The U.S. Department of Justice on Thursday accused Apple of using its iPhone market power to eliminate rivals, launching a multi-year proceeding involving hundreds of lawyers and investigating Apple’s “walled garden” business. He sued Apple for threatening the model.
If the Justice Department wins, it could require a range of changes to Apple’s operations, which U.S. officials did not rule out. apple It could face “structural relief” or be dissolved.
If Apple wins, the court could rule in Apple’s favor. Estimation It said it was not a monopoly with 64% of the U.S. smartphone market share and its actions were not illegal, giving Apple new tools to fight future regulations.
But before that happens, there will likely be years of legal wrangling, during which Apple will defend its business in public, distract executives in legal meetings, and challenge governments to They will submit internal documents and face potentially bad headlines. Damage your brand and image.
Justice Department cases still need to be assigned to a judge. In the short term, Apple is likely to request a change of venue away from New Jersey and will likely request a complete dismissal of the lawsuit.
William Kovačić, director of the Competition Law Center, said the length of time all of these proceedings will take varies, with a trial scheduled for 2025 and an appeal that could end in 2027, depending on which judge takes the case. He said it was realistic. at George Washington University.
John Newman, a University of Miami law professor and former Justice Department attorney, said companies like Apple that are accused of antitrust violations often have lengthy trials.
“Defendants generally prefer to drag their heels forever,” Newman said. “Are the judges going to go along with the defendant’s proposal, which will inevitably take years and years and tons of discovery? Will they drag it out forever? Or will they actually go ahead and do it? Can you try to control it?” he continued.
For example, Google was sued by the Department of Justice in October 2020 in a similar case, which took nearly three years to go to trial. No remedies have been determined and no appeals have been filed. The Justice Department’s case against Apple was inspired by the historic case against Microsoft filed in 1998, which went to trial later that year and was decided on appeal by 2001.
Potential distractions
Similar to the Microsoft case, the Justice Department’s case against Apple focuses primarily on not just its products but Apple’s entire ecosystem and whether its features constitute anticompetitive behavior, creating a new picture for antitrust law in the United States. He is trying to reach a final judgment.
In a statement provided to CNBC on Thursday, Apple said the lawsuit “threats our existence” and could harm its ability to manufacture competitive high-tech products.
Apple further explains why it doesn’t like this type of litigation in its SEC filing. The company says it must spend money to comply as laws and regulations change, including antitrust litigation. The filing says “forced” changes could hurt customer demand and create uncertainty for Apple as laws and regulations change.
Another challenge for Apple is that large-scale public trials like this one compete for executives’ time and attention, potentially requiring more decisions to go through legal review within Apple in the future. It is a certain thing.
Kovačić, a former FTC commissioner, said companies facing antitrust lawsuits are forced to take measures such as including employees not involved in the case in meetings, organizing internal documents, and how the company handles evidence and technical matters. They often need to help guide them on how to present their arguments.
“The real danger for the company, given its past major antitrust cases, is that the focus will be on winning antitrust cases rather than on acquiring customers and getting the job done,” Kovacic said. ” he said. “It slows you down. It really holds you back.”
In addition to the Justice Department lawsuit, Apple also has to deal with new regulations in Europe and investigations around the world.
The U.S. government has not said what it wants Apple to do to resolve the allegations, but its initial filing on Thursday left the issue unresolved and made a broad request for overall relief. ing.
One possibility is to force Apple to open up iPhones to third-party stores, as it does in Europe. Many of the Justice Department’s other claims, such as Apple’s alleged regulation of third-party smartwatches and “super apps,” have no recent parallels in other countries or markets. The Justice Department could also find a remedy aimed at redirecting the entire technology industry and its future products.
“If this case goes to trial, I predict that it won’t just be about smartphones, even though that’s the crux of the story. This is really a case about the future of smart devices,” Newman said. .
As in the past, Apple may choose to preemptively make changes or tweaks to affected products to avoid additional scrutiny. for example, in JanuaryApple has partially opened its App Store to cloud gaming services, one of the major competitors that the Justice Department claims Apple has blocked.
discovery and deposit
Government lawyers plan to request confidential internal Apple documents to support their case in a process called discovery. Apple’s business partners could also be required to turn over their company’s confidential documents to the government. Companies generally fear discovery because of the uncertainty of what will be revealed, but Apple is particularly secretive about its internal documents and strategy.
Documents unearthed through discovery are often made public during trials, exposing private deliberations.
The government is likely to move to dismiss Apple executives, including the CEO. Tim Cook, or even calling them to the stand during a trial. For example, Cook took the stand in a recent antitrust trial against Epic Games.
But executive depositions and testimony can still be risky for technology companies, especially if executives can’t control their egos, said former Microsoft CEO Bill Gates. famous for being quick-tempered and showing utter contempt A videotaped deposition by David Boies in 1998 was played during the trial.
“The lesson from the Gates deposition experience is that if you’re a CEO, it takes real craft and skill to do a good deposition,” Kovačić said. “To do a good job, you need to suppress some of your ‘master of the universe’ impulses and, in this case, listen carefully to your lawyer’s guidance.”
It’s also possible that Apple and the Justice Department could reach a settlement, in which Apple would make some changes and the government would drop the case before further discovery or depositions. However, there are no signs of reconciliation in public.
Apple declined to comment Thursday when asked if there had been any settlement negotiations.