German Antitrust Regulators Probe Apple, With Focus On App Store

Apple Inc. AAPL has come under the scanner of German antitrust regulators for alleged anti-competitive practices.

What Happened: The Bundeskartellamt, or the Federal Cartel Office, has initiated proceedings against Apple, in accordance with an amendment to the German Competition Act that came into force in January.

As the first step into the process, the regulator will now look into whether Apple, with its proprietary operating system, iOS, has created a digital ecosystem around its iPhone that extends across several markets.

The regulator also referred to Apple's many products and a host of device-related services the company offers, including the App Store, iCloud, AppleCare, Apple Music, Apple Arcade and Apple TV+.

"Besides assessing the company's position in these areas, we will, among other aspects, examine its extensive integration across several market levels, the magnitude of its technological and financial resources and its access to data," said Andreas Mundt, president of the Bundeskartellamt.

The main focus of the investigations will be on the operation of the App Store as it enables Apple in many ways to influence the business activities of third parties, he said.

The regulator also said it will look into various complaints it has received, including those from the advertising and media industry against Apple restricting user tracking with the introduction of its iOS 14.5 operating system, and a complaint against the exclusive pre-installation of the company's own applications as a possible type of self-preferencing.

Related Link: Amazon Being Probed By U.K. Anti-trust Regulator Over Use Of Data: Report

App developers have also complained about the mandatory use of Apple's own in-app purchase system and the 30% commission rate associated with this, according to the German regulatory agency.

This dynamic has common ground with the European Commission's ongoing proceeding against Apple for imposing restrictions on the streaming service Spotify Technology S.A. SPOT.

"Where necessary, the Bundeskartellamt will establish contact with the European Commission and other competition authorities in this regard. So far, no decision on initiating a further proceeding has been taken," the agency said.

Why It's Important: Apple is the fourth big tech firm that has been taken to task by the German antitrust regulator. The Bundeskartellamt already has ongoing investigations against its FAANG counterparts Alphabet, Inc. GOOGL (GOOG), Facebook, Inc. FB and Amazon.com, Inc. AMZN.

Apple has locked horns with Epic Games Inc. in a court battle over whether its policies have resulted in a monopoly over the digital payments landscape.

Regulatory clampdowns are one of the key risks these big tech firms are facing. Among the likely outcomes are potential breakups of businesses and opening up businesses to competition.

"You may see some sort of curtailment where they come in and say you guys can't do that, you have to open [your businesses] up, I think that'd be one of the easier ones to initially address as opposed to going after a major breakup," a S&P report said, citing Daniel Morgan, a senior portfolio manager at Synovus.

Apple shares were up 0.85% at $131.58 at last check. 

Related Link: Apple Could Take 50% Bite Out Of Intel's Business In 2021: Report