This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Amidst escalating trade tensions between the US and China, Bloomberg reports that China is investigating Apple’s App Store for charging excessive fees. China announced an anti trust investigation against search engine giant Google yesterday, with reports adding that the scrutiny would cover Google’s Android platform and its impact on Chinese firms such as Xiaomi and Oppo. Now, according to a fresh report, the country’s State Administration for Market Regulation (SAMR) is investigating whether Apple’s AppStore commissions are excessive and if its decision to exclude external payment platforms and application stores from its platforms is warranted.
Apple Might Face Action In China At A Time Its iPhone Sales Are Slowing In The Country
Apple’s developer commissions with the App Store and its decision to restrict the iOS platform to applications available only through the App Store have long been a source of controversy in the technology industry. One such case occurred in 2020 when video game developer Epic Games sued Apple for restricting external payment platforms on its devices after Apple blocked Epic’s Fortnite for introducing alternative payment mechanisms.
This strategy is also under the radar of Chinese authorities, as per Bloomberg. In its report, the publication quotes anonymous sources to note that Apple’s 30% revenue share for in-app spending and the decision to limit external payment platforms are being scrutinized by China’s State Administration for Market Regulation (SAMR). Bloomberg adds that the scrutiny is in the preliminary stages and might not translate into a full investigation if discussions are fruitful.
The report comes after Apple’s fiscal first quarter earnings in January reported a mixed bag of results. While the firm beat analyst earnings expectatons, a slowdown in China led it to miss those for revenue. During the quarter, the firm earned $18.5 billion revenue through China which marked an 11% annual drop. The drop was in sharp contrast to the revenue Apple earned from all other geographical regions, which grew across the board.
Apple’s bread and butter iPhone sales also declined during the quarter. However, the firm was eager to note that it grew Services revenue by 13% annually to make up for some of the shortfall. Apple’s Services business includes its AppStore revenue, and any potential action in China – which was its third biggest market in the quarter – could create headwinds for the business division.
Bloomberg’s sources believe that the Chinese government could launch a formal investigation into Apple if the firm does not acquiesce to requests for changes. The investigation could be part of a broader Chinese strategy to respond to President Trump’s attempts to reduce America’s trade deficit with the country. While China’s response to the President’s 10% tariffs was muted, reports such as the one today could be Beijing providing an early look at its future strategies that could involve more American companies caught in the crossfire of trade tensions between the world’s two largest economies.
