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Apple's nightmarish year keeps getting worse

Apple cracked glass
Apple's year just keeps getting worse — and it's only March.Chelsea Jia Feng/BI
  • The Justice Department's Apple suit is just the latest in several events that may hurt the tech giant.

  • It comes just weeks after the EU slammed it with a $2 billion fine.

  • Apple is also struggling with a drop in China iPhone sales and doubts about its path forward in AI.

Apple is having an epically bad year, and it's only March.

On Thursday, the US Justice Department sued Apple, accusing the iPhone maker of using anticompetitive practices to dominate the smartphone market. It's another blow to the tech behemoth in a quarter that's already featured an almost multibillion-dollar fine and a sharp drop in sales in one of its biggest markets.

"Apple just keeps getting worse," Gene Munster, a managing partner at Deepwater Asset Management, said. The department's headline-grabbing lawsuit is "the latest in a string of bad news," he said.

In the suit brought Thursday, the department and 16 attorneys general allege Apple illegally maintained a smartphone monopoly by "delaying, degrading, or outright blocking other technology in the smartphone market." They point to everything from the Apple Watch's incompatibility with non-iPhones to the janky green-bubble text messages sent through Android phones as evidence that Apple uses unfair maneuvers to blow its rivals out of the water.

Apple, which has denied the department's claims, is also feeling heat from regulators on the other side of the pond.

Earlier this month, the European Union slammed Apple with a nearly $2 billion fine for stopping apps like Spotify from offering alternative payment options outside the App Store. (Apple's response: Regulators don't have any "credible evidence of consumer harm.")

The European Commission is also looking into whether Apple violated the EU's Digital Markets Act, which seeks to prevent "gatekeepers" — aka Big Tech — from dominating the digital marketplace.

And Apple isn't getting pressure just from regulators. A day before the Justice Department suit, Meta, Microsoft, X, and Match Group joined forces with Epic Games in the video-game maker's legal efforts to get Apple to open its App Store to outside payment options, Bloomberg reported.

On top of all that, Apple has been struggling with its core business this year — making and selling actual products.

In early March, a Counterpoint Research report said that Apple's iPhone sales in China — a huge market — fell by 24% in the first six weeks of 2024. The iPhone has been dethroned from its No. 1 position in the country, the report said, as smartphones from local competitors like Huawei grow in popularity.

Apple also killed its self-driving-car project, "Project Titan." The company ended the billion-dollar effort almost a decade in the making to focus on artificial intelligence, Bloomberg reported.

All this has left many wondering: What's next?

If Apple loses the Justice Department lawsuit, iPhone users could see changes like more digital payment options and better iPhone-Android messaging. However, Apple claims these changes could open the iPhone to privacy and security threats — key values the company says it upholds across its product line. The company is also expected to lose money from developers now that the EU has forced it to crack open its App Store in the region. The European Digital Markets Act investigation could result in further fines, Bloomberg reported.

Apple did not immediately respond to a request for comment from Business Insider for this story. In a statement after the Justice Department filed its suit, it said: "This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets."

"We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it," it added.

And investors are rattled. Apple's shares dropped after the department's lawsuit was announced and have fallen by nearly 12% this year. Some see the end of the car project as a sign that the company is lagging the likes of OpenAI, Microsoft, and Google on the AI front.

Still, according to Dan Ives, an analyst at Wedbush Securities, it might not be all doom and gloom for Apple regarding the department.

"We do not expect any business model changes for now as this case will likely take years in the courts to litigate and lead to a conclusion," Ives wrote in a recent analyst note. But Apple "clearly has to find a way to eventually settle this case, pay a hefty fine, and ultimately find some compromise with developers on the App Store structure down the road," he added.

And Deepwater's Munster seemed to concur.

"They're going to be forced to make some changes," he told BI. But, he added, "the changes that they make aren't going to change the fact that Apple still makes products that their users love."

Read the original article on Business Insider