Dutch Authorities Order Apple to Change its In-App Payments Policies

Netherlands’ Authority for Consumers and Markets (ACM) has said that Apple Inc.’s (AAPL) App Store broke the Dutch competition laws, and ordered changes to its in-app payment policies. Shares of the iPhone manufacturer closed at $176.28 on December 23.

Dutch Competition Laws

Apple has been facing severe criticism globally for its in-app payment policies, which require app developers to pay a commission of up to 30% on digital goods purchased via its app store.

Lately, the ACM has accused Apple of following anti-competitive policies, especially in the dating market app segment, after initiating a broader investigation into the company’s practices in 2019.

The regulator has ordered Apple to make changes to its in-app system to allow dating app service providers to use alternative payment systems. Failure to do so will result in a fine of up to $56.6 million (50 million euros). Apple has until January 15 to make the changes.

Company Comments

Responding to the statement, Apple said, “We disagree with the order issued by the ACM and have filed an appeal… Apple does not have a dominant position in the market for software distribution in the Netherlands, has invested tremendous resources helping developers of dating apps reach customers and thrive on the App Store.”

Following the news, global dating app provider Match Group (MTCH) said, “We applaud the ruling issued today by a Rotterdam Court affirming the ACM’s decision that Apple’s forced use of its in-app payment systems and other practices violate Dutch and EU competition law, and must be eliminated by January 15th.”

Wall Street View

Recently, Citigroup analyst Jim Suva raised the price target on the stock to $200 (13.5% upside potential) from $170, while maintaining a Buy rating.  

Suva lists 5 reasons for his optimistic view on the stock. These include robust revenue growth aided by strong iPhone demand; the much-awaited Apple virtual headset, which is expected to hit the markets in the second half of 2022; momentum in service revenue growth, which Suva believes will be unharmed by the regulatory hurdles; rewarding shareholders with dividends and stock buybacks; and the company’s plans of launching the Apple Car.

Overall, the stock commands a Strong Buy consensus rating based on 21 Buys, 4 Holds, and 1 Sell. The average Apple price target of $175.28 implies that shares are almost fully valued at current levels. Shares have gained 29% over the past year.

Risk Analysis 

According to the TipRanks Risk Factors tool, the FAANG stock Apple is at risk mainly from its Ability to Sell factor, which contributes 21% towards the total 28 risks identified for the stock. This is followed by an equal 18% risk from 3 other factors, namely Legal & Regulatory, Production, and Macro & Political.

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