Apple urges judge to dismiss US antitrust lawsuit at early stage

Apple Inc. argued in federal court that a U.S. judge should dismiss the Justice Department’s antitrust lawsuit at an early stage because it failed to state how the iPhone maker’s alleged monopoly has harmed any consumers or developers.

The suit accuses the iPhone maker of violating antitrust laws by blocking rivals from accessing hardware and software features on its popular devices. It claims Apple has used its power over app distribution and the iPhone’s features to thwart innovations that would have made it easier for consumers to switch phones.

U.S. District Judge Julien Xavier Neals said after the hearing that he hoped to decide by January on Apple’s bid to dismiss the suit brought earlier this year by Joe Biden’s administration and attorneys general from 19 states and the District of Columbia.

“Counsel addressed pretty much every question I had,” said Neals, a Biden appointee, breaking his silence after three hours of arguments on Wednesday. “We’re really going to put a lot of effort into having a decision to you by January.”

Apple’s lawyers urged the judge to dismiss the case because of the government’s failure to argue it has any monopoly power in the smartphone market or that anyone was harmed. They also argued that Apple has a legal right to choose with whom it does business and it has no duty to boost the chances of its competitors.

“The fundamental problem with the government’s allegations is that they don’t include facts that link the challenged conduct to any harm to smartphone users,” Apple attorney Devora Allon argued Wednesday in federal court in Newark, New Jersey. “The government’s theory of harm really boils down to speculation about what smartphone developers” and consumers would do under the alleged conduct, said Allon.

The Justice Department and a group of U.S. states say Apple has refused to support cross-platform messaging apps, limited third-party digital wallets and non-Apple smartwatches, and blocked mobile cloud streaming services.

“Apple is litigating a ghost complaint based on rules of law that don’t exist,” Justice Department attorney Jonathan Lasken argued. “Apple can compete on the merits. What Apple can’t do is use monopoly to prevent others from competing.”

The hearing came as President-elect Donald Trump prepares for his second stint in the White House. The Biden administration has made competition a cornerstone of its economic policy, with Silicon Valley becoming a key focus, but the business community is hoping for at least a partial rollback of that stance, particularly around dealmaking.

Business changes

Apple has already made some changes to its business, recently adding support for cloud-based gaming services and RCS messaging, a text messaging standard used by many telecom carriers and communication apps.

“The antitrust law allows companies like Apple to choose the companies with which it wishes to deal” and the terms on which it does so, argued another Apple lawyer, Craig Primis.

Lasken said the case is not about Apple refusing to do business with rivals. Rather, it accuses Apple of using its dominant position in the smartphone market to block competitors, he said, comparing it to how someone uses a baseball bat.

“If you use it to break your neighbor’s window it becomes illegal,” Lasken said.

Apple’s conduct has led to inflated prices and restrictions on consumer choice, said Isabella Pitt of the New Jersey Attorney General’s Office.

At this early stage in the case, the U.S. and states must only show their allegations are plausible. Apple claims the case should be dismissed or limited before moving forward. The Justice Department and states argue that Apple’s conduct was a deliberate attempt to box out rivals and build an illegal “moat” around the iPhone.

Apple contends that its iPhone business is constrained by Samsung Electronics Co. and Alphabet Inc.”s Google but that is an argument the company can make at trial, Lasken said.

Apple is also facing a full-blown European Union probe into its compliance with the bloc’s Digital Markets Act. Bloomberg reported earlier this month that the company is expected to be the first to face a fine under the European law.

The Justice Department and states filed the case in New Jersey, which is overseen by the 3rd U.S. Circuit Court of Appeals and has a reputation for issuing friendly rulings to those bringing antitrust lawsuits. Those include exclusive dealing cases in dental supplies and consumer goods.

The case is U.S. v. Apple, 24-cv-4055, U.S. District Court, District of New Jersey (Newark).

2024 Bloomberg L.P. Distributed by Tribune Content Agency, LLC.