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Summary:

Federal authorities are widely believed to be considering an antitrust inquiry of some kind into Apple’s practices regarding development of apps for the iPhone and iPad, with the FTC and the Justice Department discussing a complaint reportedly made by Adobe over Apple’s restrictions on developers.

Federal authorities are widely believed to be considering an antitrust inquiry of some kind into Apple’s practices regarding development of apps for the iPhone and iPad. According to a Bloomberg report quoting sources “familiar with the matter,” a complaint about the company was originally filed by Adobe, whose Flash software has been blocked by Apple from running on either device (the WSJ and New York Times and Reuters have similar reports). The Federal Trade Commission and the Justice Department have reportedly met to discuss a possible inquiry into Apple’s conduct, but it isn’t clear whether one will proceed, or which branch of government will take charge of the investigation if one is actually begun.

If true, this marks a dramatic escalation of a battle that has been going on between Apple and the Flash maker for several years. Apple founder and CEO Steve Jobs has repeatedly criticized the company and its technology for being buggy, a resource hog and insufficiently advanced for his liking, and Apple recently changed its developer agreement to specifically block a workaround that Adobe had come up with for getting Flash to run on the iPhone OS. Jobs’ latest salvo was a long letter posted to the Apple website detailing the reasons why the company has no interest in allowing Flash on its devices, a letter that sparked a furious debate among Adobe supporters and Apple fans. Federal authorities are also apparently interested in how the company’s restrictions on apps could benefit its recently previewed iAd application advertising service.

Although it’s impossible to know what the eventual outcome of a federal investigation into Apple’s behavior might be — if in fact one even occurs — here’s a sample of what some observers are saying about the situation. Reuters quotes former Federal Trade Commission policy director David Balto as saying of Apple:

What they’re doing is clearly anticompetitive…They want one superhighway and they’re the tollkeeper on that superhighway.

The Wall Street Journal says one potential trigger for an investigation is a concern that changes to the Apple developer agreement could harm advertisers on those devices, and benefit Apple:

Apple’s new language forbidding apps from transmitting analytical data could prevent ad networks from being able to effectively target ads, potentially giving Apple’s new iAd mobile-advertising service an edge, executives at ad networks say. One wireless-advertising executive said he was contacted a few weeks ago by an official from the FTC who wanted to talk about how the mobile-ad industry works, the Apple developer agreement and how it could affect the executive’s business.

The WSJ also interviewed the former deputy director of the Bureau of Competition at the Federal Trade Commission, Kenneth Glazer, about the chances of an investigation:

Glazer indicated that, as the smart-phone market stands now, regulators could have a difficult time proving monopolistic practices because Apple’s share of that market, though growing, remains below a certain threshold. He said regulators might avoid that problem if Apple begins dominating the iPhone advertising market, although the mobile-ad market in general is so young that many questions remain.

John Gruber, who writes the widely followed Apple blog Daring Fireball and is close to the company, questions a report by one developer that said the controls placed on him by Apple were unreasonable:

This guy isn’t a federal regulator, but he seems to be arguing that he has a right to use Flash, or at least some sort of cross-platform solution, to develop for iPhone OS. Why not write web apps, then?

ZDNet’s editor-in-chief, Larry Dignan, also questions whether regulators needed to get involved in what is essentially a trade dispute between two equal parties:

Apple simply doesn’t have the world domination market share in the iPhone or iPad for regulators to give a hoot…Call me crazy, but I’m not sure I want the Feds playing around with SDKs. It smells like micromanagement to me and that’s dangerous.

Fortune magazine, meanwhile, looks back at the antitrust case against Microsoft, and how it ultimately failed, and what that means for a potential case against Apple:

To win a Sherman Antitrust case against Apple, the government would have to prove both that Apple’s market share constitutes a monopoly — itself not illegal — and that it has abused that monopoly power in ways that damage its competition.

And Nilay Patel, a lawyer who writes for Engadget, notes that even if the FTC or Justice Department does launch an inquiry, the result could take years to unfold:

Assuming the report is true, an inquiry would still just be the very first step — whichever agency is ultimately put in charge would then have to launch a formal investigation and then finally file and win a lawsuit for any changes to occur. That’s a timeframe measured in months, if not years.

Post and thumbnail photos courtesy of Flickr user 1happysnapper

  1. As always GigaOM puts together the info very well.

    By the time the Gov gets to dealing with Apple, if at all, they will be well past iPhone OS 4.0. If this happens it will take years for anything to come of it and as the “smartphone” market is changing so quickly Apple may or may not be relevant by that time. If the Gov can’t find a way to act quickly on such cases it seems almost irrelevant to even act at all.

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  2. While some may argue that Apple is anti-competitive (among other more colorful things), I can’t see any reasonable argument that the iPhone is a Monopoly. The iPhone isn’t even #1 in Smartphones, let alone its’ tiny share of the entire cell phone market. No Monopoly, No AntiTrust problems.

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  3. Apple is free to follow its closed ecosystem iAd model, but the reality is that carriers are just as able to present highly relevant, yet anonymous user profiles to ad networks for effective, contextual mobile marketing. User-identifiable metadata can be guarded by the carrier and only revealed upon opt-in by the user. DISCLOSURE: Comverse is a client in the carrier-centric mobile ad business.

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  4. The real monopoly Apple has at the moment is in mind-share. Take it from a guy who’s an orange in a world of Apples, there are plenty of devices that can do as much magic as an iPhone or an iPad. I give Apple many kudos and much respect for the elegance of their products and their spit and polish. What they’ve done is truly outstanding. But, there are innumerable alternatives that still accomplish modern mobile communications such as e-mail, Web browsing, social networking, app catalogues for customization, and all wrapped up in a neat pocket-sized touch screen aparatus. With a bit of courage to stomach the cold frowns of diaproval from the “well bread,” who needs Apple anyway? Let them have their “time in the sun” and bask in their glory undisturbed for a little while for crying out loud. The pendulum will swing once again in the same way that when Microsoft was being investigated for anti-trust, Apple was on heaving in a death knell in the public eye. Microsoft was still Mac’s biggest customer since the only thing you could find on the store shelves to install on a Mac were Microsoft Office and Adobe Photoshop.

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  5. Apple has really helped to advance the state of HTML5 in recent months. Not only are more people talking about it, but major websites are implementing it.

    Adobe should accelerate support for HTML5 in their web authoring tools, instead of wasting their energy trying to push Flash on Apple.

    Check out this DreamWeaver HTML5 demo: http://www.youtube.com/watch?v=v69S22ZBBqA

    By doing so:
    - Adobe will sell more software/upgrades.
    - Adobe’s customers will have more choices, for their website design (i.e. Flash, HTML5 or both).
    - non-Flash devices will be able to access more content.

    WIN-WIN-WIN

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    1. I expect that as we move into a time of better HTML5 adoption, and more platforms supporting the standards, that the idea of an application will change. Apple beginning with a web model was wrong as the market demonstrated. Android, HP, Microsoft, Nokia et al should be standardizing web systems and extending cloud support rather than enabling Flash.

      But, I hope that we enter a period where these platforms are found to be like the computers we use rather than the game consoles, and that companies cannot dictate the types of apps that are allowed.

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  6. [...] here: What the Web Is Saying About Apple and Antitrust You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, [...]

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  7. Apple has this habit of forcing its own decisions on users. In this case, Apple clearly has economic incentives to ban Flash and should definitely investigated. More http://truvoipbuzz.com/2010/05/why-apple-steve-jobs-does-not-approve-flash-iphone-ipad-opinion/

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  8. Someone at the Gov. is looking for a quick hit for publicity. This is going nowhere and if Adobe actually made the complaint it just proves Mr. Jobs assertion. That the “golden days” and leaders of that era are gone. Adobe is just a technology “gambler” with no guts to innovate or lead!

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  9. Someone in the Gov. is looking for a quick hit for publicity. This is going nowhere and if Adobe actually made the complaint it just proves Mr. Jobs assertion. That the “golden days” and leaders of that era are gone. Adobe is just a technology “gambler” with no guts to innovate or lead!

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  10. Johnathan Black Tuesday, May 4, 2010

    Apple is not the world’s number one smartphone vendor. That is Nokia.
    Apple is not the world’s number two smartphone vendot. That is RIM.
    Nokia and RIM combine for well over half of all smartphones sold.

    Apple is an important player, but they certainly have no monopoly. Adobe should simply approach Nokia and RIM to complement the Flash partnership they already have with Android. If there is consumer demand for Flash then Apple will be at a disadvantage.

    Calling in the government on this seems at best like a poor business move.

    -JB

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