Murray's Week In Review.

Business and Financial news round-up.

What follows was written by Matt Murray, former editor-in-chief of The Wall Street Journal. It’s a new feature of News Items. It arrives in your in-box most every Friday at ~noon.

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1. Another sour week for Apple, as the EU slapped it with a fine of 1.8 billion euros, or nearly $2 billion, after a five-year probe. Spotify had complained that Apple had used its platform to favor its own music streaming services over those of competitors, by blocking apps from telling users about cheaper music streaming alternatives outside the App Store. It was the latest in a series of regulations and penalties to target the App Store, most of which are tied to Apple's gatekeeper power and requirements that apps use its in-app payment service for sales (from which Apple takes up to a 30% commission). 

Apple, which last month made some changes in an effort to comply with/appease the EU, said it would appeal, a process that likely will take years, and that investigators had failed to "uncover any credible evidence" of consumer harm or anti-competitive behavior. Spotify, long a vocal Apple critic, crowed that "no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers.” Spotify will quickly test the ruling. Daniel Ek made it clear the company will keep going after Apple. Piling on, Epic said Apple had suddenly canceled a developer account in Sweden just weeks after approving it. 

Tim Cook's company is now on a collision course with Brussels due to the landmark Digital Markets Act (see below), which is especially tough for Apple's model. It and other new rules are fracturing the App Store worldwide, a growing challenge for Apple. Meanwhile, an independent report suggested that Apple sales fell 24% in China in the first six weeks of 2024, further battering its shares, which are down 12% on the year.

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2. Speaking of the DMA, the landmark law in Europe took effect Thursday and two stories in two leading publications offered almost opposite views on its effects. As a reminder, the new law requires six designated gatekeepers--Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft--to comply with more stringent rules and forces them to allow rivals to share information about their services.  Big Tech howled to the Biden administration, but it didn't press the issue.

This FT story wonders how much difference it will make:  

There is little evidence yet to suggest that the law is having the desired effect. Industry groups representing travel apps such as Airbnb and Booking.com, and entertainment apps like Spotify and Deezer, complain the tech companies are focused on the letter of the law rather than the spirit of it, and it is having no meaningful impact on their businesses. 

Judging by the record stock market highs enjoyed by some of these companies, Wall Street doesn’t believe it will have much practical effect on profits or the level of competition either — particularly as the tech industry hurtles into the AI age, resetting the competitive dynamics in some of the core tech markets. 

“The impact is likely to be very small. It really won’t change behaviour that much,” says a portfolio manager at one big investor in tech. “It feels like another case of regulators and politicians trying to regulate industries in ways they just don’t understand.”

This NYT piece sees the DMA and other laws clearly changing behavior, if slowly, arguing that a "global tipping point for reigning in the largest tech companies has finally tipped:

The companies have been forced to alter the everyday technology they offer, including devices and features of their social media services, which have been especially noticeable to users in Europe. The firms are also making consequential shifts that are less visible, to their business models, deal making and data-sharing practices, for example.

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