'Bark worse than the bite' in EU Apple antitrust probe, analysts believe

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A European Commission investigation into whether Apple disadvantages Apple Music rivals is wrapping up and charges against Apple are expected. However, analysts believe the "bark is a lot worse than the bite."

Credit: Apple
Credit: Apple


Back in 2019, Spotify filed an antitrust complaint with the European Commission alleging that Apple treats rival music streaming platforms unfairly. In the two years since, the European Union's antitrust body has been investigating the claim.

On Wednesday, reports indicate that the probe is winding down and that a statement of objections could be levied against Apple. The investigation could also require action that could pose potential risks to the App Store.

Here's what financial analysts think those charges and regulations could mean for Apple Music, the App Store, and Apple as a whole.

Cowen - Paul Gallant

In a note to investors seen by AppleInsider, Cowen policy analyst Paul Gallant says he expects the European Commission to rule that Apple's App Store policies violate European antitrust regulations by favoring Apple Music over third-party alternatives.

If the EC only issues a statement of objections in the summer, the analyst says the App Store won't see any major risks until the second half of 2022. However, if the ruling includes so-called "interim measures," then potential antitrust remedies could be implemented sooner.

The analyst cites a comment from European Commissioner Margrethe Vestager. In 2020, she said that the EU acted" too slowly" against Google and said she would want to impose interim measures more frequently in anti-competition investigations.

"Our sense is the EC's investigation of Apple has put music on a faster track than other competing apps like video games so that it could rule more quickly and set a precedent for those other verticals," Gallant writes.

As far as what those interim measures could entail, the analyst believes the EC signaled remedies in its Digital Markets Act proposal. New rules could include ones that force Apple to allow users to download alternative App Stores, use third-party payment platforms, and sideload new apps.

Apple's best defense in this case could be arguing that the EC shouldn't act because EU lawmakers are currently considering tech platform legislation in 2022. "That would be much better for Apple given the uncertainty around passage and the EC's ability to enforce a broad new tech law," Gallant writes.

For the impact to Apple, analyst Krish Sankar writes that the regulatory potential of the investigation are "broadly in line with our expectations for an increasingly stringent regulatory backdrop."

He says that it's unclear how the investigations could affect platforms like Apple Pay, which is still a sub-$2 billion business. On Apple Music, Sankar believes any change to the way it's offered could affect growth. However, he doesn't expect any large scale migrations of existing users after remedies are implemented.

Wedbush - Daniel Ives

Wedbush analyst Daniel Ives says he's expecting the EU to "finally rip the long awaited band-aid off and bring antitrust charges against Apple for the first time in the coming weeks."

In a note to investors, Ives says the complaint will focus on the 30% cut that Apple takes of app and in-app purchases on the App Store. He likens the dustup between Apple and Spotify to the ongoing saga between the Cupertino tech giant and "Fortnite" creator Epic Games.

The analyst does note that Apple's "App Store stronghold" has held up in U.S. courts. He adds that the impending antitrust suit also comes on the heels of a separate probe announced by the UK's Competition and Markets Authority.

Ives believes that the "bark is a lot worse than the bite" in the EC investigation, however. The EC is taking a "risky and calculated path" going after Apple when the company is already in the spotlight in the U.S. for its App Store policies and commissions, the analyst added

"Apple has successfully defended its App Store moat again and again with this time being no different in our opinion and likely resulting in headline risk and fines rather than any business model driven changes coming out of this likely EU antitrust probe," Ives writes.

Because Apple's Services business represents a $65 billion revenue stream in 2021, Ives says this is a "high stakes game of poker being played by the EU." Apple needs to make sure that the EC probe and the Epic Games are handled in a way that doesn't cause any ripple effects to its business.

Ives says Wedbush is monitoring the situation closely, but still expects the EC probe to result in scarier headlines than actual effects to Apple's business.

Comments

  • Reply 1 of 13
    baconstangbaconstang Posts: 1,107member
    Oh well.  Deserved or not, they are the biggest target.   So of course they will be targeted.
  • Reply 2 of 13
    Oh well.  Deserved or not, they are the biggest target.   So of course they will be targeted.
    That’s because the others don’t want to compete. They want government to level the playing field and then leverage that to gain advantage. Competing one on one simply takes too much work.
    lkruppzeus423watto_cobra
  • Reply 3 of 13
    EsquireCatsEsquireCats Posts: 1,268member
    Without malicious evidence (for Microsoft there was ample in the Halloween documents) the risk is that the rules can be applied to any business that merely has a successful diversified business model.

    I appreciate that these are complicated matters, but I doubt there is any realistic remedy that will save Spotify - their issues didn’t come about from Apple taking a tiny cut of their revenue. 
    baconstanggenovellezeus423anantksundaramwatto_cobraFileMakerFeller
  • Reply 4 of 13
    omasouomasou Posts: 575member
    I really don't understand the obsessive focus on the 30% Apple commission.

    All retail has ~50% mark-up from wholesale. Therefore the manufacture earns 50% less if they want someone to distribute and retail their products.

    As for alternate app stores. Well we see how even Google can't keep dubious software off their platform. So if it aint coming from the Apple App Store, forgetaboutit.
    Dogpersonzeus423radarthekatwatto_cobra
  • Reply 5 of 13
    genovellegenovelle Posts: 1,480member
    omasou said:
    I really don't understand the obsessive focus on the 30% Apple commission.

    All retail has ~50% mark-up from wholesale. Therefore the manufacture earns 50% less if they want someone to distribute and retail their products.

    As for alternate app stores. Well we see how even Google can't keep dubious software off their platform. So if it aint coming from the Apple App Store, forgetaboutit.
    Most developers don’t want this either. They know Apple is where they make their money. Popular apps on Google are easily pirated so the sales and revenue are much lower. This is why they are attacking Apple and not Google who has the same fees but a much smaller install base. Apple draws customers willing to pay because their platform is designed for them and they market to draw them. They just want a free ride. 
    aderutterzeus423h2pwatto_cobra
  • Reply 6 of 13
    They want government to level the playing field and then leverage that to gain advantage...
    Because unfettered capitalism is what you want, right? That's where a company can charge whatever they want and do so in a manner that doesn't give YOU, the consumer, any advantage at all but to pay whatever the company demands of you. Have fun with that.

    I'm enjoying the comments from the would-be disciples of the Free Market bib-dribble and spoon-clang about how mean and unfair this all is, while in some other comment forum, they've complained loudly about Adobe's "unfair" practice of making you have a subscription to use their products and walled gardens and such. Sound familiar? 
    muthuk_vanalingam
  • Reply 7 of 13
    sflocalsflocal Posts: 6,095member
    If Apple is somehow forced to allow side-loading of apps, I can easily see the floodgates opening of rogue-developers/miscreants introducing malware like the mess that is Android and doing anything and everything they can to steal financial data.  Who will be blamed?  Apple.
    anantksundarambaconstangwatto_cobra
  • Reply 8 of 13
    flydogflydog Posts: 1,124member
    They want government to level the playing field and then leverage that to gain advantage...
    Because unfettered capitalism is what you want, right? That's where a company can charge whatever they want and do so in a manner that doesn't give YOU, the consumer, any advantage at all but to pay whatever the company demands of you. Have fun with that.

    Yeah you are completely clueless.  Developers clearly can't charge "whatever they want," and Apple's 30% or 15% fee has nothing to do with that.  Developers (any business for that matter) can only charge what people are willing to pay.  

    And if you think app prices will go down simply because third-party app stores are allowed then you are truly out of your freaking mind. A developer has zero incentive to lower prices simply because Apple collects a lower fee or because they sells apps direct to the consumer.  If that was the case, the app prices would have gone down when Apple implemented it's reduced 15% fee.  It didn't happen, and it never will.  

    This doesn't help consumers. It only helps companies like Epic and Spotify get richer at the expense of Apple. If anything, consumers will be worse off because apps will no longer be vetted to ensure they comply with basic privacy principles and are free of malware. 

     
    edited March 2021 h2pradarthekatbaconstangwatto_cobraFileMakerFeller
  • Reply 9 of 13
    They want government to level the playing field and then leverage that to gain advantage...
    Because unfettered capitalism is what you want, right? That's where a company can charge whatever they want and do so in a manner that doesn't give YOU, the consumer, any advantage at all but to pay whatever the company demands of you. Have fun with that.

    I'm enjoying the comments from the would-be disciples of the Free Market bib-dribble and spoon-clang about how mean and unfair this all is, while in some other comment forum, they've complained loudly about Adobe's "unfair" practice of making you have a subscription to use their products and walled gardens and such. Sound familiar? 
    Groan. Another fettering fanatic...

    Ever heard of a ‘demand curve’?
    edited March 2021 watto_cobra
  • Reply 10 of 13
    omasouomasou Posts: 575member
    Pretend we have a future where people can load apps from other sources.

    I'm willing to bet those channels--except for the really big and or trusted ones, if any :)--will have to charge less to attract customers and Apple will still be the preferred App Store just b/c of simplicity and trust.

    If correct, it will be interesting to see if content providers end up putting their tails between their legs and shutting down their discount stores and return to Apple. I think it will be similar to cheap phones vs. premium phones. Sure some will go though the pains to save money b/c they have to or want to and the media will claim them a success but in reality Apple will continue to dominate like they have w/their phone strategy.

    watto_cobrateixeiramelo
  • Reply 11 of 13
    nasseraenasserae Posts: 3,167member
    omasou said:
    Pretend we have a future where people can load apps from other sources.

    I'm willing to bet those channels--except for the really big and or trusted ones, if any :)--will have to charge less to attract customers and Apple will still be the preferred App Store just b/c of simplicity and trust.

    If correct, it will be interesting to see if content providers end up putting their tails between their legs and shutting down their discount stores and return to Apple. I think it will be similar to cheap phones vs. premium phones. Sure some will go though the pains to save money b/c they have to or want to and the media will claim them a success but in reality Apple will continue to dominate like they have w/their phone strategy.

    In that future we will have exclusive app deals where many iPhone apps will only be available in third party stores and not on Apple App Store. You want to download Skype or MS Teams for a meeting? Go download it from Microsoft Store. You want to play this new game? Go download Epic Store. How about Instagram? Sorry.. you need Facebook Store. We as iOS users will end in signing up for dozens of app store to download apps. Then comes the major iOS update causing all these apps to break and Apple facing another anti-trust lawsuit because they are harming those poor other big corporations stores by updating iOS API's.
    FileMakerFeller
  • Reply 12 of 13
    nicholfdnicholfd Posts: 824member
    omasou said:
    I really don't understand the obsessive focus on the 30% Apple commission.

    All retail has ~50% mark-up from wholesale. Therefore the manufacture earns 50% less if they want someone to distribute and retail their products.
    Because everyone knows digital goods don't cost anything to market, distribute & sell, right?  And everyone's entitled, right?  /s
    omasou
  • Reply 13 of 13
    omasouomasou Posts: 575member
    nasserae said:
    omasou said:
    Pretend we have a future where people can load apps from other sources.

    I'm willing to bet those channels--except for the really big and or trusted ones, if any :)--will have to charge less to attract customers and Apple will still be the preferred App Store just b/c of simplicity and trust.

    If correct, it will be interesting to see if content providers end up putting their tails between their legs and shutting down their discount stores and return to Apple. I think it will be similar to cheap phones vs. premium phones. Sure some will go though the pains to save money b/c they have to or want to and the media will claim them a success but in reality Apple will continue to dominate like they have w/their phone strategy.

    In that future we will have exclusive app deals where many iPhone apps will only be available in third party stores and not on Apple App Store. You want to download Skype or MS Teams for a meeting? Go download it from Microsoft Store. You want to play this new game? Go download Epic Store. How about Instagram? Sorry.. you need Facebook Store. We as iOS users will end in signing up for dozens of app store to download apps. Then comes the major iOS update causing all these apps to break and Apple facing another anti-trust lawsuit because they are harming those poor other big corporations stores by updating iOS API's.
    Those apps will need to have a significant personal ROI for me to use other App Store. MS well if a business phone, OK but I have no need of MS. Epic, I do not play games but understand other do. Facebook, LOL, they're too busy trying to survive the App Tracking Transparency (ATT) feature.  But I do get it some may need their apps but other won't even know they exist, which should bring the next law suit where Apple's App Store has to search of results for apps that it doesn't host or sell. LOL. That will be an interesting argument :)
    edited March 2021
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