Is the EU About to Crack Down on Apple?

Just after Apple (NASDAQ: AAPL  ) got treated to the third degree for its tax practices stateside, the Mac maker may be about to get similarly scrutinized across the pond. According to Financial Times, European regulators are investigating Apple's sales practices in the region as potentially being anti-competitive.

The European Commission has asked carriers about Apple's notoriously strict contractual obligations, since minimum purchase obligations could potentially undermine competitiveness from rivals. Apple also exerts control on marketing and requires that the iPhone isn't disadvantaged with subsidies relative to other OEMs. Additionally, regulators are looking into whether or not Apple inhibits the iPhone 5 from a technical standpoint.

At this point, the investigation is preliminary and there is no formal abuse probe, although several carriers have reportedly complained in private.

Android is still on top
One key consideration of any possible formal proceedings would be overall competition in the smartphone market. Apple has a strong position in European markets, but it's not the dominant smartphone OEM or operating system platform. Like in most markets, Samsung uses a broad product portfolio that includes all price tiers to ship the most volume, which has contributed significantly to Google (NASDAQ: GOOGL  ) Android's rise.

Q1 2013 Market Share

iOS

Android

Germany

16.9%

73.6%

Great Britain

28.7%

58.4%

France

21.2%

63.3%

Italy

19.9%

62.5%

Spain

3.2%

93.5%

EU5

19.4%

68.8%

Source: Kantar Worldpanel ComTech. EU5 = European Union Five (Germany, Great Britain, France, Italy, Spain).

Android is growing much faster than iOS in Europe, which has caused other rivals to file an official antitrust complaint. Google's geographical disclosures don't break out most European countries individually, but the search giant does attribute 11% of last quarter's revenue to the U.K. alone.

Apple's market share in Spain is particularly low after Spanish carriers experimented with eliminating smartphone subsidies, a move that they now regret.

While Apple's tough requirements may be drawing regulatory scrutiny, Android's dominance shows that competition is healthy, which will reduce the possibility of any formal action against the iPhone maker.

There's a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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