Evercore: EU probe of App Store could bruise Apple

The antitrust investigation of Apple Pay, not so much, says analyst Amit Daryanani.

From a note to clients that landed on my desktop Tuesday:

All You Need to Know: The European Commission is opening two antitrust investigations into Apple’s App Store and Apple Pay. The first investigation follows complaints by Spotify and Rakuten over Apple’s 30% cut on App Store sales. Both companies have claimed that the 30% fees stifle innovation and limit consumer choice.

The second investigation will assess whether Apple’s payment system violates EU competition rules by restricting access to the NFC functionality.

Both investigations have been discussed as a possibility for months and the investigation of Apple Pay comes months after German lawmakers voted in favor of a bill that would force Apple to allow other companies to access its phone’s NFC chips.

We do not expect much of an impact from the Apple Pay investigation as we think Apple Pay will remain the dominant choice even if Apple is forced to allow competitors access.

The App Store investigation is less certain as lower fees could have a significant earnings impact. We have previously estimate that lowering the fee from 30% to 5% would drive an 11% EPS hit (lowering to 25% would be a 2% impact).

Net/net: These investigations will likely drag on, but we think the main risk is around headlines.

Maintains Outperform rating and $365 price target

Below: The back of Daryanani’s envelope…

apple EU evercore app store

My take: Slow burning fuse. I don’t expect a big bang.

3 Comments

  1. Fred Stein said:
    Apple Pay? Open up access to the NFC Chip? Crazy. Why not open up access to the NFC chip on my other credits cards? Will they demand all other SmartPhones open access to their NFC chips?

    And for what? I can use other CCs on my iPhone already.

    Scary that the commission advanced this idea.

    4
    June 16, 2020
  2. Steven Noyes said:
    Again, the fees Spotify pays is only 30% for the first year. After that, the subscription fee drops to 15%.

    2
    June 16, 2020

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