threaten the free and fair markets

upon which our economy is based.

- [Narrator] The Department of Justice

is suing Apple for being,

as it says, an illegal monopoly.

But for years, Apple has argued that it isn't.

- We have no monopoly.

There is no monopoly here.

- [Narrator] To make its case,

the DOJ is pinning its argument

to Section Two of the Sherman Act,

which makes it illegal to monopolize

or attempt to monopolize a market,

adding Apple to a long line of American companies

that have been sued under that law.

Some have been forced to fundamentally change

the way they work,

or even break up completely.

Brendan Benedict is an antitrust lawyer

who has litigated against Apple before.

- There's nothing about the Sherman Act

that makes making money

or collecting user information unlawful.

What it does do is create a set of rules

so that the method by which companies do that is fair.

- [Narrator] Here's how the DOJ plans to show

that Apple is a monopoly,

and how the company might fight back.

The Sherman Act dates back to 1890

when it was used mostly to reduce monopoly power

in industries like oil, tobacco, and railroads.

Today, it covers a different industry, big tech.

The Sherman Act says, "anyone who monopolizes,

or attempts to monopolize

any part of trade or commerce in the US

will be deemed guilty of a felony,"

but it doesn't actually define what a monopoly is.

- We know that monopolies have the power

to raise prices above a competitive level

and to exclude competition.

But there's no bright line rule or light switch

that says, yes, you're a monopoly,

no, you're not a monopoly.

- [Narrator] So prosecutors will likely rely on a precedent

that outlines three things the DOJ will have to show.

- That Apple has monopoly power

in a relevant product market,

and then to show that Apple willfully acquired

and maintained that monopoly

on something other than competition on the merits.

- [Narrator] First, the government will try to show

that Apple is competing unfairly

in what's called a relevant market,

or in this case, two relevant markets,

the performance smartphone market

and the broader smartphone market,

just in the US.

Showing this is essential

in showing the next piece, monopoly power.

- To show monopoly power

typically takes two things.

One is a high market share

and then barriers to entry,

which means that it's difficult for competitors

to come in and lower that market share.

- [Narrator] The DOJ argues that Apple's share

in the performance smartphone market.

- Exceeds 70%, and its share

of the entire US smartphone market exceeds 65%.

- [Narrator] Then they'll have to show barriers to entry.

The complaint alleges that the high cost of switching phones

is one thing that makes it hard for competitors

to disrupt Apple.

But just being big or successful isn't necessarily illegal.

The DOJ will also have to show

that Apple maintains that monopoly power

in ways that aren't fair.

- We allege that Apple has employed a strategy

that relies on exclusionary anti-competitive conduct.

- [Narrator] The DOJ is focusing on five areas

where it says Apple suppresses competition.

Super apps and cloud streaming,

in which it says Apple imposes restrictions

and fees on app developers,

and messaging, smartwatches, and wallets,

which the DOJ says Apple limits

from working across platforms and with third party apps.

- What the government has to show there is that

the conduct they're challenging from Apple

has anti-competitive effects,

and that means things that are likely to increase price

or diminish quality or choice.

- [Narrator] As a result of all of these things,

the government alleges.

- IPhone users become dependent on Apple and its products

and find the process of switching phones

exceedingly costly and complex.

- [Narrator] Apple says that its practices

help ensure the security and privacy of its platform,

and that it does not restrict third party competitors.

But the DOJ faces challenges

in showing that all of these

makes Apple an anti-competitive monopoly.

For starters, it will need to define

that relevant market and monopoly power.

In the DOJ's case against Microsoft in 1998,

it said Microsoft had more than a 95% share

of the relevant market,

and the court agreed.

That helped squarely qualify it as a monopoly power.

But Apple only has that 70% share

in the performance smartphone market in the US,

and even less when the market is broadened out.

- Apple will likely argue

that their relevant market is worldwide

where the market share plummets.

- [Narrator] Apple says it has a less than 20% share

of the global market

where it competes with Samsung and other manufacturers.

In the Microsoft case, the relevant market was global.

Benedict also says that focusing on five different areas

rather than one could trip up the government.

- There's a theory out there

for doing this called monopoly soup.

There's some disagreement in the law right now

whether the government has to show that each ingredient

into the soup is on its own anti-competitive,

or whether the mix of ingredients together

is anti-competitive.

- [Narrator] Apple, on the other hand,

will have to show that its conduct

is a benefit for consumers.

Apple says its customers prefer Apple products

rather than feeling locked in,

which it successfully argued in Epic versus Apple,

another antitrust lawsuit it was involved in in 2020.

- While the government points to the stickiness

in switching ecosystems,

Apple will point to the privacy and security

that having everything on Team Apple offers to users

as well as the ease of use and the seamlessness

from staying within the Apple ecosystem.

- [Narrator] Apple and the DOJ are looking

at years of litigation

which could cost the company millions of dollars,

time and attention from executives,

and potentially its competitive edge.

The Microsoft case took more than a decade to fully resolve,

and Bill Gates has said

that it put the company behind competitively.

Take The New York Times DealBook Conference in 2019,

for example, where he said Microsoft fell behind

in creating its own smartphone operating system.

- If it hadn't been for the antitrust case,

Microsoft would go- - [Andrew] You get this.

- oh, we were so close!

You know, I was just too distracted.

- [Narrator] And if the government wins,

apple could face big changes,

like making its products easier to use

with other devices and apps.

- If Apple has to make changes to those products in some way

to accommodate the government,

it thinks that it's compromising on its qualities.

But the upside is if the DOJ is right

and the evidence supports its claims,

then injunctive relief could mean

lower prices for consumers, more innovation,

and better options for security and privacy.

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