An Apple Anti-Trust Probe, and Hong Kong’s Second SPAC Merger

By Doug Young & Rene Vanguestaine

Growing scrutiny of Apple by China in a rumored anti-trust investigation raises fundamental questions about the nature of competition and regulation in global markets. Apple and Google have long enjoyed a duopoly in the app store ecosystem, charging developers hefty fees — sometimes as high as 30% of their revenue — for the privilege of selling through the two companies’ popular app stores. While these fees have been a point of contention for many developers worldwide, China’s sudden shift to take a closer look at this business model is what’s sparking the latest interest.

The reasons for China’s renewed interest in Apple’s practices seem tied to the iPhone maker’s broader competition with Huawei, a Chinese tech giant that has made significant strides in developing its own operating system and app store. Huawei’s growing competitiveness in the mobile phone market, particularly within China, could be a driving force behind the investigation. By pressuring Apple and Google to lower their app store fees, China could be creating a more level playing field for domestic players like Huawei. As is often the case in China, the motivations behind these moves are multilayered, blending competition policy with geopolitical strategy. Given Huawei’s growing market share, this investigation could serve both as a regulatory action and as a subtle nudge to encourage more local innovation.

While many might feel sympathy for app developers who face high fees, it’s worth noting that Apple and Google have offered robust platforms with unparalleled reach. In some ways, the fees could be justified by the value these platforms provide, and as long as there’s no overt collusion between the two giants, one might argue that it’s simply a reflection of a successful business model. After all, in the real world, businesses — just like individuals — must pay to access resources that allow them to thrive. The question, then, is whether these tech giants’ dominance is stifling competition or whether it is simply a result of their ability to offer exceptional products that developers and users demand.

This investigation is occurring as geopolitical tensions are rising, especially between China and the U.S. Just weeks before the rumored probe into Apple, China launched a similar antitrust investigation into Google, though it didn’t reveal the nature of the probe. The timing is curious, especially since Google has long been absent from the Chinese search market, having withdrawn in 2010 over censorship disputes. The Chinese government, which has historically held a grudge against Google for refusing to comply with its information control demands, may see this as an opportunity to pressure the company. While Apple may be more directly tied to the Huawei competition, the scrutiny of Google underscores a broader push by China to assert control over foreign tech companies operating within its borders, especially considering the possibility of Google’s return to China in the future.

Hong Kong’s Struggling SPAC Market

Shifting gears to Hong Kong, the slower-than-expected pace of the stock exchange’s special purpose acquisition company (SPAC) program reflects broader issues within the region’s financial ecosystem. While SPACs have gained traction in markets like the U.S., their performance in Hong Kong has been lukewarm at best. Hong Kong’s second-ever SPAC listing, the merger between Aquila Acquisition Corp. and ZG Group, is moving forward, but the broader trend is clear: few companies are jumping on the SPAC bandwagon in Hong Kong, and the regulatory timeline is tightening.

The challenges faced by Hong Kong SPACs are multifaceted. While SPACs were initially hailed as an innovative financial instrument, they have fallen out of favor, especially in markets like the U.S., where enthusiasm for these vehicles has waned in recent years. The lack of liquidity in Hong Kong’s stock market, compounded by regulatory constraints, has made SPACs less attractive to investors. A recent decision to ease regulatory requirements for De-SPAC deals reflects a sense of urgency, but also highlights shortcomings of the program. Lowering the threshold for independent third-party investors may make it easier to get deals done, but it could also reduce the transparency and accountability that make such deals viable in the long term.

Ultimately, Hong Kong’s struggle with its SPAC initiative may reflect a broader issue: the difficulty of creating financial products that can thrive in an unpredictable and competitive global market. Unlike initiatives where the government can exert significant control, such as the Hong Kong-Shanghai and Hong Kong-Shenzhen Stock Connect programs, the free-market nature of SPACs means that their success depends heavily on investor appetite and market conditions — factors that are beyond the direct influence of regulators.

About China Inc

China Inc by Bamboo Works discusses the latest developments on Chinese companies listed in Hong Kong and the United States to drive informed decision-making for investors and others interested in this dynamic group of companies.

Subscribe to China Inc on your favorite app:

Apple Podcasts

Spotify