Google And Apple Could Split As Regulators Target Tech Companies

(CTN News) – Apple and Alphabet’s Google may face break-up orders, which would be a first for the industry, as antitrust regulators crack down on alleged anti-competitive practices.

After the EU and U.S. cases were opened, there was a growing number of antitrust probes in various countries. The last time an American company faced the possibility of a regulator-led break-up was exactly 40 years ago.  According to Apple, the U.S. lawsuit is wrong on the facts as well as the law, as Google disagrees with EU accusations.

In 1984, AT&T, also known as Ma Bell, was broken up into seven independent companies. At the moment, AT&T, Verizon, and Lumen remain.

As a result, walled gardens have been coined by regulators as a result of companies such as Apple and Google creating impenetrable ecosystems around their products.

After partnering up with 15 states to sue the iPhone maker for monopolising the smartphone market, thwarting rivals and inflating prices, the Department of Justice warned Apple, a $2.7 trillion company, that breakup orders are not excluded as a remedy to restore competition.

Despite Apple’s vowed fight, the case may take years to decide. Earlier this week, other threats across Europe mounted. Apple, Meta Platforms, and Alphabet are likely to be investigated for potential Digital Markets Act (DMA) violations shortly, according to sources familiar with the matter. For repeated breaches, hefty fines and even break-up orders could result, according to people with direct knowledge of the matter.

A year ago, Margrethe Vestager, the EU’s antitrust chief, accused Google of anti-competitive practices in its money-making adtech business and suggested it might have to divest its sell-side tools.

According to her, Google should sell a portion of its assets to avoid conflicts of interest, as it would prevent Google from favoring its own online digital advertising technology services over advertisers and publishers. By the end of the year, Vestager should make a final decision.

Legislators want bold action against Big Tech that flouts rules, according to Andreas Schwab, who heavily contributed to the EU’s landmark tech regulations.

The DMA will force breakups if they don’t comply, he warned. Markets should be open, fair, and innovative.

It’s hard to break up with someone

While regulators mulling options, any action may just result in a fine rather than a break-up order. In addition, lawyers suggested this case against Apple might be more difficult than the one against Microsoft in 1998. It has never been done before in the European Union, where splitting a company is viewed as a last resort.

Damien Geradin at Geradin Partners, who is advising several app developers in cases against Apple, said Apple’s highly integrated system would make a break-up difficult. “It seems much more complicated. You can’t force Apple to divest its App Store. That makes no sense,” he said.

For Apple, he suggested imposing behavioural remedies that make it do certain things, while for Google, a break-up order could simply target acquisitions made to strengthen its core businesses. As Max von Thun, director of advocacy group Open Markets, puts it: “The DOJ is more likely to go for remedies like opening hardware functionality or making sure developers aren’t unfairly priced.”

Despite saying everything’s on the table, he said they may not choose it. Hardware — iPhones, Macs, iPads and Watches — accounts for the majority of Apple’s nearly $400 billion-a-year revenue, followed by services, which generates around $100 billion.

White & Case partner Assimakis Komninos said breakups will ultimately be tested in courts.

Despite the lack of experience regarding imposed structural measures, such as breakups, he stressed that it is very challenging.

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