Analyst Laura Martin quotes at length from skeptical regulatory experts at the Technology Policy Institute (TPI).
From a note to clients that landed on my desktop Wednesday, starting with Martin's preamble:
Yesterday, the House subcommittee on Antitrust released a 450-page report outlining anti- competitive threats posed by AAPL, AMZN, FB and GOOGL. Our key take-aways from the 45 AAPL pages include: a) dozens of complaints about AAPL (out of the 20mm app developers and 1.8mm apps in AAPL's App Store), with zero positives about AAPL's value to consumers or life- improving innovations; b) underscores AAPL's strong shareholder value proposition and finds fault with widely used business practices such as bundling; and c) most complaints about AAPL are biz judgments (they charge too much, they pre-load their apps, etc), and not easily fixable through regulation. Finally, because AAPL's core asset is access to nearly 1B of the wealthiest consumers, we do not expect this report to materially impact valuation.
Quoting from the TPI's "Is There Evidence of Antitrust Harm in the House Judiciary Committee’s Hot Docs?"
Relating to key issues raised by the House report about AAPL, regulatory experts at Technology Policy Institute (TPI) believe:
- "The key regulatory question is whether Apple uses the App Store to systematically foreclose competition or engage in unfair or deceptive practices using quality control as an excuse. This question cannot be answered by claims of a few developers, whose particular apps may have been technically deficient, failed to meet some security standard, or whose apps were unfortunately harmed by legitimate changes in the App Store. "
- "Determining whether Apple behaved anti-competitively when it pre-loads its owned 40 apps will involve considerations such as the difficulty of downloading and installing replacements for AAPL's pre-loaded apps (ie, none), the level of integration of AAPL's owned apps with its operating system, and any negative effects on innovation inside AAPL's app ecosystem."
- "Whether Apple’s app review policies are antitrust violations will hinge on how its policies affect the market and whether prosecutors can prove that the issues raised are not just disputes between large companies over how to distribute profits and protect user privacy/security. Not being able to pay for Netflix and Spotify within an app are not, by definition, harms. To prove harm, a plaintiff would have to demonstrate that their absence foreclosed access, thereby harming consumers."
Buy rating and $140 price target unchanged.
My take: Martin (or staff) did her clients a huge favor by stripping out the footnotes and weird formatting in yesterday's committee report and quoting the full text of the 45-page Apple section.