Apple CEO, Tim Cook, testifies before the Senate Homeland Security and Governmental Affairs Committee’s Investigati
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The U.S. Department of Justice sued Apple on Thursday, accusing it of using the iPhone’s market power to chop off rivals, kicking off a multi-year process involving lots of of lawyers and threatening Apple’s “walled garden” business model.
If the DOJ wins, it could seek a variety of changes to Apple’s business, and U.S. officials didn’t rule out the likelihood that Apple could face “structural remedies” or be broken up.
If Apple’s arguments prevail, a court could rule that its estimated 64% of U.S. smartphone share is not a monopoly, or that its conduct wasn’t illegal, giving Apple latest tools to fight off future regulation.
But before any of that happens, we’ll likely see years of legal wrangling, during which Apple can be forced to defend its business in public, distract its executives with legal meetings, produce internal documents for the federal government, and potentially face bad headlines that might hurt its brand or image.
The DOJ’s lawsuit still must be assigned to a judge. Within the short term, Apple could ask for a change of trial location away from Recent Jersey, and it’s going to likely ask to dismiss the case entirely.
All these steps take various amounts of time, and it’s realistic the trial can be scheduled for 2025, and the appeal won’t wrap up until 2027, depending on which judge is assigned the case, said William Kovacic, director of the Competition Law Center at George Washington University.
Often, corporations accused of antitrust violations like Apple wish to drag out the trial, said John Newman, a professor of law on the University of Miami and a former DOJ attorney.
“Typically, defendants love to tug their heels eternally,” Newman said. “Is the judge going to go along with what the defendant proposes, which is inevitably years and years, tons and tons of discovery? Drag it out eternally? Or they’ll actually step up and check out to regulate that?” he continued.
For instance, Google was sued by the DOJ in the same case in Oct. 2020, and it took nearly three years before it went to trial. Remedies have not been decided and it hasn’t passed through appeals. The DOJ case against Apple was inspired by a historic case against Microsoft filed in 1998. It went to trial later that yr and an appeal was decided by 2001.
A possible distraction
Just like the Microsoft trial, the DOJ lawsuit against Apple is attempting to erect a latest landmark decision for antitrust within the U.S., mostly by specializing in Apple’s entire ecosystem, not only a product, and whether the way it functions represents anticompetitive conduct.
In an announcement provided to CNBC on Thursday, Apple said that the lawsuit “threatens who we’re” and that it could hurt its ability to make competitive tech products.
Apple provides more details about why it doesn’t like this sort of litigation in its SEC filings. Apple says that when laws and regulations change, including antitrust litigation, it has to spend money to comply. “Imposed” changes can hurt customer demand, in keeping with the filing, and when laws or regulations change, it creates uncertainty for Apple.
One other challenge for Apple could also be that a giant, public trial like this one competes for executive time and a focus, and more decisions inside Apple could have to undergo legal review before going forward.
Firms facing antitrust often must loop employees who don’t have anything to do with trials into meetings, to sort through company documents, or help guide how the corporate will present evidence or technical arguments, Kovacic, a former FTC commissioner, said.
“In past major antitrust cases, the true danger for the corporate is that the main focus of attention becomes winning the antitrust lawsuits as an alternative of winning customers and doing all your job,” Kovacic said. “It slows you down. It’s an actual drag.”
For Apple, it is not just the DOJ suit, but in addition latest regulations in Europe, and investigations in other countries all over the world that it has to cope with.
The U.S. government hasn’t said what it wants Apple to do to repair its allegations, but its initial filing on Thursday left the matter open, with a broad request for overall treatment.
One possibility includes forcing Apple to open the iPhone to third-party stores prefer it has in Europe. Many of the DOJ’s other allegations, like Apple’s alleged restrictions on third-party smartwatches and “super apps” haven’t got close recent parallels in other countries or markets. The DOJ could also find remedies that aim to reorient the complete technology industry or future products.
“If and when this thing gets to trial, I might expect that it’s going to not only be about smartphones, despite the fact that that is the core of the story. This is absolutely a case concerning the future of smart devices,” Newman said.
Apple may, because it has up to now, decide to pre-emptively make changes or tweaks to targeted products to move off additional scrutiny. For instance, in January, Apple partially opened its App Store to cloud gaming services, one of the important thing kinds of competitors that DOJ alleged that Apple cuts off.
Discovery and deposition
Government lawyers will request internal, confidential Apple documents to bolster their case in a process called discovery. Apple’s business partners may additionally get requests to point out the federal government their very own confidential documents. Generally, corporations fear discovery, since it’s unclear what’s going to turn up, and Apple is especially secretive about its internal documentation and strategy.
Documents unearthed through discovery are sometimes posted publicly throughout the trial, exposing private deliberations.
The federal government will likely move to depose Apple’s executives, including CEO Tim Cook, and even call them to the witness stand throughout the trial. Cook took the stand during a recent antitrust trial against Epic Games, for instance.
But executive depositions or testimony can still be dangerous for technology corporations, especially if executives cannot control their egos — former Microsoft CEO Bill Gates was famously petulant and showed utter contempt for the method during a videotaped deposition by David Boies in 1998 that was played throughout the trial.
“A lesson that the Gates deposition experience taught is that if you happen to’re a CEO, there may be an actual art and skill to doing a great deposition,” Kovacic said. “It requires you to suppress some of your ‘Master of the Universe’ impulses for the sake of doing a great job, and on this case, listening very fastidiously to the coaching of your lawyers.”
Apple and the DOJ could also come to a settlement, where Apple makes some changes and the federal government drops the suit before further discovery or depositions. Nonetheless, there aren’t any public signs of reconciliation.
Apple declined to comment on Thursday when asked if there had been settlement talks.