In a huge show of strength against the so-called anti-competitive practices of US tech companies, the French competition watchdog has fined Apple a record US$1.2 billion.
US tech companies have been under intense scrutiny in recent months from European regulators, with various accusations ranging from anti-competitive practices, to tax avoidance, to the mishandling of user’s data.
In this case, Apple was accused of working closely with local resellers to fix the prices of Apple products across the country. This stifled any chance of competition and ensured that everyone selling Apple products were getting an equal, and rather large slice of the Apple pie. This is bad news for consumers and a classic example of market failure.
Whilst Apple is likely to quickly appeal the fine, the action still sends a strong message to American tech giants – who have long dominated European markets and taken advantage of weak regulations and low corporate tax rates – that those highly lucrative days may be coming to an end!
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term market failure?
Q2. Explain why Apple’s actions in the French market are an example of market failure.
Q3. Analyse the possible ways that the French government could deal with the market failure described in the article.
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