Plaintiffs Likely to Incur 'Future Overcharges' for IPhones, Says Antitrust Action

Apple’s anticompetitive conduct forced Louis Levine and class members to suffer “overcharge damages,” alleged his class action Wednesday (docket 2:24-cv-04284) in U.S. District Court for New Jersey in Newark. The class period covers iPhone individuals or entities that bought iPhones directly from Apple, other than for resale, from March 2020 to the present.

Because of Apple’s continuing conduct using its market power, contractual restrictions, fees, application programming interface (API) restrictions and other means to monopolize relevant markets, Levine of Voorhees, New Jersey, and class members are likely to incur “future overcharges for iPhones,” said the complaint. The actual harm and threat of future harm are “cognizable antitrust injuries” directly caused by Apple’s violation of the Sherman Act and the New Jersey Antitrust Act, it said.

Apple’s anticompetitive acts include contractual restrictions against app creation, distribution and access to APIs that have “impeded apps and technologies such as super apps, cloud streaming, messaging, wearables and digital wallets," the complaint said. As technology advances, the technologies impeded by Apple’s anticompetitive acts and the manner of impediment may shift in response to technological and regulatory change “consistent with Apple’s past conduct,” it said.

For years, Apple blocked cloud gaming apps that would have given users access to “desirable apps and content” without having to pay for “expensive Apple hardware” because that would have threatened its monopoly power, the complaint said. Cloud streaming apps leverage the computing power of a remote server, which runs the program and streams it to the phone, allowing developers to bring “cutting edge technologies and services to smartphone customers,” including gaming and AI services, “even if their smartphone includes hardware that is less powerful than an iPhone,” it said.

Cloud gaming apps “deliver rich gaming experiences” on phones without the need for users to buy powerful hardware, said the complaint. Apple “feared a world” where consumers could buy an inexpensive Android smartphone and have a “solid cloud computing device” that worked adequately, because users with access to cloud-based gaming “may be more willing to switch from an iPhone to a smartphone with less expensive hardware because both smartphones can run desirable games equally well,” it said.

Developers benefit from cloud streaming because they can create one app that works across iOS, Android and other mobile operating systems, said the complaint. Cloud streaming also provides simpler options for offering subscriptions, collecting payment and sending software updates, it said. That allows developers to reach “economies of scale and profitability they might not achieve without offering cloud gaming apps,” it said.

Apple “wielded its power” over app distribution, effectively preventing third-party developers from offering cloud gaming subscription services as a native iPhone app, the complaint said. “Even today, none are currently available on the iPhone,” it said.

Levine seeks for himself, a nationwide class and a New Jersey class judgment for three times the amount of damages they sustained and for equitable relief the court deems necessary “to cure any anticompetitive harm,” plus attorneys’ fees and legal costs. He also requests an order enjoining Apple from engaging in anticompetitive practices, including the use of private APIs and its control of app distribution “to undermine cross-platform technologies” such as cloud streaming and super apps.

In another antitrust case filed vs. Apple, one of eight since the DOJ and 16 AGs brought their case March 21, four California plaintiffs claim violation of the state’s Unfair Competition Law, in addition to monopolization, attempted monopolization and tying under the Sherman Act. Jennifer Chiuchiarelli of Atherton; April Yamaichi of Burlingame; Kiyomi Ishii of San Mateo; and Foster City resident Richard Hopper allege Apple “unlawfully ties Apple watches to its iPhones to arbitrarily restrict” users from buying another smartwatch maker’s device, the complaint said.

Apple prevents third-party smartwatches from accessing APIs related to advanced actionable notifications, “so iPhone users cannot respond to notifications using a third-party smartwatch,” the complaint alleged. The defendant only gives third-party smartwatches access to “limited APIs" that don't allow users to respond to a message, accept a calendar invite, or take other actions available on Apple Watch, it said. The plaintiffs and class members “have been forced to purchase Apple Watches in order to be compatible with their iPhones,” it said.

Similarly, the complaint alleged, Apple has “undermined third-party location trackable devices to fully function across platforms,” and “it has been reported and alleged that Apple has impaired third-party cross-platform video communications apps while steering users to its own video communication app, Face Time.”

In a blog Thursday, Jeffrey Westling, director of technology and innovation policy at the American Action Forum, said for DOJ to succeed at trial, it has to show that Apple has illegally acquired or will acquire monopoly power to control prices or exclude competition in the smartphone market vs. “simply outcompeting rivals on the merits.”

In its complaint, DOJ cites two practices that make Apple’s conduct anticompetitive, the blog said: enforcing App Store rules designed to increase reliance on Apple’s hardware and limiting cross-platform functionality of devices and apps to prevent current users from switching to Android or other smartphones. The DOJ alleges Apple is placing barriers to prevent users from switching to rival smartphones, harming both competition and the consumers who use Apple devices, he said.

To counter the DOJ’s claims, Apple “will likely assert that it lacks monopoly power in any relevant smartphone market, and that it has a myriad procompetitive justifications for the conduct the DOJ alleges is anticompetitive,” Westling said. One tack would be to say its closed ecosystem “allows Apple to improve the functionality of its services through the use of consumer data without adding security risks for users and protecting their privacy,” he said. In turn, that gives Apple users “more options and incentivizes rival smartphone manufacturers to continue to innovate to keep pace,” he said.