DOJ lawsuit against Apple 'just doesn't make sense': NetChoice VP

The Department of Justice has sued Apple (AAPL), which alleges that the tech giant is creating a monopolistic entity. NetChoice Vice President and General Counsel Carl Szabo joins Yahoo Finance Live to discuss why he believes the Department of Justice faces an "uphill climb" in this legal battle.

According to Szabo, the monopoly accusations "just doesn't make sense." He points out that when Americans buy a smartphone, they have "two clear choices": Apple and Android devices, disbarring any assumptions of a monopoly. He notes as this legal battle continues, Apple's innovation efforts may be impacted "out of fear" of being accused of monopolistic practices.

Szabo notes that as long as Apple can provide evidence that supports "business purposes for what they are doing," the courts will most likely rule in their favor. He suggests that many of the concerns raised by the DOJ can be "easily dismissed" due to the legitimate purposes they serve in relation to Apple products like security prevention and payment processing.

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Editor's note: This article was written by Angel Smith

Video transcript

RACHELLE AKUFFO: The DOJ accusing Apple of violating antitrust laws by blocking its rivals from accessing both hardware and software features on its iPhone devices. Now this is the culmination of a five-year probe into one of the world's most valuable technology companies. Joining me now on this is Carl Szabo, NetChoice Vice President and General Counsel.

Thank you for joining me this morning. So as we heard there, the Attorney General laying out the grounds for this antitrust lawsuit. What are the key takeaways that we need to keep in mind at the beginning of this?

CARL SZABO: Yeah. So this is a really long process. And what we've seen in similar efforts by the Biden administration's Department of Justice and the Federal Trade Commission, when it comes to antitrust, is a kind of Hail Mary pass when it comes to antitrust law. What you heard from the AG was a lot of declarations of monopoly, or declarations of bad business practice when, in fact, we as Americans know that actually, if we want to go buy a device, we actually have two clear choices. We have Apple, and we have Android.

So already, the argument that there's a quote, monopoly, on smartphones just doesn't even make sense to the average American. But this will be a really long process. And kind of the process is the pain for a lot of these businesses because as it goes on, Apple will continue to move away from innovation, creating new services and new features for our phones out of fear that this will be then used against them by the Department of Justice as part of this frivolous lawsuit.

One of the other important components of this is you didn't hear any real claims of consumer harm. They said consumers are being harmed. But they didn't actually go in to explain how. How are consumers being harmed, because there's really no evidence of consumer harm.

What you have seen is devices continue to get better and better. And that is evidence of a clear competitive and functioning marketplace. So the Department of Justice has a real uphill climb when it comes to the courts. Just saying somebody is something doesn't make it so.

RACHELLE AKUFFO: And Carl, to your point, though, the focus did seem to be on the exclusionary conduct. So not just for certain users. They mentioned, you know, Android users with the green bubble. Some of that cross-platform messaging becoming difficult. And that they were purposely sort of degrading, or limiting, the functionality there. How high of a barrier is that to try and cover, if you're Apple, to really combat that argument?

CARL SZABO: Yeah. So essentially, as long as Apple can show compelling business purposes for what they are doing-- the courts have typically gone on the side of businesses. So Apple will say, look, the reason we don't allow you to install your own apps is because we know the security problems. And one of the reasons why people like Apple ecosystem is because they know their devices are safe and secure.

Just think about your laptop, computer, where we're constantly worrying about installing malware or spyware. That doesn't really happen on iPhones. And that's because of the closed ecosystem.

With respect to payment processing, one of the reasons why it is typically only been allowed through Apple is because as a parent, for example, I get an alert every time my kid tries to make an in-app purchase. If we allowed other payment processors, I wouldn't have such a recourse on my device. So a lot of the complaints that you're hearing are easily dismissed by Apple because of the security and consumer benefits that are being used to offset whatever claims that a business has.

RACHELLE AKUFFO: And Carl, just quickly. They also mentioned that 30% commission, when it comes to developers who want to be on the App Store. How strong is that argument?

CARL SZABO: So this is a little bit of the legal jujitsu that the Department of Justice is trying to do. I actually read their complaint. They claim that it can be up to 30%. But in reality, an overwhelming majority of apps pay $0.00, 0%, to be hosted on the App Store.

In fact, it is only the largest of corporations that even begin to pay a 30% commission, or service, for being hosted on the App Store. And that's the same service fee that Microsoft charges on the Xbox. And seemingly, the Department of Justice hasn't weighed in on that as anti-competitive.

So what you're seeing is kind of the use of a big number that applies to only a small fraction of big corporations being used to try to explain the entire ecosystem. And that's just not what's happening. Most apps pay $0 on the App Store. And many apps can actually pay $0 even if they're big. Netflix, for example, will not let you sign up through their app. And in fact, Netflix does not pay a single cent to Apple for being hosted on their service.

RACHELLE AKUFFO: Well certainly, some important context added there. Carl Szabo, thank you so much for joining us on this breaking news story.