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Apple (AAPL) Faces Two EU Antitrust Investigations for Apps
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Apple (AAPL - Free Report) is facing antitrust probes for violating competition law. The European Commission is opening two antitrust investigations into Apple’s App Store and Apple Pay practices over concerns that the company’s way of doing business hurts consumers by limiting choice and innovation and keeping prices high.
The lawsuit comes at a time when Apple is dealing with the impact of the coronavirus pandemic on its iPhone sales.
Apple has been working to expand revenues in its services business to offset slowing growth from sales of iPhones and other hardware. In second-quarter fiscal 2020, revenues for Apple’s services (22.9% of sales) grew 16.6% year over year to $13.3 billion contributing 22.9% to overall sales of $58.3 billion.
The Commission opened an investigation into the mobile App Store over concerns that Apple forces developers to use the company's own in-app purchasing system, which charges them a 30% commission. It also restricts them from letting iPhone and iPad users know about other cheaper ways to pay for digital services like music subscriptions.
Apple’s App Store recorded sales of $519 billion in 2019 while $45 billion came from in-app advertising such as in social networking apps and $61 billion was generated by digital sales like app and game downloads and in-app-purchases, per a Bloomberg report.
Although this Zacks Rank #3 (Hold) company claims to have paid out more than $155 billion to developers since the App Store launched in 2008, small companies have no choice but to accept Apple’s terms to get access to more than 1.5 billion iOS devices in active use and 500 million people who use the App Store on a weekly basis.
In April, Bloomberg News reported that the company allowed a handful premium subscription video providers — including Amazon (AMZN - Free Report) and Altice USA Inc’s Altice One — the ability to charge consumers directly using their own payment systems without paying a commission to Apple.
Unfortunately, not all companies have the negotiation leverage of Amazon. The investigation follows complaints from music streaming service, Spotify (SPOT - Free Report) and an e-book distributor Rakuten on the impact of the App Store's rules on competition
On Mar 5, Rakuten's subsidiary Kobo alleged that Apple's commission rate is anti-competitive as it also promotes its own Apple Books service. Kobo argues that having to pay Apple 30% commission on each e-book that it sells through the App Store via the Kobo app limits profits significantly, while Apple's own Bookstore does not have to take an equivalent revenue cut.
The complaint is similar to one that Spotify filed in March 2019. Spotify specifically took issue with Apple's 30% fee collected on App Store purchases, which forced Spotify to charge subscribers through the App Store $12.99 per month for its Premium plan instead of the $9.99 per month fee it normally collects.
EU’s Eyes on Apple Pay Over Competition Law
Alongside the App Store investigation, the European Commission will also look at Apple Pay to assess whether the payment system violates EU competition rules. Apple has limited access to the Near Field Communication (NFC) functionality of its iPhone and Apple Watch devices.
Notably, Apple Pay is the only mobile payment solution that is allowed to access NFC technology on iOS devices for making payments in stores.
The investigation into Apple Pay comes months after German lawmakers passed an amendment to anti-money laundering laws that compel Apple to open up the technology to other mobile-payment firms.
The Apple Pay investigation centers on a technology that allows iPhones and Apple Watches to make tap-and-go payments. It also lets users buy goods via an app or website without having to give their payment card details to the seller.
The EU’s new investigations add to other formal and informal probes into companies including Google, Facebook and Amazon, which is set to face antitrust charges in the coming weeks.
The European Union is planning to file charges against Amazon over its treatment of third-party sellers.
Meanwhile, per Washington Post, on Jun 16, Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai signaled they are open to testifying to Congress as part of lawmakers’ ongoing antitrust probe into the tech industry, while Apple has not yet explicitly agreed to send its leader.
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Apple (AAPL) Faces Two EU Antitrust Investigations for Apps
Apple (AAPL - Free Report) is facing antitrust probes for violating competition law. The European Commission is opening two antitrust investigations into Apple’s App Store and Apple Pay practices over concerns that the company’s way of doing business hurts consumers by limiting choice and innovation and keeping prices high.
The lawsuit comes at a time when Apple is dealing with the impact of the coronavirus pandemic on its iPhone sales.
Apple has been working to expand revenues in its services business to offset slowing growth from sales of iPhones and other hardware. In second-quarter fiscal 2020, revenues for Apple’s services (22.9% of sales) grew 16.6% year over year to $13.3 billion contributing 22.9% to overall sales of $58.3 billion.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
Antitrust Probe on App Store
The Commission opened an investigation into the mobile App Store over concerns that Apple forces developers to use the company's own in-app purchasing system, which charges them a 30% commission. It also restricts them from letting iPhone and iPad users know about other cheaper ways to pay for digital services like music subscriptions.
Apple’s App Store recorded sales of $519 billion in 2019 while $45 billion came from in-app advertising such as in social networking apps and $61 billion was generated by digital sales like app and game downloads and in-app-purchases, per a Bloomberg report.
Although this Zacks Rank #3 (Hold) company claims to have paid out more than $155 billion to developers since the App Store launched in 2008, small companies have no choice but to accept Apple’s terms to get access to more than 1.5 billion iOS devices in active use and 500 million people who use the App Store on a weekly basis.
In April, Bloomberg News reported that the company allowed a handful premium subscription video providers — including Amazon (AMZN - Free Report) and Altice USA Inc’s Altice One — the ability to charge consumers directly using their own payment systems without paying a commission to Apple.
Unfortunately, not all companies have the negotiation leverage of Amazon. The investigation follows complaints from music streaming service, Spotify (SPOT - Free Report) and an e-book distributor Rakuten on the impact of the App Store's rules on competition
On Mar 5, Rakuten's subsidiary Kobo alleged that Apple's commission rate is anti-competitive as it also promotes its own Apple Books service. Kobo argues that having to pay Apple 30% commission on each e-book that it sells through the App Store via the Kobo app limits profits significantly, while Apple's own Bookstore does not have to take an equivalent revenue cut.
The complaint is similar to one that Spotify filed in March 2019. Spotify specifically took issue with Apple's 30% fee collected on App Store purchases, which forced Spotify to charge subscribers through the App Store $12.99 per month for its Premium plan instead of the $9.99 per month fee it normally collects.
EU’s Eyes on Apple Pay Over Competition Law
Alongside the App Store investigation, the European Commission will also look at Apple Pay to assess whether the payment system violates EU competition rules. Apple has limited access to the Near Field Communication (NFC) functionality of its iPhone and Apple Watch devices.
Notably, Apple Pay is the only mobile payment solution that is allowed to access NFC technology on iOS devices for making payments in stores.
The investigation into Apple Pay comes months after German lawmakers passed an amendment to anti-money laundering laws that compel Apple to open up the technology to other mobile-payment firms.
The Apple Pay investigation centers on a technology that allows iPhones and Apple Watches to make tap-and-go payments. It also lets users buy goods via an app or website without having to give their payment card details to the seller.
The EU’s new investigations add to other formal and informal probes into companies including Google, Facebook and Amazon, which is set to face antitrust charges in the coming weeks.
The European Union is planning to file charges against Amazon over its treatment of third-party sellers.
Meanwhile, per Washington Post, on Jun 16, Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai signaled they are open to testifying to Congress as part of lawmakers’ ongoing antitrust probe into the tech industry, while Apple has not yet explicitly agreed to send its leader.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>