☀️☕️ Brussels Bruises Apple

📝 Focus

• Brussels Bruises Apple

📊 In the Markets

• Tesla drops; Macy’s Bid Upped; Spirited Away; Turkish inflation 67%; TSMC all time high; Japan holds above 40K; China premier’s silence;

📖 MoneyFitt Explains

• 🎓 Antitrust - competition and markets

💸 Personal Finance Corner

• FIRE Movement: Advantages, Disadvantages and Tips!

📝 Focus

Brussels Bruises Apple

Brussels has fined Apple €1.84 billion ($2 billion) for stifling competition from rival music streaming services, remarkably the first time the tech giant has ever been penalised for breaching antitrust laws in the EU. The fine is much larger than anticipated and follows complaints from competitors who view any fine, even in the hundreds of millions, as a mere “slap on the wrist” considering Apple’s immense size and cash balances: At the end of the last financial year, Apple’s net cash balance was about $5.8 billion with total cash and cash equivalents of over $20 billion.

Margrethe Vestager, the EU's competition chief, accused Apple of abusing its dominant position in the music streaming market through the App Store, where Apple gets to clip 30% of payments for itself. The bloc's decision aims to address complaints from rivals like Spotify, which were prevented from even informing iPhone users about alternative, cheaper subscription options beyond Apple's ecosystem, violating EU antitrust rules. (There are such options??)

Apple intends to appeal the decision, definitely signalling protracted legal battles ahead. The tech giant contends that the European Commission's ruling lacks credible evidence of consumer harm and overlooks the competitive dynamics of a thriving market ON the App Store.

..... ▷ The European Union (EU) has been taking a more assertive stance than the UK and even the Biden-led United States when it comes to antitrust actions against tech giants. 

In 2022, The European Parliament signed a landmark law with the Digital Markets Act, targeting tech giants to curb their abuses against smaller rivals. 

"Gatekeepers" violating the DMA could be fined up to 10% of their global revenues.

In contrast, the US and the UK have been criticised for being less aggressive in their enforcement, with some arguing that fines are not proportionate to the companies' size and profits.

The EU also looks beyond traditional antitrust violations and investigates other aspects, including data privacy, unfair practices and abuse of dominance. Its US and UK counterparts tend to focus more narrowly on specific antitrust issues, such as mergers and monopolistic behaviour.

..... ▷ While this is a (slightly?) painful first for Apple, several of its megacap and tech peers have been reeling from EU fines for years. 

Google has faced several significant fines from the EU for antitrust violations related to its search engine dominance and Android operating system. 

The largest fine came in 2018 when the EU fined parent Alphabet €4.34 billion (about $5.1 billion) for abusing its dominant position in the mobile market, hindering competition and stifling innovation by imposing restrictions on Android device manufacturers and app developers.

Microsoft has also been fined by the EU multiple times for antitrust violations. Its largest fine came in 2004 when it was fined €497 million for abusing its dominant position in the PC operating system market and bundling the Windows Media Player with Windows, which limited competition.

Ah, the good old days when half a billion euros meant something. 

In 2009, the EU fined Intel €1.1 billion for antitrust violations by offering rebates to computer manufacturers to exclude rival AMD's chips. In 2018, Qualcomm was slapped with a €997 million fine for antitrust violations related to its pricing practices, specifically paying Apple to exclusively use its chips in iPhones and iPads.

..... ▷ But Amazon managed to avoid what could have been the most stupendous fine of all by reaching a settlement with the European Commission in 2022 to address antitrust allegations. The main one was using independent sellers’ data to its advantage, given Amazon’s dual role as both a marketplace and a competitor to the merchants selling on its platform.

The company committed to stopping the “systematic” use of that non-public data to benefit its own retail businesses, including branded goods and private label products. 

Had Amazon not settled, it could have faced a fine of up to 10% of its global annual revenues, which for Amazon could have been as high as $47 billion.

📊 In the Markets

The S&P 500 closed marginally lower on Monday, with Apple down 2.5% after a $2-billion EU antitrust fine (above.) 

But of the Mag7, Tesla dropped much more, losing 7.2%, taking its losses this year to 24%, on 19% weaker February China sales and a renewed price war with BYD, which responded to last week’s new Tesla incentives with further price cuts. BYD saw February sales down 37% compared to a year earlier. (Chinese New Year last year was in January.)

And of the Mag7, Nvidia was (of course) the only winner, leading chip stocks up again to drive the index to intraday records on a blend of optimism and desperate FOMO from institutional and retail investors alike over AI demand. 

However, the index slipped late in the day, with traders awaiting key economic indicators like Fed chair Jay Powell’s testimony to the Senate Banking Committee on Thursday and non-farm payrolls (jobs) on Friday.

Super Micro Computer stock surged 19% in Monday trading following its selection to join the S&P 500 on the 18th of March. The AI industry frenzy has pushed its market cap above $50 billion, and it will replace white goods maker Whirlpool.

Macy's shares surged 14% after Arkhouse Management and Brigade Capital upped their bid for the department store operator (and underlying property owner) from $21 to $24 per share, valuing it at $6.58 billion. The revised offer represents a 38% premium to Macy's closing price on Dec. 8 when talks began. [MFM: Bricks, Mortar and Macy’s]

JetBlue Airways and Spirit Airlines scrapped their $3.8-billion merger agreement due to a U.S. judge's block in January over antitrust concerns. The Biden Administration applauded the decision, citing worries about higher ticket prices. The collapsed deal would have created the fifth-largest U.S. carrier and alleviated deepening Spirit's financial woes. But Reuters reports that privately, JetBlue execs have sighed in relief while their stock rose 4%. Spirit dropped 11%. [MFM: Spirited Away, JetBlue Off]

Gold prices neared record highs amid expectations of US Federal Reserve interest rate cuts, which boosts the relative demand for the non-yielding asset and potential banking industry troubles. Demand for the safe-haven asset has fueled a 16-month-long rally. Spot prices reached $2,098 per troy ounce on Monday, up 0.7% after a 2% jump on Friday. 

Meanwhile, in the largest country in Europe (IF you include the population in both the European and Asian parts of the country) and the 18th largest in the world, Turkey’s inflation surged to a 15-month high, reaching 67% annually in February, again above the best guesses of Ankara’s Finest.

The Turkish central bank has kept interest rates up at 45% since June, despite President Recep Tayyip Erdoğan's well-known hatred of high rates. But the bank, under a new governor, maintains that it will only consider raising rates further if there's a substantial and lasting upward shift in underlying inflation.

Japan’s popular press benchmark, Nikkei 225, surged to a new all-time high, closing above 40,000 points on Monday, driven by loose monetary policy and a weak currency, making it the world’s best-performing major index this year. 

The last peak was reached on the last day of 1989 and is often morbidly referred to by traders as Tokyo’s “iron coffin lid”, a symbol of Japan’s multiple decades of deflation, economic stagnation and feeble market performance. No more!

Expectations are that Japan’s central bank will raise interest rates sometime this year after nearly a decade of negative rates, potentially sucking home an immense wave of domestic funds parked profitably for years in overseas assets. [MFM: A Yen Tsunami and a Big Mac; New BoJ Boss’ Job: Don’t blow up the world]

Meanwhile, Japan’s broader Topix index, which is followed much more closely by market professionals, edged up 0.2%. Global money has flowed into Japanese stocks amid investor shifts away from China due to the economic slowdown and geopolitical tensions, even as domestic households capitalised on a new government-subsidised savings scheme. 

In a rare surprise during its annual rubber stamp political events, China will cancel the customary press conference of its premier, currently Li Qiang, the low-key number two official in the country. Starting this year, the move discontinues a platform for the premier's policy showcase, reflecting the waning influence of premiers under President Xi Jinping, China’s most powerful leader since Mao Zedong. 

South Korea’s Kospi gained 1.21% after a long weekend. Over in Taiwan, TSMC, the world’s largest contract chipmaker, counting Nvidia among its major clients, hit a record high as investors continue to pile into artificial intelligence plays. 

Oil prices ticked up a little, with US crude oil benchmark West Texas Intermediate briefly surpassing $80 per barrel for the first time in four months, following OPEC+ producers' widely expected decision to extend crude supply cuts.

📖 MoneyFitt Explains

🎓️ Antitrust - competition and markets

While it may seem anti-capitalistic for a government agency to stop one private company from buying or merging with another on either agreed or hostile terms, there are strong reasons for it to happen!

Competition or antitrust laws exist to protect consumers from unlawful monopolies or unfair business practices, which would harm them through higher prices and less competition, while benefiting certain powerful companies.

The stated mission of the US Federal Trade Commission (FTC) is to protect the public from deceptive or unfair business practices and from unfair methods of competition. The European Competition Commission and the Competition and Markets Authority in the EU and UK, respectively have similar mandates.

Preventing mergers and acquisitions from resulting in monopolies is perhaps the easiest part of the job, but firms that have become monopolies or overly concentrated market power can also be broken up.

Collusion between several companies in formal or informal cartels with practices such as price fixing is also forbidden, though proving it in court can be a lot harder.