Judge allows antitrust lawsuit against Apple to proceed

Key Points

• Judge Xavier Neals refused to dismiss the DOJ’s antitrust lawsuit accusing Apple of erecting a walled garden that blocks competition, and set a timetable toward a 2027 trial.
• The Justice Department contends Apple’s tight hardware-software integration has morphed into a shield against competition, enabling higher prices and stifling innovation.
• Apple insists the case is wrong on the facts and the law and vows to continue fighting it in court.
• Apple also faces separate legal challenges, including a civil contempt order banning fees on alternative in-app payment systems and a risk of losing over $20 billion in annual Google search revenue.

A federal judge on Monday rebuffed Apple's request to throw out a U.S. government lawsuit alleging the technology trendsetter has built a maze of illegal barriers to protect the iPhone from competition and fatten its profit margins.

The 33—page opinion from U.S. District Judge Xavier Neals in New Jersey will enable an antitrust lawsuit that the U.S. Justice Department filed against Apple 15 months ago to proceed. Neals has set a timetable that could see the case come to trial in 2027.

Apple has sought to dismiss the lawsuit, arguing the Justice Department had distorted the contours of the smartphone market and made a series of other misinterpretations that warranted the case be thrown out.

But Neals decided there is enough evidence to support the Justice Department's market definitions and concluded the case's key allegations merited further examination at trial.

The case seeks to pierce the digital fortress that Apple Inc., based in Cupertino, California, has built around the iPhone, iPad and other products to create a so-called “walled garden” allowing its hardware and software to mesh seamlessly for users.

The Justice Department alleges that walled garden has mostly turned into a shield against competition, creating market conditions that enable it to charge higher prices and stifle innovation.

The lawsuit “sets forth several allegations of technological barricades that constitute anticompetitive conduct,” Neals wrote in his opinion. The judge also concluded the Justice Department had pointed toward enough areas of troubling conduct that raised the “dangerous possibility” that Apple has turned the iPhone into an illegal monopoly.

In a Monday statement, Apple reiterated its position that the Justice Department's case “is wrong on the facts and the law, and we will continue to vigorously fight it in court.”

The antitrust lawsuit isn't the only legal headache threatening to undercut its profits, which totaled $94 billion on sales of $295 billion in its fiscal year ending last September.

Another federal judge in April issued a civil contempt order banning Apple from collecting any fees from in-app transactions on the iPhone that are funneled through other options besides its once-exclusive payment processing system that charged commissions ranging from 15% to 30%.

Apple also could lose a more than $20 billion annual payment that it gets for making Google the default search tool on the iPhone and other products as part of another antitrust case brought by the Justice Department. A federal judge in Washington D.C. is considering whether to ban the deals with Apple as part of a shake-up being proposed to address Google's illegal monopoly in searc h.

Neals' decision to allow the Justice Department's antitrust case to proceed came on the same day that Apple was hit with a lawsuit by app maker Proton amplifying the accusations of wrongful conduct by the company. The lawsuit, which will seek to be certified as a class action presenting thousands of developers who have made iPhone apps, is asking for punitive damages against Apple, as well as a court order to dismantle its walled garden.

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