On March 21, the Department of Justice (DoJ) joined 16 state attorneys general to sue Apple for monopolization of the “performance smartphone” (or if the court doesn’t buy that, the “smartphone”) market. The complaint includes five counts of alleged monopolization that superficially appeal to consumer welfare, the current legal standard. In this regard, DoJ appears chastened by Epic Games’ resounding loss in the 9th Circuit, seemingly resigned to the notion that the most distant stars are out of reach. However, the framework of the lawsuit ultimately reveals exactly the kind of effort to protect specific competitors the federal court system generally rejects. More relevantly for developers, each count would deprioritize small app companies’ interest in the managed marketplaces that competition itself has produced. Similar to the Federal Trade Commission’s (FTC’s) recent campaign aimed at marketplace management and the European Union’s Digital Markets Act adventure, DoJ is challenging the basic steps Apple takes to protect privacy, security, and the user experience to differentiate the iPhone from competitors like Samsung, Google, and others abroad. If successful, the complaint could also knock down the fundamental measures curated online marketplaces (COMs) in general take to distinguish their distribution services from rival storefronts.
Each count selects and advances the specific demands of Apple’s extraordinarily well-resourced competitors. In doing so, the counts seek remedies that subvert the iPhone’s long-standing features that stem the tide of security, privacy, and other consumer protection problems on smartphones. This function is exceedingly overlooked and taken for granted—but crucial to sustain a marketplace that works for smaller app companies.
“Super Apps.” The competitors this count is designed to protect and serve include companies like Meta and X (formerly Twitter). These companies have complained that the App Store blocks their plans to develop their own versions of “super apps,” an undefined term in itself. They appear to argue that developer guidelines somehow restrict them from enabling a WeChat-style experience—with features like financial services, ride-hailing, and food delivery—in the United States. DoJ reflects this grievance in its complaint, suggesting that Apple is threatened by “enormously popular super apps in Asia” [para. 66]. WeChat is likely the app in question, as it serves 1.08 billion monthly average users in China or around 80 percent of China’s entire population.
The stated problem is confusing for two reasons: 1) the App Store currently carries WeChat, and 2) other super apps are also not disallowed from the major app stores. Thus, this count is swinging at a straw man. DoJ’s purpose here appears to be much more in the vein of taking Meta’s and X’s sides as they seek free and unconstrained distribution on iPhones. Enforcers should not be pursuing goals like this since the App Store’s guidelines in no way actually restrict these companies’ ability to add financial services, ride-hailing, or other features to their apps. The obstacle these companies face in reality is that it is exceptionally costly to begin or buy ride-hailing businesses, financial service offerings, and other elements that might constitute a WeChat-style super app. In those separate markets, the United States already has formidable competition from entities that have succeeded in serving consumers, making it relatively more challenging for a social media platform to enter those markets than it appears to have been for WeChat in China.
With the lack of any potential benefit derived from this count in mind, its costs would be a completely unnecessary increase in risks to privacy, security, and other consumer protection harms the developer guidelines are there to prevent. DoJ presents no clear antitrust justification for taking social media platforms’ side in their dispute with Apple, especially given their comparable bargaining power, but more importantly, their comparatively much worse track records on privacy and security. Consumers are comfortable downloading software from smaller, relatively unknown companies—especially those that collect sensitive personal information—in large part because they adhere to app store guidelines, which the app stores enforce. Mandating that these guidelines be unenforceable with respect to social media firms’ demands would obviously create a giant loophole for bad actors, especially since app stores have historically constrained social media’s privacy and security excesses.
Cloud Streaming Apps. The specific competitors DoJ seeks to protect and serve on this count are the big gaming companies, including the largest company in the world. A notable problem with this count is the same as the above: cloud streaming games are not disallowed on the major app stores. Thus, here again, DoJ’s intervention creates and tries to knock down a straw man. The lawsuit takes place in the midst of negotiations between game developers and the App Store over the specific form of cloud streaming certain companies want the app stores to carry—and takes the big game developers’ side. The justification for this count also appears to put the largest companies’ interests before those of small app companies that derive relatively more value from app store management. Not all game developers are keen to observe developer guidelines or federal children’s privacy laws and, if unencumbered by app store guidelines, could certainly take advantage. DoJ’s insistence that the App Store bend to the demands of gaming companies is, again, an attempt to convince the court to impose a duty to capitulate on Apple (but not the big gaming companies). Inexplicably, DoJ comes down in favor of flattening the App Store’s demands, which have generally frustrated certain gaming apps’ efforts to circumvent App Store guidelines to further ongoing privacy and security abuses.
Digital Wallets. The specific competitors DoJ seeks to protect and serve on this count are big banks like Chase, Wells Fargo, and Bank of America. Central to its claim here is that Apple charges banks 0.15 percent for transactions executed through Apple Pay on iPhones. DoJ argues that charging card-issuing banks for swipe fees is anti-competitive, even though thousands of banks make their cards available on the Wallet app. Simultaneously, DoJ argues that by limiting access to the near field communication (NFC) chip and carefully limiting credential management, Apple closes off credential management software and NFC processing provided by other companies on iPhones. As the complaint notes, Apple steers consumers to make Apple Wallet the default credential management tool, including for digital car keys. These measures tend to make the consumer experience more seamless and user-friendly, meaning they are examples of competition with other mobile platforms. Meanwhile, imposing privacy and security requirements in return for access to sensitive device features like the NFC chip and credential management on iOS is plainly pro-competitive. Thus, if DoJ succeeds on this count, the resulting requirement for Apple to open its NFC chip and credential management would introduce new privacy and security risks, specifically with some of the most sensitive hardware and software on iPhones.
Messaging. The specific competitors DoJ seeks to protect and serve on this count are large messaging app makers, including Meta. DoJ argues that imposing restrictions on messaging services and smartwatch makers violates antitrust law. Notably, iMessage is not the global leader in end-to-end encrypted (E2EE) messaging; that distinction belongs to WhatsApp, which is owned by a company DoJ is siding with in this complaint, Meta. On DoJ’s allegation that Apple restricts access to rich communication service (RCS), a messaging standard, Apple has already announced its plan to roll it out. However, the current RCS standard is structured for custom implementations, which do not always support E2EE, and it is unclear to users which conversations are and are not encrypted. Given that RCS standard developers are still ironing out kinks and that the dominant messaging services globally are not owned by Apple, it is not clear at all how a court order for iPhones to support RCS for all messaging would be better for competition or consumers than how messaging on iPhones has developed in free market conditions.
Smartwatches. The specific competitors DoJ seeks to protect and serve on this count are Apple’s rival smartwatch makers. It is obvious that maintaining a closed posture to third-party wearable devices has privacy and security benefits. Strava provides a stark example of why consumers should have a choice of smartphones that, by default, limit access by wearables to track sensitive physiological and location data. Smartwatches and wearables are exceptionally important rails on which small digital health companies are and will be, building their products and services. The security and privacy protectiveness of these devices and the software that runs them is the number one factor in whether or not consumers actually adopt them at the scale and to the extent necessary for them to meaningfully enable preventive measures and chronic condition management. If—whether for competition or other reasons—the federal government decides to eliminate the closed model that truly enables this consumer trust, the alternative is for companies to monetize that data. This option involves selling the customer’s data, which is great if it means the product is cheaper or free, but (as the headlines have revealed) it often comes with dubious privacy and security practices. Such a result would rob consumers of the currently more popular option for their digital health and condemn the FTC to many, many more rounds of whack-a-mole with digital advertisers and health data.
The antitrust theory DoJ is chasing here is for a court to impose on one competitor a “duty to deal” with the other competitor. If that sounds antithetical to the purpose of promoting competition, inherent in antitrust law, you’re onto something. In general, there is no duty for competitors to deal with one another and, in fact, it is often potentially anticompetitive, as collusion is separately prohibited by antitrust law.
Crucially, DoJ wants the court to buy its characterization of Apple as having first “invited third-party investment on the iPhone and then imposed tight controls on app creation and app distribution” [section header above para. 41, emphasis added]. If this were true, DoJ could have an incrementally stronger case to make, but it is not. Apple never represented to the marketplace that its messaging service, operating system, or smartwatch support would be available to everyone. In fact, third-party apps were only allowed on the platform from the beginning of the App Store subject to tight controls, in order to facilitate a consumer-friendly and Apple-curated experience. Fast-forward to today, and the support page plainly states that if you’re seeing a green bubble in your text messages, it could be because the person you sent the message to “doesn’t have an Apple device.” No reasonable person could call this a bait-and-switch. For living examples of the conduct DoJ ascribes to app stores, see instances where standard-essential patent (SEP) holders promise to license standardized technologies on terms that are fair, reasonable, and non-discriminatory (FRAND) and then disregard those promises, seeking injunctions against willing licensees (an area of activity that has seen, and should continue to see, enforcement under U.S. competition laws). At no point did Apple represent to the market that its operating system or App Store are standardized technologies subject to open access, and that is because the product itself is in large part exclusivity and curation. That product has in turn created massive value for small app companies looking to tap global markets.
In Summary. By seeking the homogenization of distribution across the mobile ecosystem, DoJ’s complaint is an attempt to create pantomime versions of competition on top of those distribution options. In doing so, the arguments Apple and Google make to attract consumers to curated, managed marketplaces are suffocated in exchange for much less compelling markets-in-a-DoJ-created-box relegated to platforms that are less effective because they’re no longer allowed to compete. Exhibiting DoJ’s fundamental hostility to app stores competing on the merits, one of the smoking guns comes from an internal presentation in which an Apple executive worried that bending to Meta’s demands could lead to an “[u]ndifferentiated consumer experience . . .” [para. 66]. And how isn’t this an example of competing on the merits? It is precisely this differentiated experience that small app companies don’t want to sacrifice in order for WeChat-style Meta to receive its own government-mandated special treatment on the App Store.
This is a world in which large, well-resourced interests, both on and off the app stores—like Meta, Epic Games, and the large banks—receive a short-term benefit, which in all likelihood eventually fades as platforms are mandatorily unresponsive to their demands. It is also a world in which small app companies can expect fewer choices, costlier distribution, and a far harder-to-acquire customer base.