New Jersey AG lays out how Apple's practices hurt consumers

Apple (AAPL) faces mounting regulatory pressures from both sides of the Atlantic: Department of Justice (DOJ) officials filed an antitrust lawsuit while European Union (EU) regulators probe Apple and other Big Tech companies for violating its Digital Markets Act.

Sixteen US attorneys general are joining the DOJ suit alleging Apple's practice of creating a monopoly in the smartphone and digital app store markets. New Jersey Attorney General Matt Platkin — who is among the state attorneys general pushing for this case — breaks down the consumer harm Apple's anticompetitive methods have done:

"What we lay out is a pattern that Apple has engaged in of using its market share to restrict and exclude business practices in a way that stifles innovation and makes it harder for consumers to leave the iPhone platform. And as a result of that, it has driven up significantly its own profits and the cost of the products to consumers, so that now in 2024, people are paying over $1,500 for an iPhone, that if you adjust the 2007 price of an iPhone for inflation, it would only be $450."

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

AKIKO FUJITA: Well, Apple's facing big antitrust lawsuits both here in the US and across the pond, with the Department of Justice here claiming that it is monopolizing the smartphone market, particularly when it comes to its App Store controls. 16 attorney generals joining the Justice Department in bringing the case forward, including our next guest, New Jersey Attorney General Matt Platkin.

Good to talk to you today. Let me just have you walk you through your case here. I'm looking at the statement you put out saying specifically that Apple is in violation of the Sherman Act with its exclusionary and anti-competitive practices. What specifically is anticompetitive of the way Apple operates?

MATT PLATKIN: Sure. Well, thank you for having me. I think as we lay out in the complaint, and I'm honored to join the Department of Justice and, as you said, 15 other states in filing this complaint last week, what we lay out is a pattern that Apple has engaged in of using its market share to restrict and exclude business practices in a way that stifles innovation and makes it harder for consumers to leave the iPhone platform.

And as a result of that, it has driven up significantly its own profits and the cost of the products to consumers. So that now in 2024, people are paying over $1,500 for an iPhone that if you adjust the 2007 price of an iPhone for inflation, it would only be $450.

JOSH LIPTON: So I guess, Matt, I'm trying to understand-- so consumers are paying this much for an iPhone. But you know, Matt, I'm still trying to understand what the consumer harm is. If you look at customer satisfaction rates for iPhones, Matt-- and this isn't my opinion, I mean, we have the data-- they're off the charts, right? I mean, people love the iPhone, they buy it. Every September, Tim Cook introduces a new one, they buy that, too. And if they didn't want to buy it, they have alternatives, right? There are Android devices.

MATT PLATKIN: Well, actually, as we allege in the complaint, Apple's practices have made it harder for people to switch off their platform. So they don't allow things like super apps on their platform, which would allow you to do multiple things in a cloud-based app, messages, purchase products, play games, the way you can on other platforms. On those apps, when they're cloud-based, you don't need the expensive hardware that an iPhone requires.

That would allow you to switch to a lower cost platform. Apple has made it harder to do that. They don't allow tap to pay on there-- any wallet other than their own wallet. They don't allow third party app stores on their platform even though they're beginning to allow that in other markets. So there's a number of things that Apple has done that, yes, are people still purchasing iPhones. They are. 7 in 10 almost of every smartphone is an iPhone.

But the reason-- a significant reason why people are staying on the iPhone platform is because Apple has deliberately made it harder for people to leave their platform by engaging in these exclusionary business practices.

JOSH LIPTON: Well, that'll be your argument, Matt, but won't Apple say, listen, people stick with our iPhone because they're satisfied, because they're loyal, because they're happy with the product?

MATT PLATKIN: Apple is free to make whatever arguments they want, but the facts are clear. When you see the practices that Apple has engaged in that other developers are not simply-- cannot do simply because they're not as big as Apple, it hearkens back to the practices we saw Microsoft engage in the 1990s when Apple was a lead witness in the Department of Justice and states' attorneys general case against Microsoft, that case is ultimately what allowed the iTunes platform to go on the Microsoft Windows platform, which led to the iPod and the iPhone.

So Apple's very familiar with the playbook that Microsoft engaged in. Ultimately, Apple has largely adopted that playbook in our opinion.