DOJ Lawsuit: The Wrong Way to Regulate Apple

The DOJ's lawsuit against Apple is a terrible way to try to control the tech giant, but it might be the only option.

The suit is based on the accusation that Apple is "monopolizing the smartphone market," and that doing so is hurting customers. Despite some very weird-looking—and even flat-out wrong—claims, the DOJ apparently has a strong case. But as we shall see, the courts are a terrible way for the government to get what it wants.

"More often than not, what appears to be a shoddily put together document is a tricky strategy designed to cast as wide a net as possible, fostering uncertainty in the opposing counsel. This might compel them to agree to a more favorable settlement rather than risk going to trial," Andy Gillin, an attorney and partner at GJEL Accident Attorneys, told Lifewire via email.

Legislating Apple's Monopoly

The DOJ's case claims a violation of Section 2 of the Sherman Act, which is concerned with companies that exploit, or attempt to exploit a monopoly. We won't get into the weeds about whether Apple's iPhone business, with a 65 percent market share of the overall smartphone market, is actually a monopoly. Anything over 50 percent can be enough to draw scrutiny, and the DOJ argues that Apple "uses its control over the iPhone to engage in a broad, sustained, and illegal course of conduct."

In a moment, we'll get to the five terrible examples the DOJ has set out in its case, but first, why is a lawsuit such a bad way to go about this?

Let's consider the purpose of this suit. Presumably, the DOJ wants to force Apple to open up its platform, making it easier for users to switch, and to stop Apple from picking and choosing what apps developers are allowed to make for its platform. The best way to go about this is to write new laws that do exactly that and tell Apple to follow them.

This is exactly what the European Commission has done in the EU with the DMA (Digital Markets Act).

"The DMA […] is a legislative proposal aimed at imposing new obligations on digital platforms. It might appear more streamlined because it is systemically designed and not case-specific," says Gillin.

But as the US government seems currently unable to pass any laws, it has to turn to the courts. Even if it comprehensively wins the case, the DOJ may still not get what it wants. Say the judge hands the DOJ a victory on all counts. It still has to rely on the judge to tell Apple what to do, and then it all goes to appeal anyway.

Five Points Against Apple

The case cites five main points, and it's worth listing them here

1. Blocking innovative super apps: "Super apps" are apps like China's WeChat, where you can do anything from calling friends and ordering pizza to paying your taxes. But super apps just shift the problem of a monopoly from Apple to the app provider. Arguably it's worse because at least with iOS you can switch to Android.
2. Suppressing mobile cloud streaming services: Apple has in the past banned mobile game streaming services from iOS, but—possibly to avoid government regulation—it finally allowed them in January, letting Microsoft put Xbox Game Pass on the iPhone.
3. Excluding cross-platform messaging apps: This one is weird. It rightly says that Apple doesn't allow third-party apps to access plain SMS messaging, but does anybody care? It also claims that Apple has made cross-platform messaging worse, and forces users to keep buying iPhones. Clearly, the DOJ has never tried WhatsApp or Signal, both of which are as- or more-secure than iMessage, and much better apps to boot.
4. Diminishing the functionality of non-apple smartwatches: Good point. You cannot use an Apple Watch with an Android phone, and non-Apple smart watches cannot integrate with the iPhone anywhere near as deeply as the Apple Watch.
5. Limiting third-party digital wallets. This one is super weird. It's true that Apple limits access to the NFC chip the iPhone uses for Apple Pay, but the idea that Apple acts as an intermediary, inserting itself between the bank and the merchant, is exactly what makes Apple Pay so good. When you use it, your actual credit card number is never given to the merchant. Instead, it generates a "DPAN" number, which means nobody can steal your credit card number.

"DPAN […] is a standard feature of digital wallets everywhere, not just Apple Pay. Google Pay and Samsung Pay are the biggest other digital wallets in the U.S. and they both do exactly the same thing," Matt Birchler, UX designer at embedded payments company NMI, on his personal blog, Birchtree. "I can not stress enough to you how little merchants want to ever ever ever handle your actual credit card number. It adds so much risk on their end and modern payment acceptance tools make it easy to collect payment details in a way that makes sure as few people as possible have access to the real card info."

If you dig into the full filing, then you'll find a lot more nuanced and sensible arguments, but these main points are so obviously weird or just plain wrong that they may help Apple refute the more important parts.

Apple, and big tech, definitely need to be reined in and regulated, just like any other industry. But this lawsuit shows how hard that is to do in the US right now.