On Monday, Apple faced a legal setback when a federal judge denied the company’s motion to dismiss a U.S. government lawsuit. This lawsuit accuses Apple of establishing unfair competitive barriers intended to protect its lucrative iPhone line. U.S. District Judge Xavier Neals, presiding in New Jersey, issued a 33-page order permitting the antitrust lawsuit filed by the U.S. Justice Department 15 months earlier to continue. Neals has outlined a schedule that could bring the case to trial by 2027.
Apple had argued for the dismissal of the lawsuit, claiming that the Justice Department had mischaracterized the dynamics of the smartphone market and made erroneous arguments in its filings. However, Judge Neals ruled that sufficient evidence exists to justify the Justice Department’s claims and determined that the critical allegations should be further scrutinized in court.
The lawsuit aims to dismantle the barriers that Cupertino-based Apple Inc. has constructed around its iPhone and iPad lines, creating an ecosystem known as a “walled garden.” This design allows seamless integration of its hardware and software, offering a cohesive user experience. According to the Justice Department, this walled garden primarily acts as a defense against market competition, enabling Apple to inflate prices and stifle innovation.
Judge Neals stated that the lawsuit includes “several allegations of technological barricades that constitute anticompetitive conduct.” He also determined that the Justice Department identified potentially harmful practices suggesting the possibility that Apple could dominate the market illegally.
Following the ruling, Apple reaffirmed its disagreement with the Justice Department’s lawsuit, stating it believes the case “is wrong on the facts and the law.” The company pledged to rigorously defend itself in court.
The antitrust lawsuit is not Apple’s only legal concern potentially affecting its profits, which totaled $94 billion from $295 billion in sales during the fiscal year ending last September. In April, another federal judge issued a civil contempt order, preventing Apple from collecting fees on in-app purchases processed through alternatives outside its previously exclusive system, which charged commissions of 15% to 30%.
Additionally, Apple risks losing a significant revenue stream, over $20 billion annually, from its agreement with Google, where Google pays to be the default search engine on Apple’s devices. This is part of another antitrust case from the Justice Department. A judge in Washington D.C. is currently evaluating a potential prohibition on such agreements as part of measures aimed at correcting Google’s monopolistic practices.
Coinciding with Neals’ ruling, Apple was targeted by another lawsuit filed by the app developer Proton. This lawsuit, which seeks to be a class action representing thousands of app developers, accuses Apple of wrongful practices and demands punitive damages, along with a court order to dismantle its walled garden.