Why Apple Shareholders Should Fear the Government

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Nobody wins in court, especially corporations being sued by the Department of Justice. From the days of Teddy Roosevelt smashing the monopoly of Big Oil, the government has been shattering corporations with too much market share for more than a hundred years.

That track record is why the DOJ accusing Apple (AAPL) and six different publishing houses with colluding to inflate textbook prices. These actions resulted in "consumers paying millions of dollars more for some of the most popular titles" in the words of Attorney General Eric Holder.

According repeat Breakout guest Sean Udall, author of Minyanville's TechStrat Report, what Apple investors need to fear is less a fight over textbooks than an government-sponsored attack on iTunes.

"The case that would worry me tremendously would be if the government or DOJ sued Apple over massive control of the music industry via iTunes," the long-time Apple shareholder says in the attached video.

According to Udall's work, Apple controls 65 to 72% of music distribution; dangerously close to the 80% area that typically triggers government attention. To make an iTunes case stick it would have to prove not just control but that Apple was using market dominance to raise prices.

In other words, even if Apple could "win" an iTunes monopoly trial it would make raising prices on songs without provoking the DOJ almost impossible.

If a case is made against iTunes, Apple faces either an inability to raise prices or a mandatory release of market share. Apple loses even if they win. That lose-lose choice, not the textbook case is what Apple shareholders need to fear.

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