Can companies under antitrust scrutiny maintain profit growth?

Some of Silicon Valley’s biggest names are embroiled in antitrust lawsuits, and it looks like more are on the way. Can technology companies maintain innovation and profit growth when they come under heavy fire from regulators and trust destroyers?

The answer is that they can, but they must remain agile and focused, learning from others’ mistakes in order to emerge stronger on the other side.

Over the past few years, attorneys general and the Department of Justice have stepped up their efforts to fight Big Tech companies. Google, Meta and Amazon are fighting lawsuits, while Microsoft has stopped combining its Office and Teams tools as a precautionary move.

Apple recently joined the fray, receiving an 88-page complaint from the Department of Justice detailing how the company developed anti-competitive processes to increase revenue.

Although antitrust lawsuits rarely result in company breakups anymore, they can still have a huge impact on target companies, which must navigate the arduous legal process while always keeping an eye on the competition.

Since antitrust lawsuits are not something the government engages in lightly, a company that is the target of one will face the full force of the Department of Justice. This means the stakes are high and executives will be engaged – but distracted.

Although Apple has previously successfully countered such allegations by filing a lawsuit against the iPhone maker, the Justice Department is actually targeting the largest player in the cell phone market, arguing that the company has become so large that it has become a threat – and that now American citizens are being harmed.

This is something that only a relatively small number of companies will ever need to deal with. However, their rarity means that companies often lack a clear playbook on how to navigate these untested waters. Winning the legal battle may actually be the easy part – maintaining market power is where antitrust lawsuits become difficult.

Part of the problem for companies is their size: By the time you get large enough to attract the attention of the Justice Department, you tend to become a much larger and less agile organization.

So if Apple or any of these companies want to maintain large market share, they need to start by looking at the companies’ past problems.

IBM is one of the best examples of the havoc that antitrust action can wreak on a company. After years of growth, by the 1970s IBM was one of the most admired and successful companies in the country.

But when the Justice Department came forward with its anticompetitive allegations, the company looked away from the case. The lawsuit lasted a staggering 13 years, during which IBM was hyper-focused on fighting the suit, making decisions that weakened their overall market position in their pursuit of a better legal position in the antitrust case.

Combined with poor strategic decisions, IBM lost its competitive advantage. This enabled Microsoft to enter the business computing market and create the operating systems and productivity tools that it dominated. IBM’s management became too focused on the case, and although it ultimately won, it was never able to regain its market position.

Microsoft was incredibly successful, but its decision to bundle its web browser software with its core office offerings in the early days of the Internet led to antitrust scrutiny. After the federal government filed an antitrust lawsuit against it, the company effectively handed over its browser and search market to Google, provided Apple with $150 million in emergency financing for competitor behavior, and lost focus. Later, Google and Apple became dominant players, while Microsoft struggled to maintain the relevance of its core offering.

The company was close to dissolution until an appeal put the decision on hold. Microsoft spent about 15 years in the desert, struggling to regain its competitive edge. It wasn’t until 2010, with the launch of Microsoft Azure, that the company could begin to reinvent itself as a cloud-based software company.

The lesson for Apple and the rest of the technology companies currently embroiled in antitrust actions: don’t lose sight of your company’s core competencies and innovations during antitrust ventures, and don’t underestimate the impact of antitrust investigations on distracting you from the attention you need to run your business.

While Apple has had tremendous success in developing its devices and software, the market is moving toward artificial intelligence, and the company cannot afford to let the distraction of an antitrust lawsuit prevent it from continuing to grow.

It’s impossible to predict exactly how the market will behave or what the future of the Justice Department’s pursuit of Big Tech will look like. Some of the question marks surrounding this case will concern the outcome of the presidential election. Would Trump’s Justice Department have the same desire to go after Apple as the current regime?

Big Tech cannot take antitrust action lightly. This is not a slap on the wrist. They have proven to be extremely important in America’s corporate history, and there is no indication that they will not again shape the winners and losers of the next wave of technological development.

Agility is key; focus is essential. Big Tech must be prepared.

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