The Justice Department has intensified work over the past few months to draft a possible antitrust complaint against Apple Inc., AAPL 1.39%, according to people familiar with the matter.
The probe into whether Apple has a monopoly power that abuses it began in 2019, but enforcers have escalated their efforts in recent months, with more litigators now being assigned to the case and new documents and consultations with involved companies being requested, said the people.
The Justice Department’s investigation addresses in part Apple’s policies on third-party mobile software on its devices, which have been the focus of much of the criticism aimed at Apple’s competitive practices. The department is also investigating whether Apple’s iOS mobile operating system is acting anticompetitively by favoring its own products over those of outside developers, the people said.
An Apple spokeswoman declined to comment. In the past, Apple has said it doesn’t run its business in a way that harms developers. It has said it welcomes competition in the App Store, even as apps compete directly with Apple’s own products. A spokeswoman for the Justice Department declined to comment.
A question mark surrounding the department’s Apple investigation was the involvement of its chief antitrust officer, Jonathan Kanter. The agency initially barred Mr. Kanter, who was confirmed as assistant attorney general for the antitrust division in November 2021, from overseeing Apple’s case because he had previously represented clients who had accused Apple of anticompetitive behavior, the people said.
The department subsequently investigated whether Mr. Kanter could be allowed to oversee the investigation and any lawsuits against Apple, the people said. The status of this process could not be ascertained, but people said it was likely involved in an action against Apple.
Jonathan Kanter, the Justice Department’s chief antitrust officer, worked with a number of Apple critics before joining the department. Photo: Al Drago/Bloomberg News
Mr. Kanter was recently cleared to work on another major technical enforcement case involving Google, the Wall Street Journal reported in mid-January. Alphabet Inc.’s unit had tried to withdraw Mr. Kanter from that case, saying he had represented clients who had filed antitrust complaints against Google and therefore could not be impartial.
The department dismissed the argument, and Mr Kanter helped lead a lawsuit the department filed against the search leader late last month, alleging it had abused its dominant position in the digital ad market. Google denied the allegations, saying the agency’s efforts would slow innovation and increase advertising fees.
Prior to joining the Department of Justice, Mr. Kanter worked with a number of Apple critics who were his clients at Paul Weiss Rifkind Wharton & Garrison LLP and, after retiring there in 2020, at his own law firm, Kanter Legal Group , so the public financial disclosures. These clients include music streaming company Spotify Inc., object tracker Tile Inc., messaging service Blix Inc. and lobbying group Coalition for App Fairness. A client of Mr. Kanter testified in a lawsuit about a competition lawsuit against Apple by Epic Games Inc., the maker of “Fortnite”. A spokeswoman for Paul Weiss declined to comment.
The department’s current steps would allow a lawsuit to be filed as early as the spring, but the process could be delayed or the government could still decide not to pursue a legal challenge, the people said.
Apple’s policies governing its App Store have been a target for critics and government regulators around the world, who have investigated whether its power over pricing and distribution of third-party software on its mobile devices hurts competition. But the Justice Department’s probe is broader than the App Store and is looking into whether Apple used its operating system to favor its own products, including hardware, people familiar with the probe said. By blocking access to iOS, Apple makes iPhone more sticky and discourages users from switching to Android phones.
Apple’s AirTags compete with Tile’s consumer tracking devices. Photo: Jim Lo Scalzo/Shutterstock
One area of investigation is the experience of Tile Inc., which sells consumer tracking devices, people familiar with the matter said. In an iOS update released in 2019, Apple updated its Find My tracking app, a move that put the company more in competition with Tile.
As part of the update, Apple began asking users if they wanted to allow Tile’s devices to track them. Apple’s Find My app comes standard on iPhones and doesn’t constantly ask for user tracking permission. And in 2021, Apple launched a product called the AirTag, a small device similar to the one sold by Tile that can be used to track anything with the company’s Find My app.
“The practical reality is that this is a prime example of Apple using consumer privacy as a shield to put third-party apps at a competitive disadvantage,” Kirsten Daru, Tile’s general counsel at the time, told a subcommittee in 2020 of the House of Representatives.
Apple has said there are privacy differences between its Find My service and Tile’s service. Kyle Andeer, a vice president on Apple’s legal team, said in 2020 that Apple’s location data is stored locally on the iPhone and isn’t automatically sent to the cloud, giving users security and privacy benefits.
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A number of Apple products integrate with the operating system in a way that the competition doesn’t. These include iMessage, which Android users don’t have access to, and AirPods, the company’s headphones that come with unique pop-ups and other privileges that make them easier to use.
Some competitors have said the integration gives an unfair advantage. Apple says the close connection between its hardware and software is a unique feature of its products that makes them better for users.
Justice Department investigators are asking companies for internal sales and market data, people familiar with the investigation said. The department has begun requesting information on an expedited timeframe, the people said.
The Justice Department’s office in San Francisco is handling most of the investigation, sources said.
Politico previously reported that Justice Department lawyers are in the early stages of drafting an antitrust case against Apple.
Apple faces a series of lawsuits and enforcement efforts around the world that challenge its market power. In the US, “Fortnite” maker Epic recently led a two-year legal battle over how Apple is forcing its apps to be distributed through the App Store. In 2021, a US district judge sided primarily with Apple, but both sides are appealing.
In a filing last year, the Justice Department became embroiled in the Epic case, with its attorneys warning that the district court’s ruling interpreted too narrowly the Sherman Act, which prohibits conduct that suppresses market competition. The Justice Department warned that the district judge’s decision could set a precedent for allowing anticompetitive practices.
A new European Union law, called the Digital Markets Act, aims to block tech companies like Apple from using their presence in digital markets like Apple’s App Store for iPhone and iPad.
Apple has begun efforts to address the new European law that will begin enforcement in 2024. Apple has begun investigating internally how competing app stores and third-party software could be sideloaded onto the iPhone and iPad through a process known as sideloading. The Journal recently reported.
Write to Aaron Tilley at [email protected], Dave Michaels at [email protected], and Keach Hagey at [email protected]
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