Big Tech is facing its most serious test in decades, as antitrust authorities on both sides of the Atlantic hammer down on suspected anticompetitive activities that might result in breakup orders for Apple and Alphabet’s Google, a first for the sector.
This, in turn, may encourage watchdogs throughout the world to pile on, as indicated by the increasing number of antitrust investigations in other countries following the initiation of EU and US cases. Since AT&T’s breakup precisely 40 years ago, no firm in the United States has faced the prospect of a regulator-led breakup until today.
Google has stated that it disagrees with the EU’s charges, whilst Apple has stated that the US case is incorrect on both the facts and the law.
AT&T, often known as Ma Bell, was divided into seven autonomous businesses known as “Baby Bells” in 1984, establishing one of the twentieth century’s most formidable monopolies. AT&T, Verizon, and Lumen are the only remaining companies.
Regulators now claim that corporations like Apple and Google have created impenetrable environments around their goods, making it impossible for users to transfer to other services, resulting in the term “walled gardens.”
The US Department of Justice cautioned Apple, a $2.7 trillion firm, on Wednesday that a break-up order is not out of the question as a remedy to restore competition, after partnering with 15 states to sue the iPhone manufacturer for monopolising the smartphone industry, stifling rivals, and inflating prices.
Nonetheless, the case, which Apple has pledged to defend, is expected to take years to resolve.
The US steps follow other growing threats throughout Europe this week.
Big Tech will face increased scrutiny soon, with Apple, Meta Platforms, and Alphabet likely to be investigated for potential Digital Markets Act (DMA) violations that could result in hefty fines and even break-up orders for repeated breaches, people with direct knowledge of the matter told Reuters on Thursday, on condition of anonymity.
Last year, EU antitrust commissioner Margrethe Vestager paved the ground for harsh measures by accusing Google of anti-competitive conduct in its money-making adtech division and stating that the company may have to offload its sell-side capabilities.
She stated that compelling Google to sell part of its assets appeared to be the only option to avoid conflicts of interest since it would prohibit Google from allegedly preferring its own online digital advertising technology services over advertisers and online publishers.
Vestager is anticipated to make a final ruling by the end of this year.
Andreas Schwab, a European Parliament legislator who was significantly engaged in the formulation of new EU DMA tech legislation that went into effect this month, stated that MPs expect robust action against Big Tech companies that break the rules.
“If they don’t comply with the DMA, you can imagine what Parliament will want. Break-ups. The ultimate objective, he stated on Friday, is to make markets more open, fair, and conducive to innovation.
Breaking up is difficult to do.
It is far from guaranteed that authorities will issue a break-up order while they consider their options, and any action may only result in a fine. Legal experts have stated that the case against Apple, modelled after the 1998 case against Microsoft, may be more challenging this time.
“In the European Union, there is less of a tradition, with a corporation being separated as a last resort. “It has never happened before,” said a Commission official who spoke on condition of anonymity.
According to lawyer Damien Geradin of Geradin Partners, who is representing multiple app developers in previous claims against Apple, Apple’s heavily integrated system would make a break-up more difficult than Google’s.
“It appears to be considerably more difficult. You are referring to anything that is integrated; for example, you cannot compel Apple to divest its App Store. “That doesn’t make sense,” he explained.
He believes it is preferable to impose behavioural remedies on Apple that require it to do particular things, but in the case of Google, a break-up order may simply target acquisitions undertaken to bolster its core services.
“What’s more likely is that they (the DOJ) will pursue remedies such as opening up hardware functionality or ensuring that developers are not discriminated against in terms of pricing,” said Max von Thun, director of advocacy organisation Open Markets.
“I think they want to say that everything’s on the table, but it doesn’t necessarily mean they’ll choose that path,” he added.
Apple earns the majority of its over $400 billion in income each year from hardware sales (iPhones, Macs, iPads, and Watches), followed by its Services segment, which generates around $100 billion.
Assimakis Komninos, a partner at legal firm White & Case, stated that structural remedies like as breakups would eventually be tried in court.
“I would say that experiences of imposed structural measures, such as breakups, are not many, but the small past experience shows that this is very tricky, aside from the formidable legal challenges,” he went on to explain.