Apple’s $85 Billion Services Business Faces Legal Challenges in 2024

Apple is set to face significant legal and regulatory challenges in 2024 that could impact its profitable $85 billion USD annual services business.

What’s at stake? The outcome of a series of decisions by US and EU authorities in the coming months will be crucial in determining the future of this segment of the iPhone maker, according to an overview of what Apple is up against, according to The Financial Times.

A key issue for Apple is the ongoing US antitrust trial against Google. It was revealed during the trial that Google paid over $26 billion USD in 2021 to make its search engine the default on Apple devices. According to independent analyst Eric Seufert, these payments constitute a quarter of the annual revenues of Apple’s services arm. If Google loses the case, it might be forced to stop these payments to Apple, posing a significant financial impact.

In addition to the Google trial, Apple faces increasing scrutiny from the Biden administration over the dominance of its App Store. The company is already being forced to make changes in the EU due to new legislation aimed at curbing the power of Big Tech. This scrutiny represents one of the biggest threats to Apple’s business in years.

The Google trial, considered the most significant antitrust monopoly trial in Washington in over 25 years, will hear closing arguments in May. “The question in the background was: ‘if Apple is going to have an auction for that prime placement, what should Google have done?’” said Bill Kovacic, a former Federal Trade Commission chair.

Jonathan Kanter, head of the Department of Justice’s antitrust unit, has been vocal about his intention to bring cases against major US companies. His department has been investigating Apple’s App Store policies for years and is now “firing on all cylinders” to potentially bring a case against Apple.

In the EU, Apple is preparing for significant changes due to the Digital Markets Act. The company will have to allow sideloading, enabling iPhone users to download apps from sources other than its App Store. This move, which Apple has resisted citing security concerns, could impact the App Store’s revenue, where Apple charges up to a 30% fee on digital purchases.

The App Store’s policies have been under scrutiny, especially after a landmark trial against Epic Games in California. Epic Games, along with other competitors, is pushing to launch rival app stores and payment methods on Apple devices.

For investors, the uncertainty surrounding these legal and regulatory actions poses a challenge in assessing the potential risks to Apple’s business. Gene Munster, managing partner at Deepwater Asset Management, suggests that investors have been complacent but should take these developments seriously. The Supreme Court is set to review a case related to App Store policies next year, adding to the array of challenges facing Apple.

Apple will remain happy as long as customers keep paying for services. Apple recently increased subscription prices increase across the board in Canada and beyond.