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Apple's antitrust problems grow worse in Europe

Apple's antitrust problems grow worse in Europe

 



The EU is eating into Apple

The European Union on Monday accused iPhone maker Apple of stifling competition in its App Store, intensifying the company's feud with regulators around the world, a violation that could result in hefty fines and threatens to upend a highly profitable part of the tech giant's business.

The company, which has a market capitalization of $3 trillion, is the first to be charged under the Digital Markets Act, a landmark 2022 EU law aimed at reducing the power of six online gatekeepers, mainly in the U.S. Among those under investigation are Amazon, Google and Meta, with the Financial Times reporting that Microsoft could face charges related to its market power.

The EU's accusations against Apple are as follows:

The App Store violates so-called steering rules, which regulators argue prevent app developers from easily informing customers about new offers, including cheaper deals, within Apple's ecosystem.

The fees Apple charges are too high.

The European Union is also re-investigating Apple for breaches of rules, including core technology fees, which amount to 0.5 euros per user download.

Apple is facing numerous regulatory hurdles at home and abroad as it tries to play catch-up in the artificial intelligence (AI) race. The company said on Friday it will delay the rollout of new AI products and services in Europe due to regulatory uncertainty.

And the company already faces a possible $2 billion fine from the EU for thwarting competition in the music streaming sector.

The clash poses a major test for the Digital Markets Act, under which fines could reach 20% of global turnover – more than $380 billion for Apple last year – and repeated violations give the EU's executive arm, the European Commission, more powers to force divestments or divestments.

“With a clear and effective DMA toolbox, we are determined to finally deliver real opportunities for innovators and consumers,” said European Union Internal Market Commissioner Thierry Breton.

Apple and other tech giants are expected to challenge the scope of the markets law in court.

Apple has argued that its app store is beneficial to other companies. The company said on Monday that it is making some changes to its app store to comply with the DMA and is confident that its plans comply with the law.

Another crackdown is looming in the United States: In March, the Department of Justice, the District of Columbia, and 16 states filed an antitrust lawsuit against Apple, alleging that the company designs its products to tie customers to their devices, harming consumers and small businesses.

In other Apple news, the Wall Street Journal reports that the company and longtime rival Meta are in talks to collaborate on AI.

What's going on?

Federal prosecutors are said to be recommending criminal charges against Boeing. According to Reuters, potential cases against the embattled plane maker could stem from accusations that it violated a 2021 settlement related to the deadly 737 MAX crashes in 2018 and 2019. Under the terms of that agreement, Boeing agreed to overhaul its compliance practices. The company has since been investigated for defects in more plane models.

ByteDance is reportedly working on developing sanctions-compliant AI chips. According to Reuters, the Chinese tech giant, which owns TikTok, is working with US semiconductor giant Broadcom to design advanced processors for artificial intelligence. This is the latest effort by Chinese companies to get around US sanctions that severely limit the export of advanced AI processors to China.

Advertising agencies are said to be preparing for a possible ban of TikTok in the U.S. According to the Financial Times, marketing companies are adding terms to their contracts, including so-called kill clauses, to avoid financial consequences if the video platform is blocked in the U.S. Advertising dollars are also shifting to rival platforms.

Y Combinator is leading a new campaign against proposed artificial intelligence regulations in California. The influential startup accelerator and the 140 founders it backs said the bill, which would require risk assessments and transparency for large-scale AI models, could stifle the industry's fastest-growing sector. Silicon Valley has met with near-unanimous criticism of the bill.

Exclusive: Czech Vista bidder raises bid again

The bidding war for Vista Outdoor, the parent company of CamelBak water bottles and Remington ammunition, is heating up again.

Vista announced Monday that it had accepted a $2 billion acquisition offer for its ammunition business from Prague-based defense company Czechoslovak Group, as first reported by DealBook.

Details: The Czech group known as CSG will add $90 million to its original offer (it had previously increased its bid last month).

Under the terms of the new deal, Vista shareholders will receive $18 in cash for each share of the ammunition division, known as Kinetic Group, and one share of stock in the company's newly publicly traded outdoor sports division.

The move is the latest development for Vista, which has repeatedly rejected a takeover bid from MNC Capital, an investment firm run by a former Vista director. MNC has made a $3 billion-plus offer that it says offers better financial terms and is not subject to the national security investigation the Czech company is facing.

But Vista argues that a deal with CSG would create greater value for shareholders and would also have national security approval.

Another bidder briefly emerged to buy Kinetic this month, and Vista said it fully expected its offer to be better than CSG's. (Vista did not name the bidder, but DealBook identified it as JDH Capital, an investment firm with ties to energy tycoon Jeffrey Hildebrand, after the Financial Times first reported on the deal.)

But days later, Vista announced that the new bidder had withdrawn. Behind the scenes, MNC had opposed JDH's proposal as the two companies had earlier considered a joint bid for Kinetic.

The new CSG deal will pose new challenges for Vistas' meeting on the deal, which is scheduled after a postponement for July 2. Glass Lewis, one of two leading proxy advisory firms, has recommended supporting the CSG proposal.

But another institution, Institutional Shareholder Services, changed its mind last week. It is now recommending shareholders abstain from voting on the CSG offer, citing regulatory uncertainty about the proposal. It supports Vista's move to postpone the meeting again and resume negotiations with MNC.

New developments in Tesla's legal fees battle

After Tesla shareholders overwhelmingly reapproved a multibillion-dollar compensation package for Elon Musk, some are now using the vote for a different purpose: to reject billions of dollars in payouts to the lawyers who challenged it.

Background: Tesla investor Richard Tornetta sued the company over Musk's compensation plan, which was approved at the company's annual meeting in 2018. Delaware Chancery Court Chief Justice Katherine McCormick invalidated the plan in January, saying shareholders hadn't been informed of how much influence the CEO had in creating it.

Tesla put the plan to a second vote at its annual shareholder meeting this month, and it was approved by 72% of voters, excluding Musk and his brother Kimbal, including investment giants Vanguard and BlackRock.

Tornetta's lawyers, meanwhile, are seeking court approval for a stock payment valued at $5.6 billion, of which Tesla argues the lawyers should only receive a fraction of that.

The plaintiffs have not presented any evidence that they have benefited Tesla or its shareholders, two individual investors wrote in a motion opposing the costs claim, pointing to the sharp drop in Tesla's stock price immediately after the ruling as evidence of damages. (The investors claim to own more shares than Tornetta, who owned nine shares at the time of his lawsuit in 2018.)

As Musk's fans, they pointed out that they and others had twice voted for him to win big money.

Tornetta's lawyers fought back on Friday, arguing that the judge's invalidation of Musk's vote reversed the massive dilution caused by the stock option grants, essentially restoring about $51 billion in value to the company.

But they proposed to the court a cash payment, probably around $1.44 billion, as an alternative to the stock payment they had sought.

The pay fight is about much more than the potentially record payout: An appeal of McCormick's decision to invalidate Musk's compensation plan can't go forward until the amount to be paid to the plaintiffs' lawyers has been decided.

What's next: A hearing on the fee request is scheduled for July 8, but Tesla last week requested a postponement.

There was peace in the valley for a while, but now it is in chaos.

Communications and media billionaire John Malone talks about the future of streaming, which is disrupting his cable TV empire and undermining media giants as they invest billions in trying to catch up with Netflix.

The coming week

The big event this week is the first debate between Biden and President Donald Trump, airing on CNN on Thursday, and both likely feeling the momentum: Biden has a slight lead in the polls and President Trump has closed his fundraising gap.

DealBook is watching to see if the candidates have clearer answers on how they would manage the economy and treat businesses in a second term. Voters have consistently criticized Biden's handling of the economy, even as some indicators show the U.S. outperforms other countries. Some experts say Trump's plan, which includes extending sweeping tariffs and tax cuts, will be inflationary, but a growing number of business leaders are backing him in the hope of expanding deregulation.

This doesn't mean that American companies are flocking to Trump again, Jeffrey Sonnenfeld of the Yale University Chief Executive Leadership Institute wrote in a guest essay for The Times.

So far this year, not a single Fortune 100 CEO has donated to the candidate, marking a stark shift from the overwhelming corporate and business support for Republican presidential candidates going back more than a century, from Taft to Coolidge to Bush, all of whom had the heads of dozens of major companies donating to their campaigns.

Other notables this week include:

Tuesday: The Conference Board is scheduled to release its monthly consumer confidence index. FedEx and Carnival Corp. report quarterly earnings.

Thursday: Nike and H&M report earnings, offering potential clues about the outlook for consumer spending.

Friday: The Fed's preferred inflation gauge, the personal consumption expenditures price index, is due to be released, which could influence whether the central bank cuts interest rates once or twice this year.

Speed ​​Read

Bargain Deals

UPS has agreed to sell Coyote Logistics for about $1 billion, a significant drop from what it paid for the freight-brokerage business in 2015. (WSJ)

Prosus, a major European technology investment firm, announced that its e-commerce business is finally profitable after increasing its focus on profitability. (Prosus)

Elections, politics, policies

Best remaining

There's inflation, and then there's pet care inflation, so an MRI or related procedure for a dog or cat now costs thousands of dollars. (NYT)

It's Summer in the Financial World (WSJ)

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Sources

1/ https://Google.com/

2/ https://www.nytimes.com/2024/06/24/business/dealbook/apple-europe-antitrust-dma.html

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