How Should Apple Be Regulated?

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Apple is one of the most valuable corporations in world history. With a market capitalization consistently above $3 trillion, the company rivals the gross domestic product of many developed nations.

This enormous scale has made Apple’s business decisions matters of public interest. Federal regulators now view the company through two conflicting lenses: Apple as a celebrated American innovator delivering products consumers love, versus Apple as a dominant monopolist allegedly stifling competition and harming the digital economy.

The numbers behind Apple’s influence are staggering. Apple held 49% of the US smartphone market in the second quarter of 2025, down from 56% a year prior. The company points to this decline as evidence of fierce competition, but regulators focus on Apple’s control over the high-end smartphone segment.

Apple’s power centers on its App Store, which has evolved into a private economy. In 2024, the App Store ecosystem facilitated nearly $1.3 trillion in global billings and sales, more than doubling since 2019.

This massive sum breaks down into three streams:

• Physical goods and services: $1.014 trillion (food delivery, travel booking through iOS apps)
• In-app advertising: $150 billion generated by developers
• Digital goods and services: $131 billion (paid apps, in-app purchases, subscriptions)

Apple highlights that it collects no commission on over 90% of this $1.3 trillion total, arguing it provides enormous value by giving developers global market access for free. For regulators, this scale invites scrutiny about whether a single corporation should set economic policy for a trillion-dollar marketplace on which millions of businesses depend.

This reveals a fundamental disagreement over how to view Apple’s actions. Apple frames its decisions as individual design choices enhancing user security, privacy, and experience. The Department of Justice sees these same actions as interconnected components of a “monopoly playbook” designed to lock in consumers and lock out competitors.

For a small company, green message bubbles for non-iPhone users represent a trivial design choice. For a platform dominating the US smartphone market, the “green bubble” becomes a powerful tool to enforce social norms, create switching costs, and protect market share.

The Antitrust Challenge

Understanding Antitrust Law

US antitrust law began with the Sherman Act of 1890, described as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” The Federal Trade Commission and Department of Justice enforce these laws to prevent business practices that unreasonably restrain trade, create monopolies, or harm the competitive landscape.

For decades, antitrust enforcement followed the “consumer welfare” standard, primarily asking whether company actions lead to lower prices for consumers. This narrow focus led to what critics describe as a long period of underenforcement, allowing significant market concentration across many economic sectors.

A growing movement of policymakers, academics, and advocates now argues this standard is insufficient for the modern digital economy. They contend it ignores other harms like innovation suppression, reduced consumer choice, and immense power wielded by corporate “gatekeepers” that create “kill zones” where new startups fear entering.

The current wave of scrutiny against Apple and other tech giants represents a potential turning point in whether US antitrust policy will continue focusing narrowly on price or return to broader goals of promoting competition and challenging concentrated economic power.

Apple’s Walled Garden Model

Apple’s “walled garden” is the tightly integrated ecosystem of hardware (iPhone and iPad), operating system (iOS), and exclusive software distribution channel (App Store). This model forms the bedrock of Apple’s success and the primary target of regulatory action.

The Case for the Walled Garden

Apple defends its closed ecosystem as fundamentally pro-consumer. The company’s stated guiding principle for the App Store is providing a “safe experience for users to get apps and a great opportunity for all developers to be successful.”

This achievement requires a “highly curated App Store where every app is reviewed by experts.” Every app is scanned for malware and other security threats, with developers adhering to strict privacy and content guidelines.

Apple argues this tight control creates a trusted environment where users can download apps without fear of viruses, scams, or privacy violations. CEO Tim Cook has argued that forcing Apple to allow “sideloading”—installing apps from outside the App Store—would “undermine privacy and security” and give consumers “less choice, not more” by eliminating the option of a secure, curated platform.

Apple frames its rules as features consumers value and choose when buying an iPhone. The company contends success results from winning in a competitive marketplace by offering a superior and more secure product, not by unlawfully suppressing rivals.

The Case Against the Walled Garden

Critics see the “walled garden” as an anti-competitive weapon rather than consumer protection. They argue Apple’s security and privacy claims are pretexts for maintaining absolute control over the billion-plus users of its devices, allowing it to function as a monopolist gatekeeper.

This gatekeeper power manifests in several ways drawing regulatory fire:

Mandatory App Store: On iOS, the App Store is the only permissible method for distributing software. Unlike on Mac or PC, users cannot download apps directly from developer websites, giving Apple total control over which apps reach consumers.

Mandatory In-App Payment System: For digital goods and services sold within apps, Apple historically required developers to use its proprietary payment system, taking 15% to 30% commission. Critics compare this unfavorably to credit card processors’ 3% to 5% fees, calling it an exorbitant “Apple Tax” made possible only by lack of competition.

Competition Suppression: Regulators and developers allege Apple uses App Store rules to disadvantage competing services, including rejecting apps competing with Apple’s offerings or preventing developers from informing users about cheaper purchasing options outside the app (known as “anti-steering”).

Major Legal Battles

The Department of Justice Lawsuit

In March 2024, the US Department of Justice and 16 state attorneys general filed a comprehensive antitrust lawsuit against Apple, accusing the company of illegally monopolizing the smartphone market in violation of the Sherman Act. The lawsuit explicitly compares Apple’s alleged conduct to the infamous Microsoft antitrust case of the 1990s.

The DOJ argues Apple maintained its power through “exclusionary, anticompetitive conduct” rather than competing on merits. The government’s complaint centers on five key areas where it claims Apple deliberately degrades user experience for competing products and services to lock consumers into its ecosystem.

In July 2025, Apple filed a detailed 49-page response, rejecting the government’s claims as “wrong on the facts and the law.” Apple argues the lawsuit attempts government “heavy hand in designing people’s technology” and would “degrade the privacy and security benefits of iPhone that customers value.”

The company characterizes the lawsuit as driven by large, powerful developers wanting to “free-ride” on Apple’s innovations without paying for them.

Epic Games vs Apple

Before the DOJ filed its landmark case, video game developer Epic Games launched its own legal assault on the App Store in 2020. Epic directly challenged Apple’s requirements that developers use its in-app payment system and pay 30% commission, plus “anti-steering” rules prohibiting developers from telling users about cheaper payment options outside the app.

In a mixed September 2021 ruling, the court sided with Apple on nine of ten counts, notably finding Apple did not hold an illegal monopoly under federal antitrust law. However, Epic secured a critical victory: the judge ruled Apple’s anti-steering rules violated California’s Unfair Competition Law and issued a permanent injunction ordering Apple to stop enforcing them.

Apple’s response likely emboldened federal regulators. Apple’s initial compliance plan allowed developers to link to external websites but still intended to collect 27% commission on purchases made through those links. Critics, including Epic, argued this was a “blatant violation of the Court’s injunction.”

In April 2025, Judge Yvonne Gonzalez Rogers ruled Apple had “willfully” chosen not to comply with her original order. She issued a stronger injunction immediately banning Apple from collecting fees on purchases made outside its App Store and from restricting how developers direct users to external payment options.

The Epic lawsuit catalyzed the DOJ’s more ambitious case. While the initial ruling wasn’t a complete loss for Apple, it established that a core walled garden component was illegal under state competition law. Apple’s defiant response demonstrated to regulators that the company would use market power to circumvent legal rulings and protect revenue streams.

Congressional Action

The Open App Markets Act

While the Justice Department battles Apple in court using existing antitrust laws, Congress is working to create new ones. Lawmakers from both parties argue the century-old Sherman Act is too slow for the fast-moving digital economy. Their solution is proactive regulation designed specifically for Big Tech, primarily through the Open App Markets Act (OAMA).

The OAMA is a bipartisan bill introduced in both chambers aimed at setting “fair, clear, and enforceable rules” for the app economy. The legislation targets “covered companies” operating app stores with more than 50 million US users, effectively targeting Apple and Google.

The bill’s core provisions would fundamentally dismantle the walled garden model:

Alternative Payment Systems: Prohibit covered companies from requiring developers to use their in-app payment system as a distribution condition.

Mandating Sideloading: Force platforms to allow users to install apps from third-party app stores and directly from websites.

Banning Self-Preferencing: Make it illegal for platform owners to unreasonably preference their own apps, services, or products over competitors’.

Ensuring Access: Prevent companies from blocking developers from accessing hardware or software features on devices.

Protecting Developer Communications: Codify developers’ rights to communicate directly with customers and inform them of lower prices available outside app stores.

Arguments For and Against

OAMA Supporters include bipartisan senators like Marsha Blackburn (R-TN) and Richard Blumenthal (D-CT), who argue the legislation is essential to break the “stranglehold” and “ironclad grip” that Apple and Google have over the mobile ecosystem. They contend the current duopoly functions as a private tax on the digital economy, with gatekeepers extracting excessive fees, stifling innovation from smaller competitors, and ultimately raising consumer prices.

Proponents believe it will usher in a “freer and fairer marketplace.” By allowing third-party app stores and alternative payment systems, they argue the OAMA would create genuine competition forcing Apple and Google to lower commission fees and improve services. This would allow small developers to innovate and reach consumers on a more level playing field.

OAMA Opponents, led by Apple and Google plus various tech industry trade groups, portray the bill as dangerous government intervention with catastrophic consequences for user security and privacy.

Their central argument is that the bill’s sideloading mandate would demolish the foundational security architecture making smartphones relatively safe. By forcing Apple to allow unvetted apps onto iPhones, they claim the OAMA would open “a Pandora’s box of privacy violations, foreign interference, and government micromanagement.”

Opponents argue the bill fundamentally misunderstands competition and consumer choice. Many consumers specifically choose Apple’s ecosystem for its security and simplicity. The OAMA would eliminate this choice by forcing all platforms to operate under the same government-mandated rules, substituting “Washington bureaucrats'” judgment for engineers and the free market.

Europe’s Digital Markets Act

The European Union’s Digital Markets Act (DMA) provides a real-world experiment for US lawmakers to observe. The DMA is sweeping ex ante regulation that went into effect in March 2024, forcing Apple and other designated “gatekeepers” to fundamentally change business practices in Europe.

The DMA imposes “do’s and don’ts” on large digital platforms. For Apple, the most significant obligation requires allowing third-party app stores and sideloading on iOS devices within the 27 EU member states.

Apple’s Strategic Compliance

Apple’s response to the DMA demonstrates strategic, what critics call “malicious,” compliance. While technically allowing alternative app marketplaces, Apple unveiled new business terms for the EU that many developers argue make alternatives financially unviable.

The most controversial element is the new “Core Technology Fee” (CTF). Developers choosing to distribute apps outside the App Store must pay Apple €0.50 for every annual install over a one-million-user threshold. This fee applies even if the app is free and uses no Apple services other than the operating system.

For a popular free app with 10 million users, this would result in an annual bill to Apple of €4.5 million, potentially bankrupting many developers.

Critics argue the CTF and other complex rules punish developers who leave the App Store, effectively preserving Apple’s control while maintaining thin compliance veneer. The European Commission appears to agree, launching non-compliance investigations into Apple’s new fee structure and steering rules. The Commission fined Apple €500 million for breaching anti-steering obligations.

The European experience warns US lawmakers that simply passing openness laws isn’t enough. Well-resourced companies like Apple can devise complex new rules and fee structures adhering to law’s letter while undermining its spirit. Apple’s Core Technology Fee demonstrates a clear strategy to make DMA-granted “freedom” illusory for many developers.

For US lawmakers considering the OAMA, the European experience warns that real regulatory battle begins after bill signing. It requires continuous, expert-led enforcement to counter sophisticated compliance strategies and ensure intended competition and choice goals are realized.

Beyond the App Store

Right to Repair

The “Right to Repair” movement pushes for legislation requiring manufacturers to make spare parts, diagnostic tools, and repair manuals available to consumers and independent repair shops. Apple has been a primary target and staunch opponent of such laws.

Apple historically argued restricting repairs to its authorized network protects consumers from safety, security, and performance risks of unauthorized work. Critics contend these safety arguments are smokescreens for monopolizing the lucrative repair market, forcing consumers into expensive official repairs or encouraging new device purchases.

A key tactic is “parts pairing,” where Apple uses software to cryptographically link specific components (screens, batteries) to a device’s logic board. If a part is replaced without Apple’s proprietary software authorizing the new component, the device may lose functionality, even with genuine Apple parts from other iPhones.

Mounting pressure from consumers, shareholders, and state legislatures has forced gradual shifts in Apple’s position. The company launched an Independent Repair Provider program and Self Service Repair program allowing consumers to buy genuine parts and tools. Apple even supported a California right-to-repair bill in 2023 after lobbying against similar efforts for years.

Critics remain skeptical, noting these programs are limited and Apple continues lobbying against stronger bills in other states, particularly those seeking to ban parts pairing.

Supply Chain Concerns

Apple’s vast global supply chain has been a source of persistent controversy. For over a decade, reports have detailed harsh labor conditions at major supplier factories like Foxconn and Pegatron in China. Allegations include excessive working hours violating local laws, unsafe factory conditions, and use of involuntary student interns forced to work on assembly lines to meet Apple’s demanding production schedules.

Recent focus has shifted to forced labor allegations. Multiple reports have linked at least seven Apple suppliers to programs using forced labor from the Uyghur Muslim minority in China’s Xinjiang region. Human rights groups have filed complaints with US Customs and Border Protection, and reports indicate Apple lobbied against the Uyghur Forced Labor Prevention Act, a US law designed to block imports from the region.

Apple consistently states it has zero tolerance for forced labor and internal investigations found no evidence in its supply chain. Critics question these internal audits’ validity, arguing they lack independence and transparency as Apple doesn’t release full individual factory inspection results.

International Tax Strategies

As one of the world’s most profitable companies, Apple’s tax practices have drawn intense global government scrutiny. The company pioneered sophisticated tax avoidance strategies designed to shift profits from high-tax countries where sales occur (like the US and European nations) to low-tax jurisdictions, notably Ireland.

The most significant battle culminated in a landmark European Commission case. In 2016, the Commission ruled the Irish government provided Apple with illegal state aid through a special tax deal allowing Apple to attribute most international profits to a “head office” existing only on paper and not tax resident anywhere, resulting in effective corporate tax rates as low as 0.005% in 2014.

The Commission ordered Ireland to recover €13 billion in unpaid taxes from Apple. After years of legal appeals by both Apple and the Irish government (which feared the ruling would damage its business-friendly reputation), the EU’s highest court ultimately upheld the Commission’s decision in September 2024.

The case exposed how Apple’s complex corporate structure was engineered to create “stateless income,” walling off enormous profits from taxation and depriving public treasuries of billions in revenue.

The Core Conflict

Across software, hardware, labor, and taxes, a consistent pattern emerges. The “walled garden” is not merely an App Store metaphor; it’s the fundamental operating principle of the entire company.

Whether controlling software flow through the App Store, restricting hardware repairs through parts pairing, maintaining an opaque supply chain, or creating complex legal structures to shield profits from taxes, Apple’s philosophy is end-to-end control.

The sprawling regulatory debate is fundamentally a clash between this deeply ingrained corporate worldview and growing global demand from governments and the public for more competition, transparency, and openness. The outcome will determine not just Apple’s future business model, but the broader relationship between dominant technology companies and democratic governance in the digital age.

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