Is Apple really ripping off its customers – and can the US government stop them?

Apple did not mince its words. It is facing a lawsuit that “threatens who we are and the principles that set Apple products apart in fiercely competitive markets”, the company said. Defeat would set a “dangerous precedent”.

An 88-page filing by the US Department of Justice, along with 16 states and the District of Columbia, accused the near-$3 trillion behemoth of violating antitrust laws with practices designed to keep customers tied to their iPhones and less likely to switch to a competing device.

The tech giant prevented other companies from offering applications that rival Apple products, such as its digital wallet, which could diminish the value of the iPhone; this hurts consumers and rival companies, according to the lawsuit.

The White House has had enough. It wants the monopoly to end. If successful, it could seek the break-up of the Silicon Valley monster.

But while the action was met with near-hysterical approval by consumer groups and campaigners, and described in existential terms by Apple itself, the corporation’s shares fell by only 4 per cent. This is about the iPhone, a cornerstone of the Apple empire.

It’s always a delicious moment when the emotional, knee-jerk reaction of one side collides with the cool, dispassionate number-crunchers on the other. Wall Street shrugged. That was it.

Can its sanguine response be justified? For a start, the legal claim has been an age in coming. Starting with the Trump administration, US authorities have been moving against the commercial titans of our age. Partly, it was the president himself, disapproving of California types who held more sway than he did, who were not among his backers, and who openly mocked him.

There was a feeling as well that Twitter (now X), Facebook, Google and Apple were simply too huge. The volume of complaints about their tactics – not only from the public, but also from businesses similarly trying to eke out a living from a universal public utility, the internet – was too hard to ignore.

The sense persisted that these beasts that had appeared from nowhere were somehow beyond the law, that the laws were designed for old-fashioned enterprises.

When he came to power, Joe Biden took up the cudgels and some, appointing tough chiefs to the Justice Department and Federal Trade Commission. Their brief is to bring these giants to heel – to rein them in and ensure they pay all the taxes they should, that they don’t create systems in which only their technology can be used.

Wall Street is aware, of course it is. So far, though, the targets of Washington’s wrath are as strong as they ever were.

Indeed, antitrust assaults on Apple are not new. Epic Games, maker of Fortnite, went for the company in 2020, alleging its App Store was restrictive. Apple maintained successfully that customers could switch easily from iPhone to Android.

Apple’s tactic all along has been to stress that, as co-founder and guru Steve Jobs eulogised, the reason the iPhone has grown so popular is not because people must use it but because they like using it and are reluctant to move to devices with other operating systems. The iPhone is a thing of beauty and simplicity, it says.

They’ve sold billions of iPhones since it launched. Likewise, the App Store has launched millions of new businesses and benefited established ones. The number of app makers, paid to design and develop apps, stands at 5.2 million. Theirs is a profession that did not exist until the App Store was created in 2008.

So, the Apple drumbeat is “we’re popular, we’re successful, we’re big but that does not make us bad”. These lawsuits could also drag on for years, if not decades – another reason for the lack of panic among investors.

While their calculation is that the claim will be watered down, or perhaps even dissolve completely, it’s possible that this lawsuit could be different. Elsewhere in the world, regulators have also attacked Apple, but they’ve tended to aim their fire at the App Store.

In its approach, the Justice Department has gone broader, going for the whole Apple method of inter-linking its products – from the Apple Watch to the iPhone to the iPad to the MacBook.

I use all four; I confess I am a Steve Jobs groupie. I do so because I like the ease of connectivity. I also believe they’re more secure, all of them emanating from the same manufacturer. The Justice Department says I’m a victim, that I’ve been snared by the in-built touches, so that the iPhone’s messaging does not work as well with an Android. Likewise, the iPhone does not function so efficiently with other brands of smartwatch – only Apple Watch will do. Getting rid of the iPhone and moving to another type of phone would be a hassle and more expensive.

Similarly, the iPhone will only enable Apple Pay – no other tap-to-pay software can be used. On it goes, the list of examples in which Apple ties in iPhone users. The Justice Department will maintain that the extra security is also a myth: that privacy and security are protected by competition, not co-dependence.

The case is going to run and run. For now, Wall Street is relaxed. Investors don’t believe the US government will destroy just about its most successful business and an almighty employer. It won’t get that far.

If I was an Apple shareholder, I would be sticking with the company, for a while at least.