Apple’s Monopoly Lawsuit: Examining the Lock-In Problem at Its Core

DOJ Lawsuit Challenges Apple’s Ecosystem Lock-In Tactics

iMessage and Cross-Platform Messaging

The U.S. Department of Justice (DOJ) has filed a lawsuit against Apple, alleging that the company’s practices mislead consumers into believing Android phones are inferior. The DOJ argues that Apple intentionally restricts cross-platform messaging to keep users within its ecosystem.

According to the lawsuit, Apple limits third-party messaging apps like WhatsApp, Signal, and Facebook Messenger compared to iMessage. Users must navigate through permissions to allow these apps to run in the background or access the iPhone’s camera for video calls. Additionally, these apps cannot incorporate SMS, requiring users to persuade their contacts to download the same apps for seamless communication.

While Apple recently committed to supporting Rich Communication Services (RCS) to enhance cross-platform messaging, the DOJ remains skeptical. It points out that Apple has not yet adopted RCS and that third-party apps would still face restrictions in incorporating it, similar to the limitations with SMS. The DOJ also criticizes Apple for agreeing to support only a 2019 version of RCS, arguing that unless Apple commits to future versions, “RCS could soon be broken on iPhones anyway.”

Apple Watch and Ecosystem Lock-In

The DOJ takes issue with how Apple leverages the Apple Watch to keep users within the iPhone ecosystem. Currently, an iPhone is mandatory to use an Apple Watch, and Apple restricts third-party smartwatches from offering the same functionality as the Apple Watch.

For iPhone users, you can’t even use quick replies to texts unless you have an Apple Watch.

The lawsuit highlights that the high cost of the Apple Watch discourages users from switching phones. Moreover, third-party smartwatches lack features like quick replies to texts, accepting calendar invites, and interacting with app alerts in the same way as the Apple Watch.

Bluetooth connectivity is another area where Apple limits third-party watches. While the Apple Watch maintains a connection even if Bluetooth is accidentally turned off on the iPhone, third-party watches cannot. Users must navigate separate permissions to enable background app refresh and disable low power mode for a stable and consistent Bluetooth connection, which affects passive updates like weather or exercise tracking.

Cellular connectivity is also restricted for third-party watches. While using the same number on an Apple Watch and iPhone is seamless, doing so with a third-party cellular watch requires disabling iMessage on the iPhone. Since most iPhone users are reluctant to do this, it effectively means choosing a third-party watch necessitates using two separate numbers.

Digital Wallets and Payment Systems

The DOJ’s complaint extends to Apple’s handling of digital wallets. The company blocks financial institutions from accessing the iPhone’s NFC hardware, limiting their ability to provide tap-to-pay capabilities and funneling iPhone users into Apple Pay and Apple Wallet.

As a result, banks must pay a 0.15 percent fee for each credit card transaction made through Apple Pay, while using Samsung or Google’s payment apps is free for banks. In 2022, Apple processed nearly $200 billion in US transactions, according to a report by the US Consumer Financial Protection Bureau. The agency projects that digital wallet tap-to-pay transactions will grow by over 150 percent by 2028.

Third-party payment apps don’t have access to the iPhone’s NFC hardware.

The DOJ asserts that Apple could enable tap-to-pay access but chooses not to because it would “be one way to disable [A]pple [P]ay trivially” and encourage alternative payment apps. Notably, Apple already allows merchants to use NFC to accept Apple Pay payments.

In response to the lawsuit, Apple spokesperson Fred Sainz stated that the company disagrees with the DOJ’s claims, emphasizing that Apple’s decisions aim to protect consumers, particularly regarding privacy and security. However, the DOJ views these principles not as improvements to the iPhone but as deliberate limitations on competitors to make the iPhone more enticing.

While a resolution to this lawsuit may take time, it could potentially challenge Apple’s walled garden approach and its effectiveness in retaining users within its ecosystem.