Apple faces years of distractions after DOJ antitrust suit

The US Department of Justice filed a lawsuit against Apple on Thursday, accusing it of leveraging the iPhone’s market strength to cut off rivals, kicking off a multiyear process involving hundreds of lawyers and endangering Apple’s “walled garden” business model.

If the DOJ prevails, it may seek modifications to Apple’s operations. U.S. officials have not ruled out the potential of “structural remedies” or the company’s dissolution.

If Apple’s arguments are successful, a court may find that its estimated 64% control of the US smartphone market is not a monopoly, or that its actions were not illegal, providing Apple new powers to combat future regulation.

But, before any of that happens, we can expect years of legal wrangling in which Apple will be forced to defend its business in public, distract its executives with legal meetings, produce internal documents for the government, and possibly face negative headlines that will harm its brand or image.

The action filed by the DOJ has yet to be assigned to a judge. In the immediate term, Apple may request a change in trial location from New Jersey, as well as the dismissal of the entire case.

All of these stages take time, and it’s likely that the trial will take place in 2025, with the appeal lasting until 2027, depending on which judge is assigned the case, according to William Kovacic, director of the Competition Law Center at George Washington University.

Companies accused of antitrust breaches, such as Apple, frequently delay the trial, according to John Newman, a law professor at the University of Miami and former DOJ attorney.

“In general, defendants love to drag their heels forever,” Newman went on to say. “would the judge accept the defendant’s proposal, which would undoubtedly result in years and years and gobs of discovery? Drag it out indefinitely? “Or they can actually step up and try to control that?” he asked.

For example, the DOJ sued Google in a similar lawsuit in October 2020, but it took nearly three years to go to trial. There has been no decision on remedies, and no appeals have been filed. The DOJ action against Apple was prompted by a previous case launched against Microsoft in 1998. It went to trial later that year, and an appeal was decided in 2001.

A potential distraction.
The Justice Department lawsuit against Apple, like the Microsoft trial, seeks to establish a new landmark ruling for antitrust in the United States, primarily by concentrating on Apple’s complete ecosystem, rather than just a single device, and if how it functions constitutes anti-competitive conduct.

In a statement to CNBC on Thursday, Apple stated that the lawsuit “threatens who we are” and could harm its ability to produce competitive technology products.

Apple explains why it dislikes this type of action in its SEC filings. The corporation claims that as laws and regulations change, including in antitrust litigation, it must invest money to comply. According to the filing, “imposed” modifications might reduce user demand, and changes in laws or regulations create uncertainty for Apple.

Another problem for Apple may be that a large, public trial like this one competes for executive time and attention, and many internal Apple decisions may require legal approval before proceeding.

Companies facing antitrust cases frequently need to include staff who have nothing to do with the trials in meetings, go through company papers, or lead how the company will present evidence or technical arguments, according to Kovacic, a former FTC commissioner.

“In past major antitrust cases, the real danger for the company is that the focus of attention becomes winning the antitrust lawsuits instead of winning customers and doing your job,” he said. “It slowed you down. It is a real drag.”

Apple is dealing with new legislation in Europe as well as probes in other nations across the world, in addition to the DOJ lawsuit.

The US government has not stated what it expects Apple to do to address its charges, but its initial filing on Thursday left the topic open, with a broad request for an overall solution.

One alternative is to force Apple to make the iPhone available in third-party stores, as it does in Europe. Many of the DOJ’s other charges, such as Apple’s purported limits on third-party smartwatches and “super apps,” lack recent parallels in other nations or regions. The DOJ may even seek remedies that aim to reposition the entire technology industry or future goods.

“If and when this thing goes to trial, I expect it to be about more than just cellphones, even though that is the central theme of the story. “This is a case about the future of smart devices,” Newman stated.

Apple may, as in the past, choose to make alterations or tweaks to specific items to avoid greater scrutiny. For example, in January, Apple partially opened its App Store to cloud gaming services, one of the primary competitors that the Justice Department claims Apple excludes.

Discovery and Deposition
In a procedure known as discovery, government lawyers will request internal, sensitive Apple documents to help them prove their case. Apple’s business partners may also receive requests to show the government their own private papers. Companies generally fear discovery since it is unclear what would be revealed, and Apple is especially secretive about its internal documents and strategy.

Documents obtained through discovery are frequently made public during the trial, revealing private deliberations.

The government is likely to depose Apple leaders, including CEO Tim Cook, or call them to testify during the trial. Cook testified in a recent antitrust trial against Epic Games, for instance.

However, executive depositions or testimony can still be risky for technology companies, especially if executives are unable to control their egos — former Microsoft CEO Bill Gates was famously petulant and showed complete contempt for the process during a videotaped deposition by David Boies in 1998, which was played during the trial.

“A lesson that the Gates deposition experience taught is that if you’re a CEO, there is a real art and skill to doing a good deposition,” he said. “It requires you to suppress some of your ‘Master of the Universe’ impulses for the sake of doing a good job, and in this case, listening very carefully to the coaching of your lawyers.”

Apple and the DOJ might possibly reach an agreement in which Apple makes some modifications and the government withdraws the lawsuit before any further discovery or depositions. However, there are no visible signs of reconciliation.

When asked on Thursday if there had been any settlement talks, Apple declined to comment.