More Class Actions Challenge Apple's Alleged Smartphone Monopoly

Apple’s goal, summarized by Steve Jobs in 2010 -- to “lock customers" into Apple’s ecosystem by erecting technological and other barriers that make it difficult for consumers to switch to other mobile devices -- is an anticompetitive practice to “illegally maintain monopoly power over the smartphone market,” alleged plaintiffs Richard Dwyer of California and Aimen Halim of Illinois, in an antitrust class action (docket 5:24-cv-01844) in U.S. District Court for Northern California in San Jose.

By limiting users’ ability to transfer their apps and data to non-Apple devices, the company makes it “difficult if not impossible for users to switch away from Apple devices,” alleged the complaint. As existing iPhone users commit to Apple, “new smartphone buyers are less likely to buy a non-Apple smartphone as a substitute for an iPhone because buying an iPhone allows them to interact more seamlessly with friends and family who already have iPhones,” it said. That results in a lack of “demand cross-elasticity between iPhones and other smartphones,” enabling the company to impose “monopolistic prices on iPhone purchasers,” the complaint said.

Its “monopoly power” in the smartphone and performance smartphone markets has allowed Apple to “control prices or exclude competition” in those markets where it holds “substantial and durable” market share, the complaint said. The company is able to set prices “without regard to competition,” said the complaint, citing a steady increase in prices from $199 for an iPhone 4 in June 2010 to $799 for a base model iPhone 15, and $1,199 for a flagship iPhone 15 Pro Max model, in 2023.

The profits and profit margins Apple pulls in for “nearly every aspect of the iPhone,” is further evidence of its monopoly power, said the complaint. Its profit margins for the iPhone “exceed those of its next most profitable rival,” it said. The defendant charges cellular carriers “considerably more than its rivals to buy and resell its smartphones to the public,” the complaint said. Apple’s contract clauses “may impede the ability of carriers to promote rival smartphones,” which plaintiffs called a “harmful exercise of monopoly power that is mostly concealed from view.”

The complaint noted the 30% fees Apple collects from developers when users buy apps or make in-app payments, plus the 0.15% commission it extracts from banks on credit card transactions through its digital wallet. The company's smartphone competitors don’t charge a fee for their digital wallet transactions, it said.

One U.S. cellular network estimated that in a given quarter up to 98% of its iPhone users replaced or upgraded their iPhone with another one, said the complaint, citing a September New York Times article. Its “exceedingly high retention rates stem from the increased switching costs for consumers due to Apple’s monopoly power and anticompetitive conduct,” the lawsuit alleged.

Christina Kolinsky of Knox County, Tennessee, bought an iPhone in September through Verizon in Knoxville, Tennessee, and plaintiff Sidney Rossi of Monmouth, New Jersey, bought two iPhones in February 2023 from a T-Mobile store in nearby Eatontown, said another complaint filed in U.S. District Court for New Jersey in Newark.

The plaintiffs allege Apple has denied them access to “super apps” that facilitate functionality across different smartphone platforms because it views such apps as “fundamentally disruptive” to existing distribution and development models. “Apple feared super apps because it recognized that as they become popular, ‘demand for iPhone is reduced,’” said the complaint. Apple used its control over app distribution and creation “to effectively prohibit developers from offering super apps instead of competing on the merits,” the complaint said.

Because super apps work the same on any web browser and any device, developers can write one “mini program” that works on either an iPhone or another smartphone, the complaint said. That benefits users because one super app could allow users to discover and access a wide variety of content and services without setting up and logging into multiple apps, it said. “Restricting super apps makes users worse off and sacrifices the short-term profitability of iPhones for Apple,” it said.

Apple knows that super apps with mini programs “would threaten its monopoly,” said the complaint, saying that as users interact with a super app, “they rely less on the smartphone’s proprietary software and more on the app itself.” Eventually, users become “more willing to choose a different smartphone because they can access the same interface, apps, and content they desire on any smartphone where the super app is also present,” the complaint said. When a super app offers popular mini programs, “iOS stickiness goes down,” it said.

In a virtually identical class action to one he filed Friday for an iPhone user in U.S. District Court for New Jersey in Newark, attorney James Cecchi of Carella Byrne filed a second class action (docket 2:24-cv-04223) vs. Apple Tuesday on behalf of Ultra Home Set, a limited liability company based in Palm Coast, Florida. The plaintiff bought an iPhone 14 Plus in October 2022 directly from an Apple Store and alleges four violations of the Sherman Act, plus a New Jersey Antitrust Act violation.