Apple Faces Class Action Lawsuit Over iCloud's Alleged 'Enormous Structural Advantage' The lawsuit asserts that cloud storage on iPhones would be "better, safer, cheaper, and more prevalent" without Apple's policies.
By Sherin Shibu
Key Takeaways
- Apple announced in February that it earned $119.6 billion last quarter, up 2% year over year.
- A new lawsuit filed on Friday emphasized Apple’s 80% profit margins for iCloud, which stand 36% higher than the company’s overall margins, and accused Apple of stifling the competition.
A class action lawsuit filed in San Jose, California federal court on Friday alleges that Apple's iCloud storage service keeps important files exclusively within iCloud, which could create an environment that stifles competition and drives prices up for consumers.
The proposed class consists of tens of millions of customers across the country.
Apple offers buyers who purchase its iPhone, iPad, and other hardware free iCloud storage for up to 5 GB of data. After a user hits that cap, they have to subscribe to iCloud+ from their Apple device to keep storing photos, files, backups, and other features — for a monthly fee. In the United States, 50 GB of storage on iCloud+ costs $0.99 per month, all the way up to 12 TB of storage for $59.99 per month.
According to the lawsuit, even though competing cloud providers like Microsoft and Dropbox can host photos and videos taken on Apple devices, Apple blocks them from accessing some restricted files containing app and settings data, which happen to be critical if a user needs to restore their device when it is replaced. So a customer who uses Google's cloud platform to store their videos would still have to use iCloud to store restricted files.
"As Apple knows, this is an unattractive option," the lawsuit asserts.
Related: Apple Is Reportedly Working on Prototypes for at Least 2 Foldable iPhones
The lawsuit tries to thwart any attempt by Apple to explain that it keeps certain files restricted on the basis of security by pointing out that Apple uses infrastructure from other companies to host iCloud data. For context, iCloud appears to implement similar security measures to Google Drive, and Apple's iCloud storage tiers are priced similarly to the competition. Meanwhile, 2 TB of iCloud storage goes for $9.99, the same price that Dropbox and Google charge.
The lawsuit pointed to Apple's 80% profit margins for iCloud, which stand 36% higher than the company's overall margins, and alleged that "Apple's restraints can be coherently explained only as an attempt to stifle competition." Apple's iCloud produced "almost pure profit" for the company, and was "undisciplined by competition," according to the lawsuit.
Related: Apple Reportedly Told Dozens of Employees They Must Relocate or Be Terminated
Apple's services business, which includes subscriptions like iCloud, hit a record high last year and continues to grow. Apple announced in February that it earned $119.6 billion last quarter, up 2% year over year.
"Apple is reporting revenue growth for the December quarter fueled by iPhone sales, and an all-time revenue record in Services," Tim Cook, Apple's CEO, stated at the time.
