One of the biggest uncertainties for U.S. tech stock investors these days is the growing uncertainty surrounding potential antitrust action. Companies like Facebook, Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Apple, Inc. (NASDAQ: AAPL) and Alphabet, Inc. (NASDAQ: GOOG)(NASDAQ: GOOGL) have all either been the subject of antitrust investigations or been accused of non-competitive practices.
Nomura Instinet analyst Mark Kelley recently held a conference call with Glenn Manishin, Managing Partner at ParadigmShift Law, specifically to address antitrust concerns among tech stock investors.
Manishin said there have only ever been four forced divestitures in U.S. history due to violations of the Sherman Anti-Trust Act, and it's unlikely any of the current batch of tech companies will be the fifth. However, he said Facebook is likely the most at-risk of a breakup among the group due to its acquisition of Instagram.
Europe Vs. US
Manishin said the climate in Europe is a completely different story. In the U.S., monopolies are legal as long as they were established legally and do not harm consumers. In Europe, monopolies that hurt smaller competitors are typically heavily regulated.
When it comes to Department of Justice investigations compared to Federal Trade Commission investigations, Manishin said the two agencies have slightly different mandates. The DOJ is only concerned with monopolies, whereas the FTC’s scope is broader and deals with unfair competition.
Manishin said he is least concerned about an Amazon breakup. He sees little evidence of a monopoly in retail, but he said Amazon investors should be most concerned with the FTC going after Amazon for non-competitive behavior.
Apple Services At Risk
Finally, Manishin said Apple’s core iPhone and other hardware businesses are likely not at risk to regulation, but its Services segment may be.
“Services is a risk, not because of the 30% App Store fee, but because of the limits Apple places on competitors such as limiting advertisements and promotions of lower subscription pricing available away from the App Store,” Kelley wrote in a note.
So far this year, the four stocks under regulatory scrutiny have still performed relatively well:
- Facebook shares are up 35.2 percent.
- Amazon shares are up 24.7 percent.
- Apple shares are up 24.2 percent.
- Alphabet shares are up 4.5 percent.
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