Apple (AAPL) Proxy Statement Mentions Antitrust Risks

Mitigating antitrust risks is now a major issue for Apple

Apple Inc. (AAPL) has drawn widespread attention over multi-million-dollar pay raises for its senior executives, including CEO Tim Cook, as announced in its 2021 notice of annual meeting and proxy statement. While this is newsworthy, a more significant revelation in that proxy statement is Apple's indirect acknowledgment that potential antitrust action against the company has become a major business risk. This is the first time that Apple has discussed antitrust risks in its proxy statement.

  • Apple indicates growing antitrust risks in its 2021 proxy statement.
  • Mitigating these risks is a major concern for managers and directors.
  • This is the first time that Apple has made such an assertion.

App Store Under Fire

In October 2020, the Judiciary Subcommittee on Antitrust of the United States House of Representatives released a report that criticized Apple's App Store for holding "monopoly power" over the sale of apps for use on the iPhone, resulting in "supra-normal" profits. Tim Cook was among the witnesses called to testify in the course of the subcommittee's hearings. Additionally, Apple is facing antitrust and anti-competitive probes in other jurisdictions, including the European Union (EU).

Privately held Epic Games, Inc., the creator of the popular game Fortnite, has launched an antitrust lawsuit against Apple, accusing Apple of a "series of anti-competitive restraints and monopolistic practices" with respect to the App Store. Tim Cook is expected to be called to testify in this matter.

Meanwhile, Chinese-based Tencent Holdings Limited (TCEHY) has a 40% stake in Epic Games. The Committee on Foreign Investment in the United States (CFIUS), which is chaired by the United States Treasury Department, has asked various companies related to Tencent, including Epic Games, to provide details on their security protocols regarding the personal data of Americans. 

In a move that probably was designed to deflect some criticism of the App Store, Apple previously announced that commissions would be cut in half for small app developers. Called the App Store Small Business Program, this initiative took effect on Jan. 1, 2021.

Apple's Statement on Antitrust Risks

Its 2021 proxy statement says that "Apple's significant business risks" include, among other matters, "antitrust compliance." Moreover, it indicates that Apple has an "Antitrust Compliance Officer" who works closely with the Audit Committee of the company's board of directors, which has "primary responsibility for overseeing enterprise risk management," including "antitrust compliance."

A section headed "Selected Areas of Audit Committee Oversight" includes a paragraph on antitrust. It states, in full: "The Audit Committee and Board regularly review and discuss with management Apple's antitrust risks. Apple's Antitrust Compliance Officer is responsible for the development, review, and execution of Apple's Antitrust Compliance Program and regularly reports to the Audit Committee. These reports cover, among other matters, the alignment of the program with Apple's potential antitrust risks, and the effectiveness of the program's design in detecting and preventing antitrust issues and promoting compliance with laws and Apple policies."

Apple's proxy statement also asserts that experience in "antitrust compliance" is among the qualifications considered in the selection of directors. However, the thumbnail biographies of the eight directors, including the four who are members of the Audit Committee, do not indicate specifically what, if any, experience in antitrust compliance these people have.

Significance for Investors

Apple apparently recognizes growing antitrust risks and is trying to take measures to mitigate them. It is unclear, at this point, how significant these risks may become and whether Apple's actions will prove to be sufficient to reduce the potential negative impacts.

Article Sources
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  2. CNBC. "Apple adds new section about antitrust risk to its annual proxy statement," Jan. 7, 2021.

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  4. 9 to 5 Mac. "Apple's annual proxy statement confirms antitrust risks for the first time,"

  5. 9 to 5 Mac. "Epic Games sues Apple over App Store rules, says it would create a competing iOS app store if allowed,"

  6. Bloomberg. "Tencent’s Gaming Stakes Draw U.S. National Security Scrutiny,"

  7. Apple Inc. "Notice of 2021 Annual Meeting of Shareholders and Proxy Statement," Pages 17-18.

  8. Apple Inc. "Notice of 2021 Annual Meeting of Shareholders and Proxy Statement," Pages 24-28.

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