Justice Department files antitrust suit against Apple

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The US Justice Department filed an antitrust lawsuit against Apple (AAPL), alleging that the maker of the iPhone illegally maintains its dominance over the smartphone market by boxing out competing apps and devices.

Apple "has maintained its power not because of its superiority, but because of its unlawful exclusionary behavior," Attorney General Merrick Garland said at a press conference Thursday.

Apple said it would fight the lawsuit, which it said "threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple."

A victory for the US in this case "would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology," Apple added in its statement.

Apple's stock fell more than 4% following news of the lawsuit, which the Justice Department filed with 16 state attorneys general.

The filing sets up yet another confrontation between the US government and a Silicon Valley icon as the Biden administration tries to rein in Big Tech's power.

The Department of Justice is suing Google (GOOG, GOOGL) over antitrust allegations, while the Federal Trade Commission is suing Amazon (AMZN) and Facebook (META) alleging they also violate antitrust laws.

Apple CEO Tim Cook gestures at Apple's annual Worldwide Developers Conference at the company's headquarters in Cupertino, California, U.S. June 5, 2023. REUTERS/Loren Elliott
Apple CEO Tim Cook. · REUTERS / Reuters

The new DOJ lawsuit filed Thursday poses a major new threat to Apple's various revenue streams.

Apple generates the bulk of its cash through the sale of its wildly popular iPhone, which accounted for $200.6 billion of the company's $383.3 billion in total revenue in 2023. But Apple's services and hardware that tie into the iPhone are also incredibly lucrative.

The company's wearables, home, and accessories business, which includes its Apple Watch and AirPods sales, generated $39.8 billion last year, while its growing services business, which includes subscriptions for things like Apple Music+ and App Store sales, brought in $85.2 billion.

The DOJ's suit comes just weeks after the European Commission (EC) fined Apple $2 billion for allegedly breaking competition laws in the bloc. The EC alleged the company illegally wielded its dominance to the detriment of its rivals in the market for the distribution of music streaming apps.

The Justice Department suit is just the latest headache for Apple, which is off to a rough start in 2024.

Shares of Apple are down 7% year to date as the company struggles with slowing iPhone sales in China, its third-largest market. Apple also lost its title as the world's most valuable company to rival Microsoft (MSFT).