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The many challenges facing Apple| GuyWhoKnowsThings


For more than a decade, Apple could do almost no wrong. The iPhone made it the most valuable company in the world. The App Store helped launch companies like Uber and Airbnb. And the company's new products made it a major player in healthcare, Hollywood and finance.

Now the difficulties are piling up. The Justice Department on Thursday filed an antitrust lawsuit against Apple for giving its own products advantages that it deprived its rivals. The lawsuit is the latest in a series of actions brought against the company by regulators on three continents.

The problems are testing the resilience of the Apple brand and undermining its business dominance, even though Apple products remain popular and continue to drive an extremely profitable business. The company reported $97 billion in profits last year on $386 billion in sales.

Here's a look at the challenges ahead.

The Department of Justice filed a wide-ranging antitrust lawsuit against Apple on Thursday that takes direct aim at the company's most important business: the iPhone. The government argued in an 88-page lawsuit that Apple violated antitrust laws by preventing other companies from offering apps that compete with Apple products, such as its digital wallet.

The lawsuit follows a year-long investigation into Apple that focused on the ways the company has controlled the user experience on iPhones and other devices to create what critics call an uneven playing field. It has given its own products and services access to core features such as its NFC chip and notification system that deny rivals such as PayPal and Garmin smartwatches.

It could be months before the case goes to trial.

On March 4, the European Commission Apple fined 1.8 billion euros ($1.95 billion) for thwarting competition by preventing music streaming rivals from offering users promotions and subscription upgrades. Because Apple is the sole gatekeeper controlling developers' access to iPhone customers, European regulators said it wrote rules for the App Store in ways that allowed Apple Music to offer benefits it denied rivals like Spotify.

“From now on, Apple will have to allow streaming music developers to communicate freely with their own users,” said Margrethe Vestager, executive vice president of the European Commission who oversees competition policy. The size of the fine, she added, “reflects both Apple's financial power and the harm that Apple's conduct inflicted on millions of European users.”

Since the fine was issued, Apple has delayed a request from Spotify to inform users about the offers on its website, Spotify said. The European Commission has said that Apple could face additional fines if it does not comply with the orders.

apple is faces fines from regulators Also in the Netherlands and South Korea.

In 2021, Dutch regulators ruled that Apple violated competition laws in the dating app market by preventing services like Tinder from using payment systems other than the one Apple offers. Instead of allowing other payment systems to collect that money, Apple reduced its commission to 27 percent of the price paid per user, from its usual rate of 30 percent. But Dutch regulators said that move did not comply with the law and fined Apple 50 million euros ($53 million) last year.

A similar situation is playing out in South Korea, where lawmakers were among the first in the world to respond to developers' complaints about App Store fees by passing legislation to force Apple to allow alternative payment systems. Apple relaxed its requirement for 26 percent. The country's telecommunications regulator said that Apple could be fined $15.4 million for “unfair practices.”

Apple said it disagreed with the conclusions of Dutch and South Korean regulators. He is appealing the Dutch fine and awaiting the results of a South Korean investigation.

Several other countries are exploring laws or regulations that could force Apple to loosen its grip, including Japan, Australia and Britain. The regulatory changes they are discussing could force Apple to offer alternative payment options and reduce their fees. Having noted how Apple has complied with similar laws elsewhere, lawmakers could choose to be more prescriptive in rulemaking.

The rules would be the latest to fracture what was once a single App Store into a mix of digital stores across national borders.

Last fall, China began tell government agency employees not to use iPhones for work. He The authorities made no public statements. beyond noting that there were “media reports” about security flaws in iPhones. But the directive has had an impact on the country's smartphone market.

iPhone sales in China fell 24 percent in the first six weeks of the year. according to counterpoint research, which tracks the smartphone industry. At the same time, sales of Huawei, once China's largest smartphone maker, rose 64 percent thanks to the introduction of a new phone with 5G wireless capabilities.

Apple largely triumphed over Epic Games, the creator of Fortnite, after the video game company sued Apple in 2020 over the App Store. But a federal judge dealt a blow to Apple's control over the App Store, ruling that it violated California competition laws by preventing app makers from offering alternative ways to pay for services.

After the Supreme Court decided not to take up the case, Apple said it would comply with the ruling just as it did in the Netherlands: by cutting its commission to 27 percent for developers who use alternative payment options.

Last week, Epic filed a motion with the court challenging Apple's compliance, saying the new fees and rules subvert the judge's order. Meta and Microsoft have filed a brief in support of Epic, setting the table for the court to have to rule again on whether Apple is violating California law.

Before European regulators began enforcing a new competition law to give customers more choice this month, App creators complained. that Apple's response to the law defied the rules. The company was supposed to open the iPhone to app stores and alternative payment systems, but added those capabilities along with new fees and requirements.

On Monday, developers met with Apple in Europe and questioned how the fees complied with the law, which has several “free” provisions. Apple has insisted that its policies are consistent with the new rules.

European regulators could open a formal investigation into Apple's plans. The process could trigger a lengthy legal battle that could force Apple to change or risk fines of up to 10 percent of its global annual revenue, which was nearly $400 billion last year.

Apple investors are clamoring for it to launch into the world of generative artificial intelligence. The technology, which can answer questions, create images and write code, has been heralded for its potential to generate trillions of dollars in economic value.

But at a time when peers like Microsoft and Google are starting to build generative AI businesses, Apple has yet to introduce a product. Apple CEO Tim Cook has assured investors that something will happen later this year. The company has celebrated talks to Google about adding its AI model called Gemini to iPhones.

Investors have sent Apple shares down more than 3.75 percent this year. At the same time, the Nasdaq Composite Index, which is packed with technology stocks, is up nearly 11 percent.


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