Apple Stock Drops Amid Scrutiny from Chinese Regulators

Apple Inc (NASDAQ: AAPL) shares are down on Wednesday, influenced by new reports indicating that Chinese antitrust authorities are considering a probe into Apple's App Store practices and fees.

What You Should Know: The State Administration for Market Regulation in China is investigating Apple's App Store policies, particularly the fees it levies on in-app transactions. Bloomberg reports suggest that the focus is on the payment services that Apple offers to its App Store users.

Sources familiar with the situation mention that discussions between Chinese regulators and Apple executives, as well as discussions with App Store developers, have been ongoing since last year. These conversations are reportedly centered around conflicts between Apple and the developers of popular apps in China.

The dialogues began prior to the administration of former U.S. President Donald Trump, but the timing is crucial given the escalating trade tensions between the United States and China. Following Trump's announcement of extensive 10% tariffs on all imports from China, the Chinese government responded with its own set of tariffs. This occurred alongside a swift launch of a formal investigation into Google shortly after the U.S. tariffs took effect.

Insiders suggest that if Apple resists proposed changes, China might initiate a formal investigation against the company. Chinese authorities are reportedly concerned that Apple may be imposing “unreasonably high” fees and stifling competition by prohibiting third-party app stores and alternative payment methods.

In response to regulatory pressures, Apple previously revamped its App Store practices in the European Union, adhering to mandates under the Digital Markets Act. Notably, the European Commission fined Apple over 1.8 billion euros (approximately $1.95 billion) for blocking competitors from offering payment alternatives outside its App Store. Apple has indicated its intention to contest this ruling.

China represents a significant market for Apple, as the company produces a majority of its iPhones there. Additionally, it stands as the second-largest market for smartphones, computing, and artificial intelligence products, following the United States.

Last week, Apple reported $18.51 billion in sales across Greater China during the fourth quarter, a decline from $20.82 billion in the same period the previous year.

AAPL Stock Performance: At the time of this report, Apple shares had fallen by 1.54%, trading at $229.35, according to market data.

Apple, China, Stocks