This week, Apple CEO Cook is on his visit to China and has been frequently met by Chinese netizens. However, on the other hand, Apple is facing multiple pressures from European and American regulations. In the United States, the Department of Justice, in collaboration with multiple states, is suing Apple for violating antitrust laws. In Europe, the company is reportedly facing an investigation into whether it complies with the digital market laws in the region. Besides Apple, many other companies are facing the same problem. After all, monopoly is the original sin of technology giants and the focus of regulatory fines.
Double encirclement and suppression
Since the beginning of 2024, Apple's troubles have been piling up one after another. On March 21, 2024 local time, the US Department of Justice, along with 15 states and Washington D.C., filed a lawsuit in the New Jersey District Court, accusing Apple of monopolizing the smartphone market, disrupting healthy competition, and harming consumer interests. This 88 page indictment is not aimed at any particular application or service on Apple phones, but at the entire ecosystem. The US Department of Justice and 16 state and regional attorneys general believe that Apple has established an exclusive smartphone ecosystem to protect the company from competition and continuously increase product prices for profit.
The indictment points out that over the years, Apple has established a dominant smartphone platform and ecosystem, causing the company's market value to skyrocket to astronomical numbers. Based on revenue, Apple has a market share of over 65% in the US smartphone market and over 70% in the high-performance smartphone market.
In response to Apple's monopolistic behavior on smartphones, the indictment focuses on five areas: super apps, cloud gaming apps, cross system SMS sending, smartwatch matching, and electronic wallets.
For example, the US Department of Justice and various states believe that super apps allow users to complete multiple activities such as socializing, transportation, dining, shopping, and entertainment within one app portal. But Apple restricts users from installing super apps in order to protect its monopoly position and prevent users from abandoning Apple's iOS system.
The indictment cites the statements of several Apple executives to prove that the company is very aware of the impact that super apps will have on Apple's mobile system. One of the executives stated that allowing super apps to enter Apple phones is equivalent to allowing "barbarians" to enter, which will reduce the stickiness of iOS system users.
On the electronic wallet, the indictment argues that although Apple encourages banks to join Apple's electronic wallet, it also prevents banks and other institutions from developing their own payment tools in order to maintain their monopoly. When users use Apple Pay for credit card transfers, Apple also charges fees to the user's account opening bank.
The indictment also specifically mentions the "Apple tax" that Apple has levied over the past 15 years, which means that when Apple phone users pay to download apps from the App Store, Apple will draw a 30% commission. This is also the focus of the EU investigation. On the same day, media also learned that Apple and Google are facing a comprehensive investigation by the European Union due to compliance issues and may face heavy penalties. This will be the first action taken by the European Union against technology giants since the Digital Markets Act (DMA) came into effect on the 6th of this month.
Affected by this news, Apple closed down 4.09% at $171.37 per share, with a total market value of $2.6 trillion. This is also the largest daily decline for Apple since August 4th last year.
Regulatory storm
This is not the first anti-monopoly investigation by the government against technology giants in recent years. Even before this, Apple was the only large technology company in the United States that had not yet been sued by the government for monopolies.
As early as 2020, the US Congress released a 450 page, 16 month investigation report that identified Amazon, Google, Apple, and Facebook as having "monopolistic power" in key business areas and abusing market dominance.
The Anti Monopoly Subcommittee stated that in order to write the report, they collected over one million documents from these companies and interviewed scholars, business leaders, and competitors of these technology giants. The report also states, "These companies have too much power and must limit this power and accept appropriate supervision and enforcement."
Subsequently, relevant departments in the United States began suing the aforementioned companies on antitrust issues. In October 2020, the US Department of Justice accused Google of illegally protecting its monopoly position through search engines and search advertising. Subsequently, in January 2023, the US Department of Justice and eight states sued Google, accusing it of illegally abusing its monopoly on online advertising technology.
In December 2020, the Federal Trade Commission of the United States, together with the Attorney General of 46 states, the District of Columbia, and Guam, accused Facebook and its parent company Meta of prematurely acquiring its competitors due to concerns that emerging software would challenge its dominance. The most notable ones were the acquisition of Instagram in 2012 and the acquisition of WhatsApp after 2014, which suppressed the development of both companies.
In September 2023, the Federal Trade Commission, together with 17 states, accused Amazon of protecting its monopoly in online retail by squeezing merchants and favoring its own services.
Earlier, the US Department of Justice and 20 states filed an antitrust lawsuit against Microsoft in 1998. The two sides reached a settlement in 2001, exempting Microsoft from being split. Nine states that were dissatisfied with the settlement subsequently filed appeals, which took four years. The court ultimately upheld the settlement.
Outside the United States, Apple has also been in constant trouble lately. Earlier this month, Apple was fined $2 billion by the European Union for setting unfair rules against music streaming app developers. In addition, Reuters quoted sources as saying that the European Union is preparing to investigate four companies, including Apple and Google, for suspected violations of the Digital Markets Act.
The Netherlands has issued a $53 million fine for payment issues related to Apple's App Store, while South Korea may fine Apple for commission issues related to App Store app developers. Japan, the UK, and Australia are considering legal means to force Apple to make changes in payment methods and commissions.
Possible splitting
The US Department of Justice and 16 state and regional attorneys general have requested the court to rule that Apple has violated antitrust laws, illegally monopolized or attempted to monopolize the US smartphone market. Officials from the Ministry of Justice also stated that it is not ruled out to resolve the monopoly issue by splitting Apple.
A US Department of Justice official, who declined to be named, stated in a media interview that according to law, the Department has the power to demand that Apple make structural adjustments, including a spin off. But the official did not disclose what measures the Ministry of Justice is preparing to take, stating that the final decision will depend on the court ruling.
An Apple spokesperson stated that there were factual and legal errors in this lawsuit, and announced that they will provide a "strong defense" to the lawsuit. An Apple spokesperson pointed out that if the Department of Justice and 16 states win the lawsuit, it will undermine Apple's ability to create technology and set a "dangerous precedent": allowing the government to heavily interfere in civilian technology design.
However, according to Wei Nanzhi, an associate researcher at the Institute of American Studies at the Chinese Academy of Social Sciences, the development trend of American enterprises over the past 30 years has been a process of gradually concentrating from small enterprises to large enterprises, transforming from free market competition to monopoly. Even the well-known "splitting of WeChat and Facebook" incident did not shake their monopoly position.
Margrethe Vestager, the EU antitrust director, stated that imposing huge fines or forcing a company to split up is not the standard for the bill's success, but "based on experience, if we cannot make real punishment, I don't think we will see anyone compliant. We need this kind of deterrence.".
Regarding the regulatory incident launched by Europe and America against Apple, Bill Kovacic, an antitrust professor at George Washington University Law School, said, "At a certain point, a large number of cases and the accompanying scrutiny will truly drag down the operations of these companies." "Even if they win, they lose in an important aspect."