Barron’s: Worst case, DOJ regulation of Apple would not be so bad

From “Weighing the Antitrust Case Against Google, Apple, Amazon, and Facebook” ($) in last weekend’s magazine:

Apple CEO Tim Cook said this past week that the company doesn’t have a monopoly in its markets. “Our share is much more modest. We don’t have a dominant position in any market,” he told CBS News.

The numbers bear out his statement. In the U.S., for instance, the company’s iPhone had 45% of the market in 2018, according to eMarketer.

But there is another way to measure Apple’s market power, apart from hardware sales. Analysts have said any antitrust probe might focus on Apple’s typical commission of 30% for every app sold on its App Store.

But even in a worst-case scenario where the App Store is regulated, the downside looks relatively limited for Apple. The store represents about 5% of the company’s sales, according to Cowen estimates.

Earlier this month, Morgan Stanley analyst Katy Huberty estimated that if Apple were forced to lower its App Store take rate by 50%, it would negatively affect the company’s value by $13 per share, or 7%. Not a great outcome for shareholders, but certainly not the end of the world.

And before that happens, Apple would surely argue that its App Store, even with its fee structure, has actually supercharged technology innovation over the past decade.

My take: Yup. Worst case not the end of the world. More likely, DOJ finds better things to do.


  1. Fred Stein said:

    Once again, gotta love Katy for giving us a number. That $13 hit is already priced in. And there is good chance that courts will decide in Apple’s favor. And Apple will have several years to buy back shares while this boo / yeah drama plays out.

    June 10, 2019
  2. Jerry W Doyle said:

    One leadership trait I admire about Tim Cook in the running of Apple is his ability to put differences aside that may conflict with his personal and business values and push forward in working with opposing sides in the perpetual hope of enlightening them or at least, in serving as some spirit of edification on outstanding differences. I rolled my eyes when some CEOs abandoned the president’s Business Advisory Council and their willingness to work with him and his staffers. Now these CEOs are on the outside looking in, and have little to no influence with the current administration.

    I’m not worried about the potential antitrust case (if it ever evolves against Apple) from Justice. Cultivating working relationships and establishing appropriate linkages with the right players in Washington is paramount for having a network of resources to tap in times of need. When those CEOs left that Advisory Council they lost out big-time. Tim C stayed. Any sitting president would have appreciated that fact. The existing president “relishes” that fact and will never forget it, imprinted indelibly in his mind who left, and who stayed.

    June 10, 2019
    • David Emery said:

      You lose every game you don’t participate in 🙂

      June 10, 2019
  3. Gregg Thurman said:

    “And there is good chance that courts will decide in Apple’s favor. ”

    Prosecutions are expensive. The higher the profile of the case the more expensive it is. Ergo, prosecutors make a business decision that weighs probable success against the cost of prosecuting an alleged offender.

    I’m not an anti-trust attorney, consequently don’t have enough knowledge to postulate an outcome. But the limited knowledge I do have suggests that in this case the DOJ is barking up the wrong tree.

    In my opinion, Apple created a market where virtually none existed before (mobile apps). That developers are making more (far more) today, despite Apple’s 30% cut, doesn’t seem like developers are being hurt. Neither do consumers. In 2007 there wasn’t a market for feature phone (the vast majority of mobile phones) apps, and those that had “smartphones had difficulty finding apps in the first place not to mention finding apps that worked on their specific handset. Today that isn’t an issue for consumers. Further mobile apps that you could find, and worked on your handset, cost far more than 99¢. Certainly there were none that were free.

    I’m having extreme difficulty finding a scenario whereby it could be logically argued that Apple’s creation of a curated mobile app store hurts anyone (certainly not the attorneys that filed these pieces of sh*t lawsuits).

    June 10, 2019
    • David Emery said:

      The perhaps more significant thing that several lawyers have told me about litigation, “Juries are very unpredictable” You might have an apparent slam-dunk case, but the jury doesn’t get it, and you lose. Or the jury makes an outsized or even outlandish award of damages.

      And that’s before you worry about ‘venue shopping’, e.g. the East Texas district that gets so many patent troll cases.

      June 10, 2019

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