Rotten Apple!

There may be a rotten little maggot in Apple wiggling its way out as the EU antitrust-violation commission starts an inquiry after having been contacted by industry participants. Apple’s contracts with EU cellphone carriers are stricter than usual and in the face of popularity of the iPhone, those carriers have had little all else to do but to sign on the dotted line.

If Apple is found guilty after the EU Commission investigation, they may find themselves on the receiving end of a call to pay up to 10% of annual sales for anti-competitive behavior. That’s the paper version though. The EU has rarely imposed such a fine and will more than likely try to settle to dispute (if it comes to that) out of court amicably. But, as usual, it will take years. So, don’t start thinking that you’ll get the iPhone cheaper than you can today!

Shareholders and investors seem relatively unfazed with the whole kerfuffle and Apple was up again at the close of business on Friday by 0.68% (+3.01 to $445.15). Today is a holiday in the US and trading will begin tomorrow. But, it doesn’t look like it will have an effect on shares. Do people really care if the apple is rotten to the core? Or are they more interested in what they can get personally. It’s having the iPhone that counts, not whether they got it to you fairly and squarely. Take a bite of the apple and the maggot gets swallowed anyhow. It’s all the same.

It’s not the first time anyhow that Apple Inc. has suffered minor setbacks in the antitrust-violation field.

  • In 2005 they had a lawsuit brought against them for having changed the encoding technology the previous year (2004) for the Apple iPod, making it incompatible with other music-downloading software programs. They had created a monopoly situation. There was an inquiry by the Competition Commission and Apple ended up agreeing to lower its prices, but the case was dismissed by the US courts.
  • The British magazine Which? Brought a case against Apple in 2008 for antitrust violation since they were selling songs on the European version of iTunes for more than in the US and elsewhere. Apple was found to have had no deals with record companies to fix prices higher, but was simply responding to higher wholesale prices in the EU. But, there’s no smoke without fire some will say and Apple might be taking us for people who are half-baked.
  • In 2008 Apple and AT&T Mobility saw an investigation inquiry for having conspired to monopolize the market and having committed unfair and deceptive trade practices. Customers of AT&T Mobility were not in apposition to bargain the price of their iPhones as they were locked into agreements over two-year periods. The claims are still in dispute.
  •  A more recent case in April 2012 saw the US Justice Department file a case against Apple, HarperCollins, Penguin Books and others in a bid to prosecute them for having colluded to maintain prices of e-books low so as to fight against the encroaching swipe at the market successfully taken by Amazon in that field. Only three of the six publishing houses that were prosecuted are still being investigated. Others have had to settle bills of millions of dollars. Apple is one of those still under investigation for antitrust violation.

Sales for the first quarter of 2013 that have just been released show a better-than-expected average for iPhone sales. It was expected that they would sell 36.5 million, but that figure saw an increase on expectations of almost a million (37.4 million). This was for all sales of iPhone 4, 4s and 5 models. The improved sales resulted in a short burst on the market for iPhone (as it increased by 6%, before falling). Shareholders will get $100 billion in dividends as a result of sales. There are over 85 million people that have bought an iPhone in the US alone since 2007. That’s big business. Apple won’t be willing to let go of its monopoly situation, whether that’s in violation or not of antitrust laws in the EU.

Whether they’re playing footsie with the phone carriers in the EU or not, the bottom dollar is that the customers want the iPhone. Others are trying to break into the market and get a share of the (Apple) pie, but, with difficulty.

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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