The influence that index funds such as BlackRock, Vanguard, and State Street have had on markets is unmistakable. They are so influential that both President Donald Trump’s Justice Department and Federal Trade Commission filed a statement of interest in Texas’s lawsuit against those same companies for distorting energy markets by “using their management of stock in competing coal companies to induce reductions in output,” which led to higher energy costs for consumers.
But these influences go beyond energy markets. Index fund interactions with the tech industry are also affecting consumers, specifically in how companies such as Apple can use them to attack competitors, as it is attempting to do to health-tech upstart Masimo.
In 2013, Apple reached out to Masimo, a small but pioneering medical technology company known for its breakthroughs in noninvasive patient monitoring, to discuss a partnership. What followed would set off a decadelong saga involving trade secrets, corporate recruitment, and ultimately, a high-stakes battle for control of Masimo itself.
In 2019, the U.S. Patent and Trademark Office issued several patents to Apple that overlapped with Masimo’s trade secrets. How did Apple come by these trade secrets? Well, Apple hired the chief technology officer of a Masimo spinoff company and roughly 20 of Masimo’s engineers. We know this because the patents listed Masimo’s former CTO as an inventor. According to Masimo, these patents contained technology and trade secrets that originated from Masimo’s own innovations. The company then sued Apple for trade secret theft and patent infringement.
Despite the legal battle, Masimo pressed on and launched its pulse oximeter watch, which Time Magazine named as one of the best inventions of 2024. Masimo then acquired Sound United, a billion-dollar audio company with more than 20,000 distribution channels, to expand its consumer reach. The acquisition positioned Masimo to introduce new wearable and hearable devices on a global scale. In 2023, Masimo also announced another competitor to Apple’s watch, the Freedom smartwatch, which featured even more privacy protections, safe radiation levels, and advanced biosensing capabilities.
In short, Apple felt serious competitive pressure from Masimo. Worse for Apple, the International Trade Commission applied an injunction halting U.S. sales of Apple Watches with pulse oximetry features that offended Masimo’s patents and other intellectual property.
One would think that this would be where the story ends, right? Wrong. Apple had an ace up its sleeve: its relationship with BlackRock.
Apple’s relationship with BlackRock is very well established. For instance, outside of its nearly 7% stake in the company, BlackRock co-founder Susan Wagner has served on Apple’s board for over a decade.
By 2024, BlackRock increased its stake to 17% in Masimo, which gave BlackRock an immense amount of influence within the company and may have assisted in a hostile takeover of the company vis-à-vis an activist investor group called Politan Capital.
Let’s unpack that.
In 2022, an activist investor group at Politan Capital, founded by Aaron Kapito, the son of BlackRock co-founder and president Rob Kapito, and Quintin Koffey, launched a campaign against Masimo. Politan raised over $1 billion to pursue the company, calling for sweeping management and board changes. In a key ruling, U.S. District Judge James Selna of the Central District Court of California found that Politan had made multiple false statements in its proxy materials and held the firm in contempt before the vote. Masmio even subpoenaed investor communications from proxy advisory firms ISS and Glass Lewis, which released negative reports about the company the same day Politan Capital sued Masimo.
Also, right before the vote, Masimo and Google announced a partnership in which Google would send companies that wanted to create Android-compatible watches to Masimo for not just Wear OS but also Masimo’s biosensing and watch technology. This would have ensured Masimo’s bright future in a space worth $50 billion a year.
Even so, on Sept. 19, 2024, BlackRock, with the assistance of Fidelity, State Street, and Vanguard, voted in favor of Politan’s slate, handing control of Masimo to the activist investors. Immediately after the vote, BlackRock reduced its Masimo stake from 17% to 7% for no apparent reason.
Following the change in control, Politan moved quickly to replace Masimo’s management and halted several of the company’s projects that directly competed with Apple’s offerings. Almost overnight, Masimo went from the global clearinghouse for Wear OS software and biosensing technology to being sold off for parts. Worse for consumers, it was no longer a competitive threat to Apple.
THE FUNDAMENTAL REASON AI PROSPERITY WILL RESIST THIS ECONOMIC WINTER
But the events surrounding the proxy fight and subsequent changes raise complex questions about corporate influence, competition, and the balance of power in technology and healthcare. As Masimo’s new leadership redirects its strategy, the implications for innovation and for the integrity of small innovators in an era dominated by trillion-dollar institutions remain profound.
The reality is that these background relationships Apple, and likely other tech companies, have with BlackRock and other index funds should send red flags to every competition regulator. Frankly, these entities operate in complete opacity, and it’s becoming clear that Big Tech has found yet another avenue to exploit free markets and kill competitors without competing. We need transparency and the DOJ and FTC to step in, just as they did in the energy markets.
Aiden Buzzetti is the president of the Bull Moose Project.