A trillion-dollar tech giant can brush off fines but altering the way it operates is a different matter
The only certainty about the EU competition commission’s inquiry into Apple is that it will take years to complete, which is probably why the iPhone maker’s share price was gloriously untroubled. The other reason for the air of calm is that financial penalties from the EU – even when delivered in the billions, as they often are – can be brushed off as small change by big tech companies with trillion-dollar valuations.
But there is a difference with this inquiry, which could ultimately be important. Margrethe Vestager, the EU’s indefatigable competition chief, is taking aim at two large and increasing sources of Apple’s revenue – the App Store and Apple Pay. With the former, she wonders if Apple’s commission rates of up to 30% are a rip-off. On the payment system, she’s asking why iPhone users can’t use other people’s tap-and-go technology.
The broad lines of argument can be predicted. Apple will plead that developers are entitled to fair rewards; that consumers aren’t obliged to buy its gadgets; and, on Apple Pay, that the need for security is paramount. The commission can argue that tech gatekeepers, however inventive and security-minded, shouldn’t restrict consumers’ choices.
The point, though, is that if the commission finds against Apple, the usual remedy of a large fine isn’t going to cut it. The only logical outcome would be to force a change in Apple’s way of doing business, at least within the EU. Given that Apple is reckoned to generate $1bn (£780m) a month from App Stores alone, the stakes are high – certainly higher than when Google’s irrelevant shopping website was probed for similar reasons.
To repeat: a result will take ages, and small armies of lawyers and lobbyists will now go to work. But this has the potential to be the biggest EU competition inquiry in years, conducted, no doubt, to the usual jeers from Washington and Silicon Valley that Vestager is on an anti-US mission. She usually wins, though.
Greggs’ tone on rents should set alarm bells ringing
Greggs is a well-run, well-capitalised business that attracts customers to high streets in droves, a strength its management is keenly aware of, to judge by the tone of Tuesday’s comments on rents.
“All landlords have been informed of our plan to move to monthly rent payments from June,” the baker said baldly. It paid in full on a quarterly basis in March, but no longer. If there was a negotiation, it was probably one-sided. Greggs and other high-street magnets have clout; landlords, no longer do.
For the latter, it gets worse. “We have reviewed our existing estate,” continued Greggs, “and are approaching landlords making a variety of proposals in return for rent reductions.” The chain offered no examples of what it’s offering, but it clearly expects a successful outcome. Maybe the landlords can hope for a free vegan sausage roll.
In the wider retail world, eyes are fixed on next Wednesday’s quarterly rent date, which is likely to be another washout from the point of view of landlords. Only about a third of rent was collected in March, when non-essential stores were closing. The figure could be lower this quarter.
But the Greggs example illustrates how the issues go deeper than just a single rental period. A permanent reset of rental levels is in prospect, accelerating trends that already existed. One can’t blame strong tenants, who are merely looking out for their own interests, but the medium-term implications could be enormous. Is anyone in central government thinking about budget shortfalls at local authorities with over-exposed commercial property portfolios? They should be.
Raab takes a pop at HSBC
“Let me just put it this way, we will not sacrifice the people of Hong Kong over the altar of banker bonuses.” So said Dominic Raab, the foreign secretary, on Monday, taking a pop at HSBC for its public support for China’s new security laws.
If HSBC chairman Mark Tucker has a plan to solve the bank’s political headache, he has yet to share it. In the meantime, shareholders may note that all the corporate pivoting to Asia hasn’t delivered much.
HSBC’s share price is about a third lower than when Hong Kong was handed back to China in 1997. More than a few other banks have done worse in the same period, but it’s still a remarkable statistic.
• This article was amended on 17 June 2020 to correct the conversion of $1bn into £790m.