What you need to know about the U.S. House Antitrust meeting examining Apple

AppleInsider

Several CEOs of major tech companies, including Apple's Tim Cook, are expected to testify at a House Judiciary Antitrust Subcommittee hearing scheduled for July 24. Here's what you should know about it.

Credit: WikiCommons

After a postponement, the meeting is currently scheduled for 12 p.m. Eastern (9 a.m. Pacific) on Wednesday, July 29 at the Rayburn House Office Building in Washington, D.C. Participants will have the option to appear virtually due to the ongoing COVID-19 pandemic.

Here are some other key facts about the testimony you should know about.

What it's about

The testimony on Monday is titled "Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Facebook, Google and Apple." It's part of a broader investigation by the U.S. House Judiciary Committee that was launched in June 2019. Specifically, the probe is an antitrust investigation that has examined dominant technology companies and platforms.

The goal of the probe is to determine where or not dominant tech companies like Apple, Google or Amazon have leveraged their power and positions to unfairly deter and stifle competition.

Apple is being scrutinized for its App Store policies.

Much of the spotlight concerns the company's 15% to 30% cut of in-app purchases made through its payment platforms. Other topics include the so-called "Sherlocking" of third-party apps, a term used to describe the company apparently "borrowing" features from apps on the marketplace and incorporating them into first-party apps.

Apple is also being looked at by antitrust officials in Europe. And, recently, the company's App Store policies stirred controversy in a dustup with Basecamp-created email client Hey.

Who is testifying

Apple CEO Tim Cook was called to testify before the committee, though he was reportedly reluctant to agree. Subsequently, the house threatened to subpoena the Apple chief executive.

Since then, the Apple executive has apparently spent most of July consulting with the company's government affairs team.

Along with Cook, Facebook CEO Mark Zuckerberg, Amazon CEO Jeff Bezos and Alphabet and Google CEO Sundar Pichai are also set to testify before the U.S. House subcommittee.

As far as why, the House says that the executives' testimonies will be critical to wrapping up its investigation.

"Since last June, the Subcommittee has been investigating the dominance of a small number of digital platforms and the adequacy of existing antitrust laws and enforcement. Given the central role these corporations play in the lives of the American people, it is critical that their CEOs are forthcoming. As we have said from the start, their testimony is essential for us to complete this investigation," the House said in a statement.

Who is grilling the tech CEOs?

The U.S. House Subcommittee Antitrust, Commercial and Administrative Law will spearhead the hearings on Monday. It's a subgroup of the broader U.S. House Committee on the Judiciary.

Currently, there are 13 representatives who sit on the committee, including Chair Rep. David Cicilline and Vice Chair Rep. Joe Neguse. The full U.S. House Committee on the Judiciary is headed up by Rep. Jerrold Nadler.

Notably, Rep. Cicilline has been critical of Apple's App Store policies in the past. In an interview alongside Hey app CTO David Heinemeier Hansson, Rep. Cicilline likened Apple's App Store fees to "highway robbery."

Rep. Cicilline also told CNBC that he hopes to introduce new regulations to "reform the digital marketplace and empower antitrust enforcers."

Since the start, the investigation has been a bipartisan effort between Democrats and Republicans in both the antitrust subcommittee and the larger Judiciary Committee.

There may be conflicts of interest for some representatives related to the investigations. According to Business Insider, at least three lawmakers own stock in one or more of the companies involved. Doing so is not illegal, but could undermine public trust in the probe.

Rep. Jim Sensenbrenner, ranking member of the Antitrust Subcommittee, owns nearly $100,000 in stock between Apple, Amazon, Facebook and Alphabet. Reps. Zoe Lofgren and Steve Chabot, members of the House Judiciary Committee, also own stocks in the companies.

Why this matters

Major tech companies have been under antitrust scrutiny in the U.S. for years now. For example, in July 2017, the U.S. Department of Justice launched its own antitrust probe into the alleged monopolization of Apple and Google.

The goal of the House's investigation is to determine whether or not existing laws are adequate enough to foster competition in the technology industry. Alongside the Department of Justice probe, it's likely that the investigation will play into a broader push to police major tech firms.

Unlike the investigations by the Justice Department, the House's probe won't result in enforcement action. But it could result in regulations and proposals to curb alleged anticompetitive behaviors in the digital marketplace.

There has also been a groundswell of calls to break up major tech companies from activists and lawmakers.

The hearing will be a major step in the investigations by the House and Justice Department. And it's likely that the results of the probes will be used to justify -- or protest -- the breaking up of dominant technology companies.

In that interview with CNBC, Rep. Cicilline said he hoped to complete a report on the group's investigation by early April, but the ongoing coronavirus pandemic has pushed back those plans until sometime in the fall.

spamsandwich

Is THIS the reason for the massive AAPL drop over the past several days?

mike wuerthele

SpamSandwich said:

Is THIS the reason for the massive AAPL drop over the past several days?

Couple of factors apply to that, but I think so, yes.

spamsandwich

Mike Wuerthele said:

SpamSandwich said:

Is THIS the reason for the massive AAPL drop over the past several days?

Couple of factors apply to that, but I think so, yes.

That could point to insiders knowing what will be the outcome of this thing in advance.

bsnjon

The “Outcome” of this will be nothing. Congress is in no position to pass any major bills for the rest of the year. 

In January, their hands will be full with other priorities, no matter the outcome of the epenctil.  

[deleted user]

SpamSandwich said:

Is THIS the reason for the massive AAPL drop over the past several days?

No, it's primarily the escalating trade war between the U.S. and China. In addition MS released it's earrings which, while good, didn't provide investors to boil over with confidence that there would be an economic rebound in the near term. When Apple announces their financials next week I'm hoping they are able to provide Q4 guidance as that would at least indicate there has some stabilization and if they provide something that resembles optimism then even better. 

lkrupp

Let’s see now. Apple has maybe 9% of the PC market (Windows has 91%, 15% of the worldwide smartphone  market (Android has 85%). Apple services are in the minority (as the haters always like to point out), 28% of the tablet market (as of first quarter 2020), and 55% of the smartwatch market. Yet Apple is alleged to be a “dominant” tech giant. How do the politicians figure that?

[deleted user]

lkrupp said:

Let’s see now. Apple has maybe 9% of the PC market (Windows has 91%, 15% of the worldwide smartphone  market (Android has 85%). Apple services are in the minority (as the haters always like to point out), 28% of the tablet market (as of first quarter 2020), and 55% of the smartwatch market. Yet Apple is alleged to be a “dominant” tech giant. How do the politicians figure that?

First off, worldwide marketshare is irrelevant to the U.S. House of Representative as they only legislate the U.S. So with all of those numbers you wold need to look at U.S marketshare which is pretty much higher in every category you named. Second, marketshare is mostly about monopolies. Abuse of a monopoly is one of the types of anti competitive behavior that is is laid out in the Sherman Antitrust Act and Clayton Antitrust Act. A good example of an antitrust violation without having dominate marketshare is the iBooksstore. Apple and publishers were found guilty of violating the Sherman Act by price fixing. 

beats

lkrupp said:

Let’s see now. Apple has maybe 9% of the PC market (Windows has 91%, 15% of the worldwide smartphone  market (Android has 85%). Apple services are in the minority (as the haters always like to point out), 28% of the tablet market (as of first quarter 2020), and 55% of the smartwatch market. Yet Apple is alleged to be a “dominant” tech giant. How do the politicians figure that?

They don't count knockoffs.

flydog

SpamSandwich said:

Is THIS the reason for the massive AAPL drop over the past several days?

Well first, 6% is not "massive," and second, it's less than 2% relative to the broad market. 

flydog

Happy_Noodle_Boy said:

lkrupp said:

Let’s see now. Apple has maybe 9% of the PC market (Windows has 91%, 15% of the worldwide smartphone  market (Android has 85%). Apple services are in the minority (as the haters always like to point out), 28% of the tablet market (as of first quarter 2020), and 55% of the smartwatch market. Yet Apple is alleged to be a “dominant” tech giant. How do the politicians figure that?

First off, worldwide marketshare is irrelevant to the U.S. House of Representative as they only legislate the U.S. So with all of those numbers you wold need to look at U.S marketshare which is pretty much higher in every category you named. Second, marketshare is mostly about monopolies. Abuse of a monopoly is one of the types of anti competitive behavior that is is laid out in the Sherman Antitrust Act and Clayton Antitrust Act. A good example of an antitrust violation without having dominate marketshare is the iBooksstore. Apple and publishers were found guilty of violating the Sherman Act by price fixing. 

The U.S. House of Representatives does not bring civil antitrust lawsuits against anyone.  Their role is legislate, so everything that you mentioned is irrelevant since the House could decide to pass whatever laws it sees fit. 

[deleted user]

flydog said:

Happy_Noodle_Boy said:

lkrupp said:

Let’s see now. Apple has maybe 9% of the PC market (Windows has 91%, 15% of the worldwide smartphone  market (Android has 85%). Apple services are in the minority (as the haters always like to point out), 28% of the tablet market (as of first quarter 2020), and 55% of the smartwatch market. Yet Apple is alleged to be a “dominant” tech giant. How do the politicians figure that?

First off, worldwide marketshare is irrelevant to the U.S. House of Representative as they only legislate the U.S. So with all of those numbers you wold need to look at U.S marketshare which is pretty much higher in every category you named. Second, marketshare is mostly about monopolies. Abuse of a monopoly is one of the types of anti competitive behavior that is is laid out in the Sherman Antitrust Act and Clayton Antitrust Act. A good example of an antitrust violation without having dominate marketshare is the iBooksstore. Apple and publishers were found guilty of violating the Sherman Act by price fixing. 

The U.S. House of Representatives does not bring civil antitrust lawsuits against anyone.  Their role is legislate, so everything that you mentioned is irrelevant since the House could decide to pass whatever laws it sees fit. 

I agree that they can pass whatever laws that they see fit as long as it is constitutional. Further you are correct that the house doesn’t bring civil antitrust lawsuits in part because they likely wouldn’t have standing in a civil antitrust lawsuit. I honestly can’t think of a way that Congress would be the victim of anticompetitive behavior. Congress can refer criminal findings to the FTC for prosecution which very much makes antitrust law and what I said relevant. In that case it would be a criminal lawsuit and not civil. 

lkrupp

"What we need to know about these hearings?” We already know everything. These meetings will be the usual dog and pony show by politicians seeking to enhance their public perceptions. The CEOs will be dragged in the mud, raked over the coals, accused of selling their children into bondage, and selling out the country. You know, the usual stuff.

dewme

The problem I have with these more recent dog & pony shows is that the legislators seem to be applying antiquated standards, expectations, and rationale to markets and businesses  that they are rather clueless about. The impact that pervasive connectivity and multiple types of network effects have on the scale and magnitude of services that take advantage of these factors seems to be beyond their comprehension.

It's like folks who at one time believed that the Dow at 2000 was huge, that the DEC Alpha chip running at 200 MHz was at the extreme limit of what chips could ever support, or that professional athletes making over a million dollars a season was unheard of. There seems to be a general lack of understanding about how multiple factors that have exponential influence over the magnitude of growth of some bottom line number can play out when network effects are also involved. What happens then is that an alarmist tone is sounded around a "big number" as a scare tactic, when in fact the big number is really tiny compared its true potential when everything plays out in a certain way.

You would think that these legislators would have a handle on big numbers like Apple's market cap and apparent market influence because they (should) be very cognizant of things like the ever increasing national deficit and knowing how it's magnitude is mitigated by the incredible upside potential and scale of the GDP, even under moderate growth scenarios. Going after companies that are delivering immense value to their customers because the scale of said company's profits or influence is a very big number is very self defeating and short sighted. It's like they want to reward achievement, but only to a certain degree. Everyone likes a winner as long as they don't win too often.

The other thing at play here, in my opinion, is power and influence. Rather than having a legislative body and executive that views itself as public servants who are always engaged in making life better for their constituents, they view themselves as overlords and barons over the riches created by the productive elements of society, including individuals and corporations. They are not going to let anyone take away their power, influence, and ability to glean wealth from those who, they believe, serve them. The accumulation of wealth among what we comically call "public servants" is evidence that they still have the game rigged in their favor.

edited July 2020

pujones1

Mike Wuerthele said:

SpamSandwich said:

Is THIS the reason for the massive AAPL drop over the past several days?

Couple of factors apply to that, but I think so, yes.

Agree.