Big Tech is facing its biggest challenge in decades as antitrust regulators on both sides of the Atlantic crack down on alleged anti-competitive behavior that could lead to breakup orders for Apple and Alphabet Inc’s Google, a first for the industry .
This in turn could inspire regulators around the world to step up their efforts, as evidenced by the rising number of antitrust investigations in various countries following the opening of EU and US cases. Not since AT&T split up exactly 40 years ago has a company in the United States faced the possibility of a regulatory-led breakup.
Google said it disagreed with the EU’s charges, while Apple said the U.S. lawsuit was factually and legally wrong.
In 1984, AT&T (aka Ma Bell) was broken up into seven separate companies called the “Baby Bells,” creating one of the most powerful monopolies of the 20th century. AT&T, Verizon and Lumen are currently the only surviving entities.
Regulators now accuse companies like Apple and Google of building impenetrable ecosystems around their products, making it difficult for customers to switch to rival services, leading to the term “walled garden.”
The U.S. Justice Department warned Apple on Wednesday that the $2.7 trillion company would not rule out issuing a breakup order as a remedy to restore competition after joining 15 states in suing the iPhone maker for monopolizing the smartphone market and frustrating rivals. and inflationary prices.
Even so, a verdict in the case could take years, and Apple has vowed to fight the case.
The U.S. action comes as other threats mount across Europe this week.
Big tech companies will soon face greater scrutiny, with Apple, Meta Platforms and Alphabet likely to be investigated for potential Digital Markets Act (DMA) violations that could result in hefty fines, people familiar with the matter said. Repeat violations even resulted in breakup orders, a person told Reuters on condition of anonymity on Thursday.
Last year, EU antitrust chief Margrethe Vestager accused Google of anti-competitive behavior in its profitable ad technology business and may have to divest its sell-side tools, setting the stage for tough measures. Leveled the road.
She said requiring Google to sell some of its assets appeared to be the only way to avoid conflicts of interest because it would prevent Google from allegedly favoring its own online digital ad technology services over advertisers and online publishers.
Vestager is expected to make a final decision by the end of the year.
MEP Andreas Schwab, who was heavily involved in drafting the landmark EU DMA tech rules that came into effect this month, said lawmakers wanted to take bold action against big tech companies that flout the rules. action.
“If they don’t comply with the DMA, you can imagine what Parliament will ask for. Break up. The ultimate goal is to make the market open, fair and allow for more innovation,” he said on Friday.
Breaking up is hard
It is uncertain whether regulators will issue a break-up order as they consider options and any action could result in fines. Legal experts also say the case against Apple, which draws on the 1998 case against Microsoft, may be more difficult this time around.
“There is little tradition in the EU of breaking up companies as a last resort. This has never happened before,” said a European Commission official who spoke on condition of anonymity.
Damien Geradin, a lawyer at Geradin Partners, said Apple’s highly integrated systems would also make a breakup difficult compared with Google’s. Geraldine Partners is advising several app developers in other cases against Apple.
“In my opinion, it’s much more complicated. You’re talking about integrated things, like you can’t force Apple to spin off its App Store. It doesn’t make sense,” he said.
He said it would be better to impose behavioral remedies against Apple to force it to do certain things, while in Google’s case, a breakup order might only target acquisitions to strengthen its key services.
“More likely, they (the Justice Department) seek remedies such as opening up hardware features or ensuring developers are not discriminated against in pricing,” said Max von Thun, director of the advocacy group Open Markets express.
“I think what they’re trying to say is everything is on the table, but that doesn’t necessarily mean they’re going to choose that path,” he said.
Most of Apple’s nearly $400 billion in annual revenue comes from hardware sales — iPhones, Macs, iPads and watches — followed by its services business, which will bring in about $100 billion a year.
Structural remedies such as breakups will eventually be tested in court, said Assimakis Komninos, a partner at law firm White & Case.
“I would say there’s not a lot of experience with enforcing structural measures such as break-ups, but the small amount of experience in the past has shown that, in addition to the daunting legal challenges, it’s very tricky,” he said.
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