Apple’s buyback bonanza could be casualty of antitrust crackdown

Should companies be punished for handing money back to shareholders? The Department of Justice seems to think so.

In the midst of its landmark lawsuit against Apple, the antitrust enforcer noted disapprovingly of the company’s $77bn buyback scheme in 2023: not because it was a lazy deployment of capital but as an indicator of what the DoJ dubbed “anti-competitive and exclusionary” conduct.

The sprawling antitrust lawsuit is the product of a five-year probe and will take years to resolve. But scrutiny can mean change before either party steps into a courtroom. Apple’s mammoth buyback programme could be one casualty. 

In the last fiscal year, Apple spent twice as much buying back its own shares as it did on R&D. Over the past 10 years the size of its buyback scheme dwarfs both its R&D spend and the buyback schemes from peers, adding up to a total of $658bn, according to data from S&P Global.

Alphabet’s programme, the second largest, was less than half that at $240bn. Alphabet’s buybacks were also not much larger than the size of its R&D spend over the period. 

Buybacks decrease share counts and flatter earning per share figures. In the technology sector they are more popular than rigid dividends. Markets can reward their introduction and enlargement as a sign of confidence. When Uber announced its first buyback programme last month, the share price rose 15 per cent.  

The DoJ case takes aim elsewhere, of course. It points to the high price of smartphones, the grip Apple has over app distribution and lack of access it provides to the iPhone operating system. It seeks to prove lack of competition in markets in which Apple faces serious rivals and in which users are able to switch to different products and services. Apple, which says the lawsuit is wrong on facts and law, has always maintained that control is integral to quality and essential to maintaining user privacy and security.

By comparing the size of Apple’s buyback programme to its R&D spending, the DoJ is highlighting what it believes is Apple’s insulation from competition and lack of incentive to innovate — something it says harms consumers. The department does not, however, mention the popularity of large scale buyback programmes across the innovative tech sector.

Apple’s stock repurchases slowed last year, dipping with falling revenue. This matched a wider trend in which S&P 500 spending on buybacks fell 14 per cent on the previous year. But while the rest of the sector is expected to raise buybacks in 2024, Apple has reason to hold still.

elaine.moore@ft.com