Antitrust regulators on both sides of the Atlantic are cracking down on alleged anti-competitive practices by Apple and Google that could result in break-up orders for the tech giants, marking the first time such an event would be taking place in the tech industry.
Since American telecom giant AT&T was broken up in the US exactly 40 years ago, no company has faced the possibility of a separation. In 1984, AT&T, then known as Ma Bell, was broken up by regulators into seven independent companies to open up one of the most powerful monopolies at the time. Out of the seven “Baby Bell” companies, only three have survived – AT&T, Verizon, and Lumen.
US and EU Regulators Gang Up on Apple and Google
Following the opening of anti-trust cases against Apple and Google in the US and EU, several global watchdogs have initiated probes against the Silicon Valley behemoths, increasing the chances of a breaking up.
Regulators allege that companies like Apple and Google have built impenetrable ecosystems or “walled gardens” around their products, making it hard for their customers to switch to similar services offered by other companies.
Last week, the US Department of Justice warned Apple that a break-up order could be initiated against the $2.7 trillion company to restore healthy competition in the smartphone market. The DoJ teamed up with 15 states to sue the iPhone maker for thwarting rivals and inflating the prices of its smartphones.
Apple said the lawsuit was wrong on the facts and the law, and vowed to fight to prove its innocence.
The DoJ’s action comes on the back of mounting threats against American tech giants across Europe.
EU Investigating Allegations of Digital Markets Act Violation by Google and Apple
Apple, Google, and Meta Platforms – the parent of Facebook, Instagram, and WhatsApp – are likely to be investigated in the bloc for potential violation of the Digital Market Act (DMA). The companies could face a hefty fine and even break-up orders for repeated breaches, that is according to unnamed sources with direct knowledge of the matter.
Last year, the EU’s antitrust chief Margarethe Vestager accused Google of anti-competitive practices in its ad-tech business, paving the way for more drastic measures. At the time, she said that the only way Google could avoid conflicts of interest would be by agreeing to sell some of its assets.
European regulators say this would prevent Google from allegedly favoring its digital advertising technology services over other advertisers and online publishers. The company disagrees with the EU’s accusations.
Vestager is expected to issue a final decision on the matter by the end of this year.
Meanwhile, European Parliament lawmaker Andreas Schwab said regulators want bold action against Big Tech, flouting rules. He said that the only other possibility for not complying with the DMA is to break up the companies. “The ultimate goal is to make the market open, fair, and allow more innovation,” he said in a press conference on Friday.
Regulators More Likely to Impose Hefty Fines Than Issue Break-Up Orders
However, it is not clear if regulators will issue break-up orders against the tech giants as they consider options. In the end, any action may result in imposing a hefty fine. Legal experts also suggested that the case against Apple would be more complicated.
Damien Geradin, a lawyer at Geradin Partners, said that compared to Google, the highly integrated system of devices and software by Apple would make it a tough task to break up the company.
He took the example of Apple’s App Store, arguing that it doesn’t make sense to divest something that is so integrated with the ecosystem. Geradin suggested that a much more logical approach would be to impose behavioral remedies on the company that obligate it to do certain things.
In the case of Google, he said a break-up order could target the various acquisitions made by the Pixel-maker over the years to strengthen its key services.
Max von Thun, director of the advocacy group Open Markets, said the more likely scenario would be the DoJ ordering Apple and Google to open up hardware functionality to make sure that developers “aren’t being discriminated against in terms of pricing”.
Apple derives most of its $400 billion-a-year revenue from selling its hardware products – iPhone, Mac, iPad, and Watch – while roughly $100 billion a year is generated by its services business – iCloud, Apple TV, and Apple Music.
In the most recently reported fiscal year, Google’s revenue amounted to $305.6 billion. A big chunk of the revenue comes from advertising, amounting to $237.8 billion in 2023.
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