CIBC Tech & Innovation Market Update – April 2024

The latest in a recent string of antitrust lawsuits from the Federal Trade Commission (FTC) and Department Of Justice (DOJ) targets smartphone maker and tech giant Apple. The Justice Department, joined by 16 state and district attorneys general, filed a civil antitrust lawsuit last week which alleges the company engaged in antitrust activities in the smartphone market, bringing about higher prices and reduced innovation. The lawsuit has been long anticipated, after years of regulatory scrutiny around Apple’s suite of devices and services. However, the case is likely to carry on for years before any resolution is reached and any implications for consumers become clear, which is likely why Apple’s shares have already almost recovered from a slight drop on March 21 when the suit was filed.

In March, the U.S. House of Representatives overwhelmingly passed a bill that would see social media app TikTok’s Chinese parent, ByteDance, forced to divest the U.S. assets of the business or face a nationwide ban. Just one year ago, TikTok CEO Shou Zi Chew testified before Congress regarding the app’s connection to the Chinese government, maintaining that the data from its U.S. users is stored in the U.S. and the Chinese government has no access or control of the app. However, in light of the upcoming U.S. election, intelligence officials have been warning House and Senate party members about user data access by the Chinese government and how TikTok could be used to interfere in the upcoming presidential election. In Canada, the federal government has launched a national security review of the app.

The European Commission fined Apple €1.84 billion in early March for preventing competition from music streaming rivals through its App Store. The penalty appears to be intended to be overly punitive: the total amount comprises a basic penalty of €40 million plus a large lump-sum amount of €1.8 billion meant to deter Apple from repeating the same or similar infringement. The oversized fine could be a precursor for what’s to come; the EU’s Digital Markets Act (DMA) came into effect on March 6. The DMA targets big tech companies that “gatekeep” and prevent competition. Potential fines under the act are significant—up to 20% of annual global revenue for repeat violations.