Breaking News – Department of Justice USA Sues Apple – Asrar Qureshi’s Blog Post #930

Breaking News – Department of Justice USA Sues Apple – Asrar Qureshi’s Blog Post #930

Dear Colleagues! This is Asrar Qureshi’s Blog Post #930 for Pharma Veterans. Pharma Veterans Blogs are published by Asrar Qureshi on its dedicated site https://pharmaveterans.com. Please email to aq.pharmaveterans@gmail.com for publishing your contributions here.

Apple I

Apple II

Apple CEO - Tim Cook

I write about business, working people, management, organizations, and business tools and environment in a broad-based manner to cover multiple dimensions. Here is a breaking news from the USA.

Backgrounder

Apple Computer Inc. was founded on April 1, 1976, in California, USA by college dropouts Steve Jobs and Steve Wozniak in partnership with Ronald Wayne. Their vision was to change the way people viewed computers. Their first product was Apple I, a computer designed and hand-built entirely by Wozniak. To finance its creation, Jobs sold his Volkswagen bus and Wozniak sold his HP-65 calculator. Steve Jobs named the company Apple because he liked the fruit. He suggested this name to Wozniak after visiting an apple orchard. Wayne sketched the first Apple logo by hand. Their first office was the garage at Jobs’ parents’ home in Los Altos California.

Wayne ended up leaving the company even before it was officially incorporated. He took an $800 cheque for his share in the company. Meanwhile, Jobs handled the business end, trying to convince would-be-investors that the personal computer market was going to explode. Eventually, he was able to bring Mike Markkula who made $250,000 investment and got a one-third share in the company. On Markkula’s suggestion, a man named Michael Scott was brought in as the company’s first President and CEO. The thought was that Jobs was too young and undisciplined.

1977 saw the introduction of Apple II, the personal computer designed by Wozniak that went on to take the world by storm. Its hot app was VisiCalc, a groundbreaking spreadsheet which was way better than the then market leaders Tandy and Commodore. By 1978, Apple had a proper office and an assembly line to produce Apple II.

Jobs was convinced that the future of computing was with a graphical user interface (GUI), which we use today in all computers. He spearheaded the effort to equip Apple’s next generation Lisa computer with GUI but was removed from the project due to infighting. Lisa was released in 1983 but it had disastrous sales. Meanwhile, Jobs ended up leading the second project, the Apple Macintosh. It became popular with graphic design professionals but was very expensive. 

In 1985, Apple’s Board removed Jobs from his managerial duties. He became furious and left the job. He went on to found NeXT, a computer company making advanced workstations. Wozniak also left around the same time, saying the company was going in the wrong direction.

The 1990s saw Apple get into lots of new market segments, none of which really worked out. Their most notable flop was Newton Message Pad which was merely a PDA – personal digital assistant, and cost $700. At the same time, Microsoft influence was on the rise. Macs offered excellent, but limited library of software on expensive computers, while Microsoft was selling Windows 3.0 on cheap, commodity computers.

Apple’s fortunes kept falling and its stocks hit 12-years low. The then CEO, Amelio, decided to just purchase Jobs’ NeXT Computer for $429 million in February 1997 to bring Jobs back to Apple.

Apple had two massively influential product releases in the 2000s, beginning with the iPod in 2001, which blew other MP3 players out, and radically changes the way people listened to music. The iPod also launched Apple’s white earbuds as a status symbol. But the single biggest victory for Apple, and probably for the world of technology as a whole, was introduction of iPhone in 2007. When it went on sale, customers lined up outside stores in the US to get one for them.

Steve Jobs passed away in 2011, but Apple has been gaining under the new CEO, Tim Cook. In August 2020, Apple hit a new milestone; it became a $2 trillion company. In June 2023, Apple became the first company to close with a market cap of $3 trillion, which it still is, after a short period of dip.

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.  

The Case of DoJ against Apple

The Justice Department, Government of USA, joined by 16 other state and district attorneys general, have filed a civil antitrust lawsuit against Apple for monopolization or attempted monopolization of smartphone markets in violation of Section 2 of Sherman Act.

The complaints alleges that Apple illegally maintains a monopoly over smartphones by selectively imposing contractual restrictions on, and withholding critical access points from, developers. Apple undermines apps, products, and services that would other make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers. Apple exercises it monopoly power to extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.

As alleged in the complaint, Apple has monopoly power in the smartphone and performance smartphones 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 must 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.

For over a century, the Department has enforced the antitrust laws against illegal monopolies, deploying the Sherman Act to unfetter markets and restore competition. As alleged in the complaint, the Department is seeking equitable relief on behalf of the American public to redress Apple’s long-running, pervasive anticompetitive conduct.

Closing Comment

All these steps take varying amounts of time, and it’s realistic the trial will be scheduled for 2025, and the appeal won’t wrap up until 2027, depending on which judge is assigned the case. Often, companies accused of antitrust violations like Apple like to drag out the trial. 

For example, Google was sued by the DOJ in a similar case in October 2020, and it took nearly three years before it went to trial. Remedies haven’t been decided and it hasn’t gone through appeals. The DOJ case against Apple was inspired by a historic case against Microsoft filed in 1998. It went to trial later that year and an appeal was decided by 2001.

Concluded.

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For most blogs, I research from several sources which are open to public. Their links are mentioned under references. There is no intention to infringe upon anyone’s copyrights. If, however, it happens unintentionally, I offer my sincere regrets.

References:

https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets

https://www.businessinsider.com/history-of-apple-in-photos-2015-8#apple-had-two-massively-influential-product-releases-in-the-2000s-beginning-with-the-ipod-in-2001-it-blew-other-mp3-players-out-of-the-water-and-radically-altered-the-way-we-listen-to-music-the-ipod-also-launched-apples-white-earbuds-as-a-status-symbol-32