The Justice Department Thursday filed a massive antitrust lawsuit against Apple, alleging the tech giant unfairly tries to keep users hooked on iPhones, and charges high fees to app developers which ultimately cost consumers money. Jo Ling Kent has details.
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The argument is one that some Apple critics have made for years, as spelled out in an essay in January by Cory Doctorow, the science fiction writer, tech critic, and co-author of Chokepoint Capitalism. “The instant an Android user is added to a chat or group chat, the entire conversation flips to SMS, an insecure, trivially hacked privacy nightmare that debuted 38 years ago—the year Wayne’s World had its first cinematic run,” Doctorow writes. “Apple’s answer to this is grimly hilarious. The company’s position is that if you want to have real security in your communications, you should buy your friends iPhones.”
In a statement to WIRED, Apple says it designs its products to “work seamlessly together, protect people’s privacy and security, and create a magical experience for our users,” and adds that the DOJ lawsuit “threatens who we are and the principles that set Apple products apart” in the marketplace. The company also says it hasn’t released an Android version of iMessage because it couldn’t ensure that third parties would implement it in ways that met the company’s standards.
“If successful, [the lawsuit] would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect,” the statement continues. “It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology. We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”
Apple has, in fact, not only declined to build iMessage clients for Android or other non-Apple devices, but actively fought against those who have. Last year, a service called Beeper launched with the promise of bringing iMessage to Android users. Apple responded by tweaking its iMessage service to break Beeper’s functionality, and the startup called it quits in December.
Apple argued in that case that Beeper had harmed users’ security—in fact, it did compromise iMessage’s end-to-end encryption by decrypting and then re-encrypting messages on a Beeper server, though Beeper had vowed to change that in future updates. Beeper cofounder Eric Migicovsky argued that Apple’s heavyhanded move to reduce Apple-to-Android texts to traditional text messaging was hardly a more secure alternative.
“It’s kind of crazy that we’re now in 2024 and there still isn’t an easy, encrypted, high-quality way for something as simple as a text between an iPhone and an Android,” Migicovsky told WIRED in January. “I think Apple reacted in a really awkward, weird way—arguing that Beeper Mini threatened the security and privacy of iMessage users, when in reality, the truth is the exact opposite.”
Even as Apple has faced accusations of hoarding iMessage’s security properties to the detriment of smartphone owners worldwide, it’s only continued to improve those features: In February it upgraded iMessage to use new cryptographic algorithms designed to be immune to quantum codebreaking, and last October it added Contact Key Verification, a feature designed to prevent man-in-the-middle attacks that spoof intended contacts to intercept messages. Perhaps more importantly, it’s vowed to adopt the RCS standard to allow for improvements in messaging with Android users—although the company did not say whether those improvements would include end-to-end encryption.
The US Department of Justice had long been expected to file an antitrust lawsuit against Apple. But when the suit arrived Thursday, it came with surprising ferocity.
In a press conference, attorney general Merrick Garland noted that Apple controlled more than 70 percent of the country’s smartphone market, saying the company used that outsize power to control developers and consumers and squeeze more revenue out of them.
The suit and messaging from the DOJ and 15 states and the District of Columbia joining it take aim at Apple’s most prized asset—the iPhone—and position the case as a fight for the future of technology. The suit argues that Apple rose to its current power thanks in part to the 1998 antitrust case against Microsoft, and that another milestone antitrust correction is needed to allow future innovation to continue.
Like the Microsoft case, the suit against Apple is “really dynamic and forward looking,” says John Newman, a law professor at the University of Miami. “It’s not necessarily about Apple seeing direct competitors,” he says. “It’s more about them trying to grab the territory you would need if you were going to even try to compete against Apple.”
Antitrust action in the tech industry has been a focus of the Biden administration’s agenda, which has seen suits brought against both Amazon and Google by the DOJ and the Federal Trade Commission. “This case demonstrates why we must reinvigorate competition policy and establish clear rules of the road for Big Tech platforms,” Democratic senator Amy Klobuchar told WIRED in a statement.
Rebecca Hall Allensworth, a law professor at Vanderbilt University, says that though the government almost always faces an uphill battle in antitrust cases, the Apple case appears relatively solid. “It’s a lot stronger than the FTC Amazon monopolization lawsuit from last year,” she says. “And yet, it’s very hard to win antitrust cases.”
In a statement, Apple spokesperson Fred Sainz said that the lawsuit “threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” including the way its products work “seamlessly” together and “protect people’s privacy and security.”
Apple has long argued that keeping its mobile operating system, app store, and other services closed offers greater security and safety for customers. But Newman says that the DOJ complaint indicates that Apple doesn’t enforce these policies consistently as would make sense if the goal was to protect users.
“Instead [Apple] heavily targets the types of app developers that pose the biggest competitive threat to Apple,” Newman says. The DOJ alleges that restrictions Apple places on iMessage, Apple Wallet, and other products and features create barriers that deter or even penalize people who may switch to cheaper options.
History Repeating
The antitrust case against Microsoft in the late 1990s accused the company of illegally forcing PC manufacturers and others to favor its web browser Internet Explorer. It is widely credited with causing the company to be slow to embrace the web, falling behind a wave of startups including Google and Amazon that grew into giants by making web services useful and lucrative.
When asked about the threat the new antitrust lawsuit might pose to Apple’s business, a DOJ official noted that “there are actually examples where companies, after having been charged and had to change business practices because they violated the antitrust laws in the long run, end up being more valuable than they were before.” Microsoft, thanks to its success in cloud services and more recently AI, is now the most valuable company in the world.
Washington — Apple Inc., one of the world’s most valuable and influential companies, illegally engaged in anti-competitive behavior in an effort to build a “moat around its smartphone monopoly” and maximize its profits at the expense of consumers, the Justice Department alleged in a blockbuster antitrust lawsuit filed Thursday.
In a complaint filed in federal district court in New Jersey, the Justice Department accused the company of using its app development rules, iPhone features and hardware that customers use every day — including iMessage, Apple Wallet and smartwatches — to thwart competition and expand its business by charging higher prices. Fifteen states and the District of Columbia joined the Justice Department as plaintiffs in the suit.
“Apple has maintained monopoly power in the smartphone market not simply by staying ahead of the competition on the merits, but by violating federal antitrust law,” Attorney General Merrick Garland said in remarks at Justice Department headquarters. “Consumers should not have to pay higher prices because companies break the law.”
The Apple antitrust suit
Attorney General Merrick Garland announces an antitrust suit against Apple at the Justice Department in Washington, D.C., on March 21, 2024.
MANDEL NGAN/AFP via Getty Images
In their 88-page complaint, government attorneys alleged Apple violated the Sherman Antitrust Act, including by employing “a series of shapeshifting rules and restrictions in its App Store guidelines and developer agreements that would allow Apple to extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives.”
Specifically, investigators alleged the tech giant — which brought in nearly $400 billion in revenue last year — boxed out its smaller competitors by blocking the expansion of so-called “super apps” that provide identical services across devices; disrupting messaging formats and capabilities between Apple and non-Apple devices; and monopolizing the use of tap-to-pay functions on iPhones to only the Apple Wallet.
Users have long been frustrated by discrepancies when sending messages between Apple and non-Apple products, including lower media quality, diminished editing capabilities and even different colors for the messages themselves. Garland said those issues were examples of Apple degrading users’ experience to entice them to stay in the company’s ecosystem.
“As any iPhone user who has ever seen a green text message or received a grainy, tiny video can attest, Apple’s anti-competitive conduct also includes making it more difficult for iPhone users to message with users of non-Apple products,” he said. “It does this by diminishing the functionality of its own messaging app, and by diminishing the functionality of third-party messaging apps.”
Apple’s alleged anti-competitive practices did not stop there, however, according to investigators. They also allegedly worked to stifle the use of non-Apple smartwatches by limiting how users interacted with them on the iPhone and used cloud streaming, location services and web browsers on iPhones to snuff out smaller rivals.
“Critically, 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, fitness, gaming, social media, news media, entertainment, and more,” the complaint alleged. “Unless Apple’s anticompetitive and exclusionary conduct is stopped, it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy.”
The government asked the court to order Apple to cease its allegedly anti-competitive activity and stop undermining cross-platform services and hardware. The plaintiffs said the court should take action needed to “restore competitive conditions in the markets affected by Apple’s unlawful conduct.”
In response to the suit, Apple said in a statement that the litigation “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 — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology,” the company said. “We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”
Apple is not the first behemoth in the tech space to face scrutiny from the Justice Department’s antitrust division. Over the last few years, Google has faced two lawsuits — one during the Trump administration and another during President Biden’s administration — that alleged monopolistic business practices.
Jo Ling Kent and Andres Triay contributed reporting.
Robert Legare is a CBS News multiplatform reporter and producer covering the Justice Department, federal courts and investigations. He was previously an associate producer for the “CBS Evening News with Norah O’Donnell.”
The Justice Department is poised to sue Apple Inc. as soon as Thursday, accusing the world’s second most valuable tech company of violating antitrust laws by blocking rivals from accessing hardware and software features of its iPhone.
The suit, which is expected to be filed in federal court, according to people familiar with the matter, escalates the Biden administration’s antitrust fights against most of the biggest US technology giants. The Justice Department is already suing Alphabet Inc.’s Google for monopolization, while the Federal Trade Commission is pursuing antitrust cases against Meta Platforms Inc. and Amazon.com Inc.
Apple and the Justice Department didn’t immediately respond to requests for comment. The people familiar asked not to be named discussing a confidential matter.
Apple shares fell as much as 1.4% to $176.10 in late trading on the news. They had been down 7.2% this year through Wednesday’s close.
The coming case will mark the third time that the Justice Department has sued Apple for antitrust violations in the past 14 years, but it is the first case accusing the iPhone maker of illegally maintaining its dominant position.
The lawsuit comes as Apple also is coming under increasing scrutiny in Europe over alleged anticompetitive behavior. The company was hit with a €1.8 billion fine this month for shutting out music streaming rivals from offering cheaper deals. Apple’s appealing the penalty and has said that regulators failed to uncover any “credible evidence of consumer harm.”
Meanwhile, the company may face a full-blown investigation under the EU’s new rules for Big Tech — the Digital Markets Act — which went into force earlier this month. Rivals have dinged new App Store rules that came into force in Europe, complaining that changes are likely to result in higher prices for developers. Penalties for failing to comply with the EU’s new rules can be severe – as much as 10% of a company’s annual worldwide revenue or up to 20% for repeat offenders.
The Justice Department opened the latest case in 2019 under former President Donald Trump. The antitrust division, though, chose to prioritize twin cases against Google, taking a back seat as Fortnite maker Epic Games Inc. sued Apple for monopolization in 2020 and that case worked its way through the federal courts.
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Anna Edgerton, Kartikay Mehrotra, Leah Nylen, Bloomberg
Europe changed the rules of the internet this week when the Digital Markets Act took effect, holding the biggest tech companies to tough new standards. Now the world is waiting to see which giant will be first to fall foul of the law. One of the architects of the DMA says Apple is a strong candidate for the first formal investigation, describing the company as “low hanging fruit.”
Apple has faced intensifying pressure in recent years from competitors, regulators, and courts in both Europe and the US, over the restrictions it places on app-makers who must rely on its App Store to reach millions of users. Yesterday Apple terminated the developer account of Fornite publisher Epic Games which has challenged the company in US courts and recently announced its intention to launch a rival to the Apple App Store.
German MEP Andreas Schwab, who led the negotiations that finalized the DMA on behalf of the EU Parliament, says that makes Apple a likely first target for non-compliance. “[This] gives me a very clear expectation that they want to be the first,” he tells WIRED. “Apple’s approach is a bit weird on all this and therefore it’s low hanging fruit.”
Schwab is not involved in enforcement of the DMA. That’s overseen by the European Commission, which has already demanded “further explanation” as to why Apple terminated Epic’s account and is evaluating whether this violates the DMA.
“Apple’s approach to the Digital Markets Act was guided by two simple goals: complying with the law and reducing the inevitable, increased risks the DMA creates for our EU users,” says the company in a statement sent to WIRED by Apple spokesperson Rob Saunders. Apple has said on its website that alternative app stores carry the risk of malware, illicit code and other harmful content.
The DMA’s rules that aim to “break open” tech platforms require Apple to allow iPhone users to download apps from places other than Apples’ official App Store. The Epic Games Store, announced in January, intended to be launched by the Fortnite-maker Epic, would have been the first alternative app store to take advantage of the new system.
Apple tells WIRED it had the right to terminate Epic’s accounts according to a 2021 California court ruling. Epic CEO Tim Sweeney has been a vocal critic of what he styles as Apple’s “app store monopoly” for years, although in January the US supreme court denied a request to hear the latest episode in a lengthy antitrust dispute between the two companies in a victory for the smartphone maker.
The DMA went into force at midnight on March 7 in Brussels—3 pm in Silicon Valley. From that moment, six of the world’s biggest tech companies—Apple, Alphabet, Meta, Amazon, Microsoft, and TikTok’s Beijing-based owner ByteDance—must comply with a suite of new rules designed to improve competition in digital markets.
In addition to Apple having to allow outside apps, Microsoft Windows will no longer have Microsoft-owned Bing as its default search tool; users of Meta’sWhatsApp will be able to communicate with people on rival messaging apps; and Google and Amazon will have to tweak their search results to create more room for rivals. Companies that don’t comply with the new rules can be fined up to 20 percent of their global turnover.
Apple may be facing a fine of roughly $539 million (500 million euros) from the EU and a ban on its alleged anti-competitive App Store practices for music streaming services, according to . The publication, which cites five unnamed sources with knowledge of the matter, reports that the European Commission will announce its ruling early next month.
The probe stems from a 2019 antitrust complaint filed by Spotify and is focused on App Store rules that at the time prevented developers from directing customers to alternative subscription options outside the app, which could be cheaper as they wouldn’t have to compensate for Apple’s 30 percent fee. Apple later loosened these restrictions. According to FT, the Commission will say Apple broke EU antitrust law and created “unfair trading conditions” for its rivals with the App Store’s “anti-steering obligations.”
Vestager was addressing increasing concerns among competition regulators that the control over artificial intelligence is being gobbled up by a few leading technology companies.
Microsoft has acquired a leading stake in OpenAI, the company behind popular chatbot ChatGPT, and is in a fierce race with competitor Google over who can roll out the most advanced AI tech the fastest.
Antitrust authorities have zoned in on the issue. In the United States, both the Justice Department and the Federal Trade Commission are looking at how to probe OpenAI on antitrust grounds. European Union regulators in January asked industry players for feedback on whether they see issues with competition for AI. And the United Kingdom’s Competition and Markets Authority (CMA) launched a similar survey in December.
At the heart of Europe’s fears: A repeat of what happened with the last generation of internet giants. When social media, search and cloud firms boomed, it created titans like Facebook’s parent company Meta, Google and Amazon — but reduced Europe to a bystander unable to catch up and compete.
Big data became “an essential driver of competition … It completely changed market dynamics,” Vestager said in the interview, on her visit to Washington, D.C. “Now, with AI, it is likely that we will see a change in market dynamics as well, and it’s likely that it will happen much faster than what we saw of network effects and the data-driven marketplace,” she said.
Fortnite maker Epic Games is not happy about how Apple intends to comply with a district court’s injunction that permitted app developers to direct users to their own websites and payment platforms — a court order that came into effect following the Supreme Court’s decision to not hear the Apple antitrust case, leaving the current ruling to stand. Though Apple had largely won the case, as the court decided it was not a monopolist, a judge ruled that app makers should be able to steer their customers to the web from links or buttons inside their apps, something that forced Apple to change its App Store rules.
But Apple’s compliance doesn’t give app makers the victory they had hoped, as the tech giant aims to still charge commissions on purchases made outside of apps — a decision Epic aims to challenge in court.
According to statements made by Epic Games CEO Tim Sweeney, shared on X, Apple’s “bad-faith” compliance undermines the judge’s order that would have allowed buttons or external links “in addition to [in-app purchases.”
The Ninth Circuit District Court had ruled on one count of out ten in favor of Epic in its decision, finding that Apple violated California’s Unfair Competition law. The decision meant Apple had to remove the “anti-steering” clause from its agreement with App Store developers. This clause for years had prevented app developers from directing their customers to other ways to pay for in-app purchases or subscriptions from inside their apps, leading to confusing screens or broken features, where customers would have to figure out on their own how to make the necessary purchases from the developer’s website.
Apple updated its App Store Guidelines following the Supreme Court’s decision but with a lot of caveats. It said that developers would still have to pay a 27% cut on purchases, instead of 30%, and developers in Apple’s Small Business Program or auto-renewing subscriptions in their second year would be reduced to 12%, instead of 15%. This 3 percentage point discount is similar to what Google is offering through its User Choice billing pilot program, which counts Spotify and Bumble among its early adopters. In Google’s case, it reduced the required commissions by 4%. But these small discounts aren’t enough to make alternative payment processing worthwhile for most developers who have to pay at least that much in payment processing fees, many have argued.
Sweeney agrees, noting in his post today, shared on X, that developers aren’t able to offer their digital items “more cheaply on the web after paying a third-party payment processor 3-6% and paying this new 27% Apple Tax.”
Apple filed a bad-faith “compliance” plan for the District Court’s injunction. It totally undermines the order allowing “buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to IAP”.https://t.co/ofbuMwe7SH
In addition, he points out that Apple is strictly controlling how the new links and buttons must appear. In addition to forcing developers to apply for permission, the links can’t be in the app’s ordinary payment flow but must be in a separate section of the app, Sweeney explains. The links also open to a generic web browser session, forcing users to log in again to the developer’s website — an additional point of friction in making a non-App Store purchase. And then customers will have to initiate a search to find the item they wanted to buy, after logging in.
Apple will also “front-run competing payment processors with their own ‘scare screen’ to disadvantage them,” Sweeney says, meaning that Apple will warn users about the issues that may arise when transacting with a developer outside its App Store. For instance, users won’t be able to cancel their subscriptions within Apple’s App Store or request refunds — they’ll have to do this through the developer’s website.
Sweeney says Epic will contest Apple’s compliance in District Court.
The developer lobbying group, Coalition for App Fairness, which also includes Epic, issued its own statement on Apple’s new App Store rules.
“Apple’s approach to ‘compliance’ with the District Court’s decision will not benefit developers and consumers. The new 27 percent commission on payments it does not process defies the intention of the District Court’s injunction and undermines competition,” said Rick VanMeter, Executive Director of the Coalition for App Fairness. “These changes do nothing to enhance consumer choice, lower prices for in-app purchases or inject competition into Apple’s walled garden. It is precisely this type of abusive, monopolistic behavior that makes it imperative for Congress to pass the Open App Markets Act,” he added.
Epic Games, the maker of Fortnite, won a Battle Royale over tech giant Google late this afternoon.
After a month-long trial but just over three hours of deliberation, a nine-person federal jury in San Francisco ruled in favor of Epic, concluding that Google held an illegal monopoly over the Google Play Store and engaged in practices that undercut Epic Games’ ability to compete fairly.
The jury concluded that Google’s conduct not only affected Epic Games, but potentially harmed many developers dependent on the Android marketplace for their business.
“Victory over Google!” Epic Games CEO Tim Sweeney said on X. “After four weeks of detailed court testimony, the California jury found against the Google Play monopoly on all counts. The Court’s work on remedies will start in January. Thanks for everyone’s support and faith! Free Fortnite!”
Victory over Google! After 4 weeks of detailed court testimony, the California jury found against the Google Play monopoly on all counts. The Court’s work on remedies will start in January. Thanks for everyone’s support and faith! Free Fortnite! https://t.co/ITm4YBHCus
The decision is a major loss for Google, which has consistently been able to withstand legal attacks from other game makers. Google may now have to change its Play Store rules, opening up the possibility for an alternate app marketplace on the Android platform. It may also affect the rates Google charges developers for in-app purchases, currently set at a substantial 15-30%.
Presiding Judge James Donato is expected to define the specific remedies of the Epic Games case early next year, but the decision carries significant implications for the industry. Other Big Tech companies may now be vulnerable to challenges on how they control pricing and payments on their platforms. It’s also bad news for Google, which is also embroiled in another high-profile antitrust trial in Washington, D.C., over its search and advertising sectors.
Ruled a monopoly
Google’s lawyers argued that the company couldn’t possibly hold a monopoly because it competed with Apple’s app store, the largest in the world. But that didn’t sway the jury, who saw pages of internal Google documents and emails. At one point during the trial, the judge issued a stern reprimand to Google for deleting chats that could have been pertinent to the case.
Today’s ruling came two years after Epic mostly lost a similar case against Apple — a ruling that both sides are trying to appeal to the U.S. Supreme Court.
But the repercussions of this case are expected to be felt widely, standing as a stark reminder that even the seemingly untouchable Goliaths of the tech industry are subject to the law.
Big Tech companies are coming out of the woodwork to challenge the European Commission’s new enforcement regime for digital competition with TikTok and Meta Platforms filing legal appeals this week.
Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft are all considered “gatekeeper” companies under the Digital Markets Act (DMA), the European Union’s new digital rulebook, for 22 core online services they run — everything from app stores and social networks to messaging services and online marketplaces.
Meta on Wednesday was the first to say it had filed a legal challenge to the EU’s revamped enforcement regime before the European Union’s General Court, disputing EU officials’ decision to bring its Marketplace and Messenger services in scope of the new digital competition rulebook.
TikTok’s owner ByteDance on Thursday argued its video-sharing platform was wrongly labeled as a social network under the new law. The firm also took issue with being targeted as a digital giant when it sees itself as a challenger to the other “gatekeeper” companies that have a vast ecosystem of digital services.
The six targeted firms had until November 16 to file their legal paperwork. Some already indicated that they aren’t happy with the new labels the Commission has given them, according to filings published online in recent weeks.
Already some companies are making changes to how they run their businesses in Europe. Facebook and Instagram will offer paid ad-free subscriptions in the EU. Google has been opening up data sharing as part of German and Italian antitrust cases.
Their other option is to convince European Union judges to overturn the Commission’s decisions.
But we don’t understand!
Companies designated as gatekeepers can ask the EU’s General Court to cancel individual decisions. That’s precisely what Meta and TikTok did in their filings Wednesday.
Alfonso Lamadrid, a partner at law firm Garrigues, said they could claim that they don’t understand why certain services were caught by the law and that EU officials failed to give “sufficient reasoning.”
They could also file appeals — either now or later — on the Commission’s probes to determine whether Apple’s iMessage, along with Microsoft’s Bing search engine, its Edge web browser and its advertising service, should be considered core platform services. There’s a February 6 deadline to wrap those up. Another probe into Apple’s iPadOS has until September 6 next year.
Lamadrid — who has worked with Google on antitrust challenges including the tech giant’s recent court appeal against an antitrust fine for its shopping service — said he doesn’t think Big Tech firms “will be taking the decision to appeal very lightly.”
Who might grumble?
Meta and TikTok aren’t the only gatekeepers unhappy with the Commission’s decisions so far.
Meta isn’t the only gatekeeper unhappy with the Commission’s decisions so far | Drew Angerer/Getty Images
Apple previously argued with the Commission that its services shouldn’t be subject to the new rules, according to the Commission documents.
Apple tried unsuccessfully to convince officials that its App Store comes in five separate versions for different devices and that its Safari browser in three, which would reduce the number of active users for each service. Apple didn’t respond to a request for comment.
ByteDance told the Commission earlier that its viral video app is “about content discovery, not about establishing or maintaining real-world connections,” according to an EU decision published last month.
Telecoms companies are also unhappy. They told the Commission it should designate Apple’s iMessage as a core platform service that needs to follow DMA curbs, according to a letter to Internal Market Commissioner Thierry Breton seen by POLITICO.
What are the others saying?
Microsoft is classified as a gatekeeper for its social network LinkedIn and Windows PC operating service. Microsoft spokesperson Robin Koch said in September that the tech giant “accepts our designation as a gatekeeper under the Digital Markets Act and will continue to work with the European Commission” to meet its obligations.
Alphabet — which has eight core platform services targeted under the DMA, including Google Search and web browser Chrome — said in September it will “work closely with the European Commission and other stakeholders” and would “make changes that meet the new requirements while protecting the user experience.”
Alphabet — which has eight core platform services targeted under the DMA, including Google Search and web browser Chrome — said in September it will “work closely with the European Commission and other stakeholders” and would “make changes that meet the new requirements while protecting the user experience.” | Justin Sullivan/Getty Images
Amazon’s marketplace and advertising businesses were both labeled as core platform services under the DMA in September. The company said at the time it is “committed to delivering services that meet our customers’ requirements within Europe’s evolving regulatory landscape” and would “work constructively with the European Commission as we finalize our implementation plans.”
Amazon earlier this year did challenge another digital label in the EU, asking a court to cancel the Commission’s declaration that it was a Very Large Online Platform.
But with just four months to go now until the rules are enforceable, any challenge could just poke the bureaucratic bear.
“This is now an important moment in time for compliance,” Lamadrid said, “so it’s not ideal to have pending court proceedings while you’re trying to negotiate with the Commission on compliance… I don’t think it’s in the company’s best interest to antagonize the Commission.”
This article was updated on November 16 to include recent developments.
Home buyers and sellers had a big week. Significant changes to how—and how much—they pay real-estate agents became more likely after a $1.8 billion verdict on Tuesday against the National Association of Realtors and large residential brokerages.
The defendants artificially inflated commissions and “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law,” a federal jury in Missouri found.
The lawsuit (and two others) could lead to a 30% reduction in the $100 billion that Americans pay each year in real-estate commissions, said Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, in a research note on the case, reported the Wall Street Journal.
“We believe changes to the residential brokerage industry’s commission structure could cause the annual commission pool to decline by upwards of 30% over time,” he said.
NAR will appeal, and that process could take years. In a statement provided to Fortune, NAR vice president of communications, Mantill Williams, said its rules “prioritize consumers, support market-driven pricing and promote business competition.” The organization will ask the judge to reduce the verdict in the interim, he added.
Housing market implications
But Anthony Lamacchia, whose brokerage Lamacchia Realty has more than 500 agents in various states, told the Journal: “I have a hard time believing that this could be the verdict and there’s no material changes. It’s just what, and when, and what does it lead to?”
The judge might require changes to how brokerages operate, but whether that happens or not, the ruling could spur real-estate brokerages, fearful of potential liability, to implement new practices. Before the trial, two of the four big real estate broker franchisors named in the case, RE/MAX and Anywhere Real Estate, agreed to settlements, pending approval from the judge.
The other two were Keller Williams Realty and HomeServices of America, an affiliate of Berkshire Hathaway. A spokesperson for HomeServices, which plans to appeal, said in a statement: “Today’s decision means that buyers will face even more obstacles in an already challenging real estate market, and sellers will have a harder time realizing the value of their homes.”
Another upshot of the ruling could be new business models finally breaking through. For years, real-estate startups have tried and failed to upend the way agents are paid. Among them was REX, cofounded by ex-Goldman Sachs partner Jack Ryan.
“This will be a catalyst,” Ryan told the Journal, “because no one could break the cartel.”
Judge Amit Mehta has granted media outlets, including The New York Times, The Wall Street Journal, Bloomberg, MLex, and Law360, partial access to evidence in the Department of Justice’s antitrust trial against Google. The media organizations had filed a motion to intervene, citing difficulties in covering the trial due to restricted access to evidence and proceedings.
The court’s supplemental order allows for a single representative from the press to submit document requests by 7 pm ET on the day evidence is presented. However, the order limits the number of daily document requests to 10, requiring media outlets to prioritize their requests. The order aims to balance public access to the trial with the protection of confidential information.
Judge Mehta did not amend the existing agreement that allows parties to optionally post trial documents online. Instead, his order supplements it by setting specific timeframes for the release of requested exhibits. Documents with no confidential information must be released within two business days, while those containing confidential information from Google or third parties must be released within three and four business days, respectively.
The intervention by media outlets has led to increased coordination among them and the creation of a public Google Drive link where unsealed evidence will be made available.
In the wake of the Federal Trade Commission’s antitrust lawsuit filed against Amazon on Tuesday, the e-commerce giant and its CEO, Jeff Bezos, are already taking a financial hit.
On Tuesday, the FTC — along with 17 state attorneys general — filed a lawsuit against Amazon, alleging that the company engaged in anticompetitive practices, unfairly promoting its own products and brands, and stifling competition.
Amazon has denied the allegations and defended its business practices, but that hasn’t stopped the tech giant from feeling the pinch of the high-profile lawsuit.
On Tuesday, following the announcement of the FTC’s lawsuit, Amazon stock fell by 3.28%. As of Thursday afternoon, stocks are still down and stand at about $126 a share, down from $131 on Monday.
As for Bezos, his net worth declined by $5 billion on Tuesday, from $155 billion to $150 billion — where it still stands as of Thursday, according to the Bloomberg Billionaire Index.
Jeff Bezos’ net worth dropped by $5 billion following the FTC lawsuit news. Paul Ellis | Getty Images.
Despite the drop, Bezo’s net worth is still in the green for the year, up $43 million, according to Bloomberg. However, with the outcome of the lawsuit still in flux, it remains to be known how much the tech giant and Bezos could lose due to the FTC complaint.
The lawsuit alleges that Amazon has created an illegal monopoly, and engaged in a “cycle of dominance and harm,” affecting both consumers and sellers. The 172-page complaint alleges that the company entices sellers and shoppers with the promise of a vast customer base and low prices, but then “exploits” them through increased fees, advertising, fulfillment service mandates, and “punishment” for selling elsewhere. The FTC argues that the cycle results in a poor experience for users and artificially high prices.
In an official statement, Amazon has defended its practices and called the lawsuit “misguided,” adding that the lawsuit “reveals the Commission’s fundamental misunderstanding of retail.”
Federal prosecutors opened a landmark antitrust trial against Alphabet Inc.’s Google on Tuesday with charges the search-engine giant for years intentionally snuffed competition through exclusive contracts with wireless carriers and phone makers.
Google GOOGL, -1.15% GOOG, -1.21%
spent billions of dollars on such contracts to cement its dominant position, a clear violation of U.S. antitrust law, prosecutors said.
“This case is about the future of the internet, and whether Google’s search engine will ever face meaningful competition,” Justice Department lawyer Kenneth Dintzer told the court. He said Google pays more than $10 billion a year to Apple Inc. AAPL, -1.71%
and other companies to ensure Google is the default or only search engine available on browsers and mobile devices used by millions of consumers.
Google’s search business accounted for more than half of the $283 billion in revenue Alphabet recorded in 2022. Search in large part has fueled the company’s $1.7 trillion market valuation.
Google attorney John Schmidtlein countered that companies and consumers use Google’s popular search engine “because it delivers value to them, not because they have to.”
The legal jousting in a Washington, D.C., federal court kicked off what is expected to be a contentious multiweek trial that could be one of the biggest domestic antitrust trials since the federal government tussled with Microsoft Corp. MSFT, -1.83%
in the 1990s. Like that case, this one involves arguments over tying together multiple proprietary products.
To that end, Justice Department officials allege Google’s contracts ensure that Android devices come with Google apps and services, including Google search, preinstalled.
Google Chief Executive Sundar Pichai heads a witness list of senior executives and former employees from Google, Apple, Microsoft and Samsung Electronics Co. 005930, +1.28%.
“This feedback loop, this wheel has been turning for 12 years, and it always turns to Google’s advantage,” Dintzer said.
Conversely, Schmidtlein said Apple’s decision to make Google the default search engine in its Safari browser underscores that Google’s search engine is the product consumers prefer. “Apple repeatedly chose Google as the default because Apple believed it was the best experience for its users,” he said.
The Google case “could not be more different” from Microsoft litigation in the late 1990s and early 2000s, Schmidtlein asserted. “The evidence will show that Microsoft’s Bing search engine failed to win customers because Microsoft did not invest [and] did not innovate,” he said. “At every critical juncture, the evidence will show that they were beaten in the market.”
Since 2005, Google has paid Apple billions to be the default search engine on Safari, bringing the two tech giants together in a partnership that has made them both billions.
Now, the partnership is under scrutiny in the U.S. Department of Justice’s antitrust case against Google (U.S. et al v. Google), which alleges that the tech giant unlawfully maintained its search-engine dominance through exclusionary deals with partners like Apple, Bloomberg reported.
Established nearly two decades ago, the agreement designated Google as Apple’s default search engine, with Apple receiving up to 50% of the advertising revenue generated by Google searches conducted on Apple’s Safari browser. In 2016, Apple and Google expanded their agreement to include other Apple features like Siri and Spotlight, further solidifying their cooperation.
Throughout the partnership, Google has benefited from Apple’s mobile achievements, resulting in a commanding 90% share of the overall search market. Apple reaped substantial annual earnings from this collaboration, estimated at around $18 billion in 2022, as reported by Sanford C. Bernstein & Co. analysts, per Bloomberg.
Google’s perspective on the relationship is one of “co-opetition,” combining cooperation and competition, Kent Walker, Google parent company Alphabet’s chief legal officer, told the outlet.
However, critics argue that such deals effectively stifle competition.
“You are not supposed to be able to cooperate with your competitors,” Rebecca Allensworth, associate dean of research for Vanderbilt Law School, told Bloomberg.
The legality and consequences of the arrangement will be under close examination in the trial, which is set to begin on Tuesday and last 10 weeks.
In 2012, a Google executive revealed to FTC investigators that the company’s search volume could plummet by as much as 50% if Apple were to replace Google Search with Bing, Politico reported.
Apple isn’t the only Google partner under examination during the trial. In 2011 Verizon, Sprint, AT&T and T-Mobile all entered partnerships with Google wherein the carriers would receive a share of advertising revenue ranging from 15% to 40% generated on the devices they sold to their customers.The strategic move aimed to safeguard Google’s Android search distribution from potential competitors like Bing or Yahoo.
In a 2011 email cited in court filings, a Google executive explained its philosophy, stating, “We pay revenue share in exchange for exclusivity,” Bloomberg reported.
Why is the U.S. Suing Google?
The DOJ has accused Google of unlawfully leveraging partnerships with phone manufacturers and internet browser firms to exclude rival search engines. Through agreements like that with Apple, the government claims that Google’s substantial payments to its partners have hindered other search engines and created a cycle of monopolization, stifled competition and limited consumer choice. As of June 2023, Google has 90.68% of the search engine market share, according to data analysis firm SimilarWeb.
Google’s monopoly, the DOJ argues, has significantly impacted the search engine landscape, particularly as it pertains to unfairly harming competitors.
Microsoft’s Bing, for instance, currently holds just a 6.4 percent share of the U.S. market, and Yahoo, which utilizes Bing, accounts for an additional 2.4 percent, according to StatCounter. DuckDuckGo, a privacy-focused Google alternative, has only managed to capture a fraction of the market, and it attributes this challenge to Google’s default search agreements.
“Even though DuckDuckGo provides something extremely valuable that people want and Google won’t provide — real privacy — Google makes it unduly difficult to use DuckDuckGo by default. We’re glad this issue is finally going to have its day in court,” Kamyl Bazbaz, the spokesperson for DuckDuckGo, told Vox.
Google argues these agreements were “legitimate” and designed to provide a superior user experience. The trial will determine if Google’s actions harmed competition and if its market power outweighed any consumer benefits.
If Google loses, the government will seek an injunction to stop anti-competitive practices, potentially impacting Google’s business.
Furthermore, the case raises the question of if such monopolies wield excessive control over users’ online experiences.
A showdown between Amazon and government regulators over whether it is overly dominant may soon be coming to a head, with the Federal Trade Commission preparing to sue — and possibly break up — the world’s largest e-commerce company, according to Politico and Bloomberg.
The retailer, which also operates an advertising agency, shipping network, supermarket chain and movie studio, has become a mainstay in Americans’ lives. But its explosive growth, which has made founder Jeff Bezos one of the world’s richest people, has also long spurred calls for the company to be reined in, with consumer activists claiming that the behemoth uses monopolistic practices to preserve its stronghold.
For FTC Chair Lina Khan — who first came to prominence while still in law school by writing a paper arguing that Amazon is a monopoly — an effort to fracture the company would amount to a career-defining throw of the dice. Of late, meanwhile, the FTC has lost battles to block high-profile mergers, including Microsoft’s $68.7 billion purchase of Activision and Meta’s takeover of VR startup Within.
“The point of her article was that traditional antitrust, in the last 40 years, is a very awkward fit for addressing competitive concerns with Amazon, so it kind of makes sense that the FTC has struggled to bring the case,” said Rebecca Haw Allensworth, associate dean for research at Vanderbilt University Law School.
To succeed, an FTC case would need to explain how Amazon’s business practices run afoul of antitrust law first passed a century ago. Here are the arguments the government is likely to bring up in a suit to break up Amazon, according to legal experts.
Platform power
According to Politico, government regulators are homing in on several areas of concern: Amazon’s requirement that third-party sellers don’t sell items cheaper elsewhere; its encouragement of sellers to use Amazon’s shipping and advertising services; and its bundling of services as part of the company’s Amazon Prime shopping club.
More than 60% of Amazon’s sales come from independent sellers that sell their wares through the retailer, and Amazon forbids these businesses from selling items cheaper elsewhere as a condition of hawking using its platform. Guaranteeing low prices sounds like a good thing, since low prices are good for consumers. But they can have negative effects on other platforms, Allenworth said.
“It makes for less competition between the platforms. Now, Amazon doesn’t have to worry that Etsy is going to be undercutting it on these products,” she said.
Washington, D.C., and the state of California have sued Amazon on similar grounds, arguing that its demand for the cheapest prices forces merchants to raise prices elsewhere, harming both sellers and consumers.
“Other online marketplaces cannot effectively compete with Amazon by lowering their fees and commissions because doing so would have no effect on the final consumer price for that product, which is pegged to the Amazon price,” Washington, D.C.’s attorney general argued in its suit. “This artificially raises the price of goods to consumers across the internet above competitive levels and enables Amazon to charge sellers higher commissions and fees than it could in a truly competitive market.”
A judge threw out the District’s case last year, and prosecutors are appealing that dismissal. California’s suit against Amazon is in progress.
Package deal
Another likely focus of the FTC’s complaint, according to reporting from Bloomberg, is that Amazon forces vendors who sell products on its platform to use the company’s logistics services, including shipping, warehouse storage and advertising. A congressional investigation in 2020 concluded that Amazon rewards sellers that use its other services by giving them better placement on its site, including the so-called “Buy Box,” and punishes sellers that don’t use those services by putting their items further down the page.
Demonstrating that this practice, called “tying,” is illegal depends on the government’s ability to prove that its only purpose is to undermine competition.
“It’s defensible if the company can come up with some sort of good explanation for it that doesn’t have to do with crushing its competitors,” Allensworth said. “Is there an efficiency justification for having these things be offered together?”
Unfair treatment?
The government could also consider whether Amazon treats third-party sellers unfairly by giving a boost to identical products that the retailer itself sells, media reports note.
A congressional investigation concluded in 2020 heard testimony from a number of sellers that accused Amazon of giving preference to its own branded products in search results, even when they cost more, and of creating Amazon-owned copies of popular third-party products sold on the platform.
One former seller described being put out of business by the company.
“On at least two different occasions, his company did all the legwork to create a new, top-selling product or product line, as well as creating the product listings, only to have Amazon copy the idea and offer a competing product,” the congressional report found. It also concluded that Amazon could access product data that other sellers could not and that it “can give itself favorable treatment relative to competing sellers.”
Amazon’s so-called “mimic and destroy” approach has drawn criticism, but it may not be illegal, Allensworth noted. “This was a big focus of the congressional investigation into Amazon that Lina Khan was very involved in, but it doesn’t have an obvious antitrust hook — unlike in the European Union where there’s a law about [how to treat] the other sellers on your own platform,” she said.
Amazon is currently disputing its designation by the EU as a large platform that deserves tight regulation.
Lionel Barber is former editor of the Financial Times (2005-20) and Brussels bureau chief (1992-98)
Nobody does “No” better than the French. Charles De Gaulle said “Non” twice to Britain’s bid to join the European Economic Community; Jacques Chirac said “Non” to the Iraq war; and Emmanuel Macron this week gave a thumbs down to Fiona Scott Morton, the American Yale academic selected for the post of top economist at the EU’s powerful competition directorate in Brussels.
L’affaire Scott Morton may seem trivial in comparison to the (still unresolved) debate over Britain’s place in Europe or armed conflict in the Middle East, but the French veto of the first foreigner to take up the post says an awful lot about the European Union’s current paranoia about America’s influence and power.
As Macron has pushed a vision of Europe that stands up to the U.S., resisting pressure to become “America’s followers,” as he put it in April, such thinking has strengthened in Brussels.
The Scott Morton fiasco brings back memories of a lunch in Brussels exactly 30 years ago when some officials suspected the U.S. was engaged in an Anglo-Saxon plot to sabotage their plans for economic and monetary union. “Remember James Jesus Angleton,” said a stone-faced Belgian bureaucrat, invoking the name of the legendary, obsessive CIA counterintelligence officer at the height of the Cold War.
Professor Scott Morton was selected as the best candidate in open competition. She enjoyed the backing of Margrethe Vestager, the Danish EU competition commissioner often described as the most powerful antitrust regulator in the world. She also had support from Ursula von der Leyen, German president of the European Commission, whose leadership during the Ukraine war and the COVID pandemic has won widespread praise on both sides of the Atlantic.
All this counted for naught. Despite her distinguished academic pedigree, Scott Morton, a former Obama administration antitrust official, worked for Apple, Amazon and Microsoft in competition cases in the U.S. The notion her background somehow disqualified her for the job shows George W. Bush was wrong when he complained the French had no word for “entrepreneur.” Today’s problem is that Paris has no understanding of the term “poacher turned gamekeeper.”
As Carl Bildt, former Swedish prime minister, tweeted: “Regrettable that narrow-minded opposition in some EU countries has led to this. She was reportedly the most competent candidate, and a knowledge of the U.S. and its antitrust policies should certainly not have been a disadvantage.”
Now, President Macron’s opposition to the appointment has attracted a good deal of support in the Commission, in the European Parliament and among European trade unions. Cristiano Sebastiani, head of Renouveau & Démocratie, a trade union representing EU employees, said senior EU officials should “be invested, believe and contribute towards the European project. The very logic of our statute is that an EU official can never go back to being an ordinary citizen.”
France’s veto of Professor Scott Morton is de facto a veto of Vestager, who was almost untouchable during her first term as competition commissioner between 2014-19. She won kudos for investigating, fining and bringing lawsuits against major multinationals including Google, Apple, Amazon, Facebook, Qualcomm, and Gazprom. More controversially, at least in Paris and Berlin, she vetoed the planned merger between Alstom and Siemens, two industrial giants intent on creating a European champion.
Vestager’s second term has been a different story. She has suffered reverses in the courts which overturned punitive fines against Apple and Qualcomm. Then, although she ranks as a vice-president of the Commission, Vestager found herself challenged by a nominal underling in the shape of Thierry Breton, a former top French industrialist put in charge of the EU’s internal market.
Both have battled over the policing of the EU’s Digital Markets Act and over policy on artificial intelligence, a proxy fight for influence overall in Brussels.
Vestager and Breton have battled over the policing of the EU’s Digital Markets Act and over policy on artificial intelligence | Olivier Hoslet/EPA/AFP via Getty Images
Breton favors the so-called AI Pact, an effort to bring forward parts of the EU’s draft Artificial Intelligence Act. This would ban some AI cases, curb “high-risk” applications, and impose checks on how Google, Microsoft and others develop the emerging technology.
By contrast, Vestager favors a voluntary code of conduct focused on generative AI such as ChatGPT. This could be developed at a global level, in partnership with the U.S., rather than waiting for the two years it will take to secure legislative passage of Breton’s AI Pact.
So what’s the solution? If Europe is to have any chance of prevailing, so the argument goes, member states must take a far harder-nosed attitude to competition policy. This leads in turn to the creation of national or pan-European champions at the expense of crackdowns on subsidies and other anti-competitive behavior. In short, the very liberal policies designed to protect the single market’s level playing field and embodied by the fighting Viking.
For those who occasionally wonder how power has shifted inside the EU since Brexit took the U.K. out of the equation, it is proof indeed that “liberal Europe” is on a losing streak.
American Airlines and JetBlue must end their alliance, a federal judge said on Friday, ruling that the partnership weakens competition and hurts consumers in the Northeast by reducing their flight options.
The decision is a blow for the airlines, which have said their codeshare agreement helps consumers by creating a stronger competitor in the region for Delta Air Lines and United Airlines.
American and JetBlue announced in 2020 that they would cooperate on some routes in the Northeast in a deal they called the Northeast Alliance. They argued it was a pro-consumer arrangement that allowed them to start 58 new routes from four airports in New York and Boston, add flights on other routes and plan new international destinations.
The partnership went into effect in early 2021 in the last days of the Trump administration. The deal lets American and JetBlue coordinate schedules and share revenue on many routes to and from New York and Boston.
However, the Department of Justice, joined by six states and the District of Columbia, sued in 2021 to block the alliance, arguing that American and JetBlue are already too powerful in the airline industry, and that the deal would lower choice and drive up prices for flyers. An economist arguing for the Justice Department predicted that consumers would spend more than $700 million more a year if American and JetBlue stopped competing with each other in the Northeast, according to the Associated Press.
“It is a very important case to us … because of those families that need to travel and want affordable tickets and good service,” Justice Department lawyer Bill Jones said during closing arguments, the AP reported.
In a statement, JetBlue said it was “disappointed in the decision” and claimed the deal was “a huge win for consumers.”
“Through the NEA, JetBlue has been able to significantly grow in constrained northeast airports, bringing the airline’s low fares and great service to more routes than would have been possible otherwise,” the company said. “We are studying the judgment in full and evaluating our next steps as part of the legal process.”
Sherman Act
On Friday, Leo Sorokin, a federal judge based in Boston, sided with the government, writing that the airlines presented little evidence that their partnership would benefit consumers.
“Though the defendants claim their bigger-is-better collaboration will benefit the flying public, they produced minimal objectively credible proof to support that claim. Whatever the benefits to American and JetBlue of becoming more powerful—in the northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another. Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent,” Sorokin wrote.
He ordered the partnership to end within 30 days of the decision.
It’s the second legal loss for JetBlue in recent months. In March, the federal government sued to block a proposed merger with Spirit, another low-cost carrier. The $3.8 billion deal would be the largest airline industry merger since Alaska Air bought Virgin America in 2016 for $2.6 billion.
EU antitrust investigators have raided energy drink maker Red Bull over suspicions it abused its dominance in the wildly popular market, officials said Tuesday.
Red Bull said EU Commission officials “visited our premises” on Monday.
“We will, of course, work with them on all matters that concern them,” the company said in a statement, declining to comment further.
The EU’s executive arm said earlier its teams carried out unannounced inspections Monday “at the premises of a company active in the energy drinks sector in various member states”.
It did not name the company or say in which countries investigators — joined by competition authorities of each member state affected — had conducted raids.
The commission, the 27-country bloc’s powerful antitrust authority, is probing allegations the company violated EU antitrust rules that prohibit cartels and restrictive business practices.
If the company raided is guilty of antitrust violations, it risks large fines but can be granted immunity if it cooperates with the commission.
Following the death of Austrian founder Dietrich Mateschitz, Red Bull named a board of three directors to lead the energy drink giant in November.
Mateschitz, who made the energy drink a global phenomenon and forged a title-winning Formula One team and a sports empire, died in October aged 78.
His son, Mark Mateschitz, now owns Distribution and Marketing GmbH, which holds 49% of Red Bull shares. The Thai Yoovidhya family holds the rest. The company is based in Fuschl am See in western Austria.
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