Will antitrust regulators please stand up — Apple’s free pass
By Nicolas Petit
Last week, Russia’s competition authority said that Apple colluded with resellers to fix the price of its iPhone. This unprecedented decision closes a long period of antitrust leniency towards the giant iPhone maker. And it also puts front and center the question of Apple’s industry dominance. According to every metric, Apple indeed appears to be a textbook monopoly. And yet, many antitrust eyes still seem unable to see it.
Let’s take a closer look, and pierce the veil of antitrust forbearance: year after year, Apple sits atop the rankings as the most successful company of the 21st century. It has been the world’s largest company by market capitalization for some time. It is also the most profitable company in the history of the modern economy. Its flagship product, the iPhone, is the most expensive mass-market smartphone ever sold. On each device, Apple’s earns a 69% gross margin. Last year, industry analysts were taken aback when Apple outsold Samsung.
Granted, high prices and large profits do not a monopolist make. So let us consider other metrics: amongst Tech’s frightful five, Apple is the slacker when it comes to investing in innovation. It spends less than 3.3% of its revenue on research and development. By way of comparison, Google, Microsoft and Facebook devote around 15%. In 2016, Apple did not even feature in the EU ranking of the top 50 highest R&D-intensive companies, trailing behind a host of less glitzy manufacturers of telecoms infrastructure equipment like Nokia and Ericsson and even of mundane suppliers of cars, chemicals, and agricultural products. At such low levels of R&D investment, it is even questionable that Apple can be called a “high tech” company (the minimum to be part of that league is 5–7.5%).
Apple also features as the world champ dividender in financial analysts’ recommendations. Instead of retaining earnings to devote to internal R&D projects as a patient capitalist, Apple returns comparatively more profits to shareholders than any of its peers. It also sits atop a mountain of unproductive capital.
