The U.S. Department of Justice is in the early stages of drafting an antitrust lawsuit against Apple, according to sources cited by Politico in a report released just ahead of the weekend. While the new report suggested a potential suit could arrive by the end of the year, it also stressed that a final decision about if or when to sue Apple had not yet been made.
A 2019 deal between U.S. regulators had allowed the Justice Department to take on the investigations of Apple and Google, while the Federal Trade Commission was to take the reins of other Big Tech investigations, like Amazon and Facebook. In Apple’s case, the DoJ has been examining whether or not Apple abused its market power to dominate smaller tech companies, including both hardware and software makers.
Apple’s tight control of its App Store has angered developers who want to be able to market their apps directly to consumers and take their own payments without having to pay commissions to Apple. This is also the subject of Fortnite developer Epic Games’ lawsuit against the tech giant, now under appeal.
The DoJ’s investigation into Apple’s business has been taking place for some time. The Reuters news agency in February 2020 noted that the Department of Justice had begun reaching out to app developers as part of its examination of Apple’s business practices. Those initial discussions had included the makers of parental control apps that were pulled from the App Store for non-compliance with Apple’s rules. One developer had said their app was pulled for six months, causing it to lose half its business, for example.
Separately, Apple has been accused by AirTag rival Tile (now owned by Life360) as engaging in unfair competition. When Apple’s AirTag launched it did so with direct access to the iPhone’s ultra-wideband technology for precision finding capabilities and deep integration into Apple’s own “Find My” app. Tile had argued that it shouldn’t have to give up its direct relationship with its customers through its own app in order to compete with Apple’s hardware by becoming just another “Find My” partner. In addition, Tile had said that Apple’s decision to enter this market would allow it to easily dominate because of its first-party advantage and ecosystem power.
Politico said that DoJ lawyers in San Francisco are leading the Apple investigation and have been reaching out to companies that partner with Tile. Those meetings indicated the lawyers were looking to frame a case that was about not just the App Store, but Apple’s mobile OS more broadly, the report noted.
The investigation comes at a time when Apple is also under increased scrutiny for the way it reports revenues from its Services business, which includes advertising, cloud services, the App Store, subscription services like Apple TV+ and Apple Music, AppleCare and more.
Analysts are pushing Apple to be more transparent about this “$70 billion black box” consisting of multiple businesses, Bloomberg recently reported in an op-ed. In particular, it’s difficult to get a sense of how much money Apple is making from any one business in that division — like the App Store, whose revenues Apple stopped breaking out separately after 2014. Now, as more countries push Apple to open up the App Store to support alternative payments — as the Netherlands and South Korea have done in limited ways — it’s difficult to tell what impact those changes are having on the App Store, the Services’ sector’s largest business by revenues. This makes it difficult for investors to make decisions about Apple’s stock.
While the timing of a DoJ lawsuit against Apple is still unknown, Politico’s report suggested the Justice Department could be awaiting the judge’s decision in the Apple-Epic Games trial before moving forward.