Big Tech faces its most significant challenge in decades as antitrust regulators on both sides of the Atlantic intensify their scrutiny of alleged anti-competitive practices.
This heightened scrutiny could potentially lead to break-up orders directed at industry giants such as Apple and Alphabet’s Google, marking a pivotal moment for the technology sector.
“In 1984, AT&T (T.N), also known as Ma Bell, was broken up into seven independent companies called ‘Baby Bells’ to dismantle one of the most dominant monopolies of the 20th century.”
This historical precedent underscores the gravity of the current situation. Since the dissolution of AT&T four decades ago, no company in the United States has faced the prospect of a regulator-initiated breakup until now.
Google has stated its disagreement with the European Union’s accusations, while Apple has countered the U.S. lawsuit, asserting its position on both factual and legal grounds.
Regulators contend that companies like Apple and Google have erected formidable ecosystems around their products, creating what are commonly referred to as “walled gardens.” These closed systems make it challenging for consumers to switch to competing services, thereby stifling competition.
“The U.S. Department of Justice issued a warning to Apple, a $2.7 trillion company, indicating that a breakup order could be considered as a measure to restore competition.”
This warning, coupled with a lawsuit filed by 15 states against Apple for alleged monopolistic practices in the smartphone market, highlights the severity of the situation. Despite Apple’s vow to contest the case, the resolution is likely to be protracted, potentially spanning several years.
Moreover, the actions taken by U.S. authorities coincide with a wave of escalating threats across Europe, indicating a broader global trend towards intensified antitrust enforcement.
Big Tech is bracing for heightened scrutiny, with Apple, Meta Platforms (META.O), and Alphabet poised to face potential investigations for alleged violations of the Digital Markets Act (DMA).
Sources familiar with the matter, speaking on condition of anonymity to Reuters on Thursday, revealed that these investigations could result in significant fines and, in severe cases, breakup orders for repeated breaches.
Last year, Margrethe Vestager, the European Union’s antitrust chief, laid the groundwork for these decisive measures by accusing Google of engaging in anti-competitive practices within its lucrative ad tech sector.
Vestager suggested that Google might need to divest its sell-side tools to address these concerns.
