Apple (NASDAQ:AAPL) is in the crosshairs. The consumer electronics company is under attack for antitrust violations. The Justice Dept. and 16 states are going after Apple stock for allegedly maintaining an illegal monopoly in the smartphone market.
You know the thing that makes users value Apple’s ecosystem so highly? That all Apple products work seamlessly with one another without issue? Yeah, that’s what the government wants to tear down. Because the iPhone and Macbook are all in sync with iCloud, that makes it too hard for consumers to switch away from Apple and that apparently is not a good thing.
Yet there are more allegations than just being too good at what it does, so let’s see if Apple stock can thrive if the government is trying to make it wilt.
Being successful is bad
On Mar 21 Justice Dept. 16 state and district attorneys filed an antitrust lawsuit against Apple. According to the complaint, the tech giant monopolizes the smartphone market, or tries to do so, by undermining “apps, products, and services that would otherwise make users less reliant on the iPhone, promote interoperability, and lower costs for consumers and developers.”
Texting or sending pictures to Android devices, for example, isn’t as seamless as it is between Apple users. And Apple was famously sued by Fortnite maker Epic Games over fees developers pay and how they’re paid. That case, by the way, was largely found in favor of Apple. The court ruled Apple just can’t prevent app developers from publicizing there are other payment systems within the app instead of going through Apple.
According to U.S. Attorney General Merrick Garland, Apple leverages its monopoly power to “extract more money from consumers, developers, content creators, artists, publishers, small businesses, and merchants, among others.”
Curiously, the complaint goes even further by alleging Apple’s sinister plan even stops parents from giving their kids Android phones! The scope of Apple’s power seemingly knows no bounds.
Not surprisingly, trial lawyers smell money and leapt at the chance to ride the Justice Dept.’s coattails. At least three class-action lawsuits against Apple have been filed in response to the government’s allegations.
A monopolist with lots of competition
Apple stock naturally (and in my opinion, rightly) says it will fight all of the charges. Noting the federal lawsuit “threatens who we are and the principles that set Apple products apart in fiercely competitive markets…We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it.”
The company adds it is a “dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”
Yet if these allegations are true, then Apple has to be one of the worst monopolists ever. The iPhone only has a 57% share of the U.S. market and 20% globally. That alone suggests the Justice Dept. is stretching the definition a bit thin.
And while we might wish Apple products were more compatible with Android devices, must companies be forced to make their products work with their competitors’ devices? After all, you’re not going to find much compatibility between Chevy and Ford (NYSE:F) parts.
It should also be noted that Justice Dept. lawyers don’t stay up-to-date on what is occurring in the tech world. They charge Apple with “suppressing mobile cloud streaming services” blithely unaware that Apple changed its policies around that issue earlier this year.
The feds also say Apple’s CarPlay infotainment app will takeover a vehicle’s screens and sensors for an iPhone-like experience but apparently ignore a carmaker’s ability to limit the interface. General Motors (NYSE:GM), for instance, has blocked all phone-mirroring services.
Now what
Apple has sufficient financial wherewithal to fight this government intrusion and overreach, which will undoubtedly drag on for years. Apple stock, though down 11% year-to-date, will shrug off this lawsuit. The stock did fall sharply on the news.
The tech company’s woes stem more from slowing sales, tough competition and a China market preferring more homegrown options. The antitrust lawsuit is an unneeded distraction but not one investors should be overly concerned with.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
