Apple antitrust suit mirrors strategy that beat Microsoft, but tech industry has changed

The U.S. government's antitrust lawsuit against Apple is reminiscent of the landmark 1998 case that challenged Microsoft's dominance in desktop software, yet it may not serve as a perfect model for tackling competition in the smartphone arena. Today's iPhone market is vastly different from the near-monopoly Microsoft held with its Windows operating system two decades ago, potentially complicating the government's challenge against Apple, according to legal experts.

The Department of Justice and 15 state governments have charged Apple with illegally monopolizing the smartphone market by imposing restrictions on app developers, stifling choice and innovation, and consequently causing consumers to pay inflated prices. Apple has contested the government's allegations, both factually and legally. Legal experts note that the government must demonstrate that Apple's business practices were exclusionary and detrimental to consumers by diminishing the quality of competing products.

The government has accused Apple of hindering technologies that could have fostered competition in smartphones across five domains: "super apps," cloud-streamed gaming apps, messaging apps, smartwatches, and digital wallets. A notable example cited is the "green bubble" issue encountered when iPhone users text Android phone users, leading to problems like poor-quality photos via text, an issue absent when messaging occurs between two iOS devices.

Antitrust regulators assert that Apple is swiftly extending its reach and power into sectors such as content creation and financial services. In contrast, Microsoft faced allegations of exploiting its market dominance to restrict users from installing software freely on computers running its operating system. While Apple's control over its app store may seem analogous to Microsoft's past actions, legal experts highlight significant distinctions.

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Microsoft was forced to open its operating system because it controlled 95% of desktop operating systems in the 1990s. By comparison, Apple had 55% of the North American market for smartphones at the end of September based on shipments, with the rest largely made up of phones using Google's Android operating system, according to Canalys, a market analysis firm.
The Justice Department seeks to define the market as that of smartphones in the United States. Apple representatives said they will try to persuade the court to define the market as the global smartphone market.
Apple and rival Samsung Electronics (005930.KS), opens new tab each had about a 20% market share globally in 2023, though Apple beat Samsung slightly on shipments, Canalys data showed.
Microsoft "clearly was a monopolist and there were no effective competitors in the PC operating system space," Ross said. On the other hand, Android “is very popular, especially in the rest of the world, and is a very effective competitor with iOS.”
Ross predicted it would be harder for the Justice Department to prevail against Apple than it was in the Microsoft case.
Some of these allegations have been touched upon before in court.
In 2021, in an antitrust case brought by "Fortnite" creator Epic Games, a federal judge found after a trial that Epic failed to prove that Apple users were "locked-in" to their iPhones and would not switch to Android devices.
Of course, government attorneys know these differences and still brought the case.
Legal experts said that reflects the viewpoint within the DOJ and the Biden Administration's Federal Trade Commission about challenging cases.
“They are happy to take on the risk of a really big case,” said plaintiffs' lawyer Patrick McGahan, whose firm is involved in litigation against Apple.
Litigator Melissa Maxman in Washington said the Microsoft case changed the tech landscape and lauded the government's lawsuit as a step toward greater competition in the smartphone market.
"If you open up the market for other competitors to get in you will see prices go down and quality go up," Maxman said. "That's exactly what was said in Microsoft — and guess what, it was true."