Scott Olson
Apple (NASDAQ:AAPL) faces the specter of yet another legal tussle, this time with the U.S. Department of Justice reportedly gearing up to file an antitrust case against the tech behemoth sooner rather than later.
The case, anticipated to hit the courts as early as March according to Bloomberg, hinges on allegations that Apple’s hardware and software constraints have dealt a blow to its competitors. Notably, Spotify and companies like Life360’s Tile, producing a rival to AirTags, and Beeper have raised similar concerns within the scope of antitrust.
Responding to these allegations, Apple, headquartered in Cupertino, California, has not promptly addressed the reported pursuit of antitrust charges, as per Seeking Alpha.
In a swift reaction, Apple’s shares witnessed a decline of approximately 1% during late afternoon trading on Wednesday.
The looming legal showdown follows the Department of Justice’s ongoing antitrust scrimmage with Alphabet’s Google unit and contemplation of similar legal action against other tech titans such as Meta Platforms and Amazon. The latter is currently entangled in an antitrust lawsuit brought forth by the U.S. Federal Trade Commission.
Apple’s Legal Challenges
The prospect of an antitrust suit arises on the heels of the U.S. Supreme Court’s refusal to review a ruling related to Apple’s App Store antitrust case. This decision has now permitted developers to steer users towards web-based alternatives for payment, a maneuver previously marred by Apple’s imposition of a 30% commission for in-app transactions.
In a ruling that sent ripples across the tech landscape, the 9th US Circuit Court of Appeals found Apple in violation of California’s Unfair Competition Law, citing its curbing of developers’ ability to communicate with users about external payment systems.
Despite the partial reprieve, the technology giant still insists on a reduced but substantial 27% commission for external payments or 12% for developers enrolled in the App Store Small Business Program, as indicated on a support page.
Apple aired its concerns, asserting the onerous nature of enforcing and collecting these payments in light of a vast developer base. “Although developers are contractually obligated to pay the commission, as a practical matter, with hundreds of thousands of developers with apps on the U.S. storefronts for the iOS and iPadOS App Stores, collection and enforcement will be exceedingly difficult and, in many cases, impossible,” stated Apple in recent court filings.
Adding to its legal woes, Apple recently found itself among a group of “gatekeepers” earmarked by Europe’s Digital Markets Act, set to take effect on March 7. Intriguingly, failure to comply with the DMA regulations could result in fines amounting to 10% of annual global turnover or 20% for repeated violations, as elucidated by the European Commission.
The EC also wields the authority to take stringent measures against non-compliant entities, including divestiture mandates or the prohibition of acquiring related services by the respective gatekeeper.
Apprehensive of the impending regulatory tides, Apple revised its risk factors late last year to factor in the evolving terrain for third-party developers and potential App Store risks in view of the impending regulatory changes.
