust Gwendolyn J. Lindsay Cooley.