As if Apple didn’t have enough legal actions it has to juggle, a proposed class action lawsuit (via Bloomberg) accuses the tech giant of more antitrust violations. This time, Apple is accused of “rigging the competitive playing field” using its dominating 70% share of the cloud platform market that it owns thanks to iCloud. The suit states, “Apple has marked up its iCloud prices to the point where the service is generating almost pure profit. Apple’s ability to sustain these prices is a testament to its monopoly power.”
Bloomberg notes that the proposed class action would include a nationwide class and a California subclass made up of those who purchased iCloud plans and were overcharged. Altogether, the number of class members could equal tens of millions of users. Cloud storage is digital data kept on off-site servers and allows users to remotely store and access their data.
The filing notes that Apple’s domination in cloud storage is not due to any lack of competitors. The suit says that “Cloud storage is offered by every major technology company.” The suit names Google, Microsoft, and Dropbox as competitors. But the issue is that certain data listed as Restricted Files are off-limits to any cloud service except for iCloud. The filing adds, “These sequestered files—hereafter ‘Restricted Files’—are significant because they include data needed to restore a device when it is replaced.”
Illustration in the court filing that compares Apple’s company-wide margins (L) with the huge margins on iCloud subscriptions
The suit goes on to point out that iCloud is the only option that iPhone users have when they want to perform a complete backup of their Apple device. Apple has not budged on the 5GB of free cloud storage that iCloud subscribers receive ever since the service was introduced by the late Steve Jobs at WWDC 2011.
The filing says, “Apple’s arbitrary prohibition on hosting Restricted Files fundamentally distorts the competitive landscape to privilege iCloud over all rivals. As a result of this restraint, would-be cloud competitors are unable to offer Apple’s device holders a full-service cloud storage solution, or even a pale comparison. Sure, rivals can host photos, videos, and certain other data files. But they cannot host all of the data users want to back up, including for device restoration.”
The suit goes on to say, “This gives iCloud an enormous structural advantage against all would-be competitors. A consumer that uses a competing cloud platform to store photos will still need iCloud for Restricted File storage.” The plaintiffs ask the court to grant them “injunctive relief requiring that Apple cease the abusive, unlawful, and anticompetitive practices described herein; declaratory relief, adjudging such practices unlawful; as well as monetary relief, whether by way of restitution or damages, including treble damages, or other multiple or punitive damages, or restitution, where mandated by law or equity or as otherwise available…”
Apple could end up seeking to settle the case as it often does. The judge would have to agree to the settlement and sign off on how any settlement fund would be distributed. We are in the early innings here, stay tuned.
