The Feds Getting Curious About Apple

19 Comments

Apple (s aapl) may be the media and public’s favorite son, but to the FBI and FTC, Apple is looking more like a red-headed stepchild.

It’s no secret that Apple has seen an incredible turnaround since Steve Jobs took back the CEO chair in more than a decade ago, going from a record-low stock price of $12.75 in June 1997 to its current price around $250. Apple is doing so well, in fact, that the FBI and FTC are collectively looking into at least three anti-trust suits against it.

Is Apple Too Successful?

The FTC has announced that it is looking into allegations that Apple is engaging in anticompetitive practices in the mobile ad space. Omar Hamoui, the CEO of AdMob, a popular mobile ad platform, claimed on his blog that Apple’s new developer terms will force developers to use Apple’s new mobile advertising platform, iAd, and not competitive advertising platforms like AdMob and other offerings. Hamoui went on to say that this constitutes “an artificial [barrier] to competition [that will] hurt users and developers and, in the long run, stall technological progress.”

When reading these allegations, it’s important to remember that AdMob was recently acquired by Google (s goog), which makes Android, a mobile OS that is one of the iPhone’s primary competitors. Curiously, the accusation comes only two weeks after the AdMob acquisition was finalized, which makes Hamoui sound less like the expert in mobile advertising that he is and more like a Google mouthpiece.

The criticism is also curious considering the current competitive landscape of the mobile ad industry. For Apple to be anticompetitive, it’s necessary that it have a monopoly which it’s abusing to the detriment of the industry. That Apple even has a monopoly is a hard case to make after today’s announcement that Android-based phones have overtaken iPhones in ad clicks, and that even those two leading platforms still trail significantly to the overall leading platform in ad clicks, Symbian. And Apple doesn’t even have a monopoly over the more general mobile space, with the iPhone holding only a 28 percent market share overall. That the iPhone’s market share is still three times that of Android’s nine percent makes this accusation sound less like a legitimate concern and more like sour grapes.

This most recent announcement comes on the heels of word of two other impending antitrust investigations against Apple. In May, the DOJ and FTC mentioned two other investigations of anticompetitive behavior: one in Apple’s music download business, where it holds 70 percent market share versus Wal-Mart (s wmt) and Amazon’s (s amzn) 12 percent each; and the other over Apple’s recently-announced policy on how iPhone and iPad apps must be built.

FBI Begins Own Investigations

And if that’s not enough to keep Apple busy, the FBI is also looking into the recent bungle that exposed the email addresses of 114,000 iPad owners using a security hole on AT&T’s network. Considering the circumstances, the FBI investigation should land entirely on AT&T’s side of the fence, but the FBI is being understandably tight-lipped about its work, so for now it’s impossible to know for sure. And with the recent leak of an iPhone prototype, Apple probably already has the FBI on speed dial, especially considering the recent rumor that evidence from the case has been taken to an FBI lab. But even if this investigation doesn’t involves Apple at all, it’s still another distraction to the company.

What Will Apple Do?

It’ll be interesting to see how all these investigations play out. With all the big announcements from WWDC, Apple must have anticipated some new legal allegations from anxious competitors. And of course, Apple is no stranger to antitrust litigation, having finished its most recent bout with Psystar only last November. Since Apple has surpassed Microsoft to become the world’s most valuable technology company, there’s no question that Apple has the means to defend itself against these claims, so ultimately, Apple’s decision will boil down to whether the suits are too much of a distraction, whether it thinks it can win, and the company’s general attitude toward being sued.

19 Comments

Macguy

All this blogging about rumors, based on rumors, is truly tiring. It has become chic to bash Apple.

Then there are user that claim they hate Apple, because what? They don’t allow Porn in the app store?

Man get a life, ever heard of Safari… no end to the stupidity.

Apple just got raped again, by the sleeze POS Google boss. AND APPLE IS THE EVIL COMPANY… just pure stupidity…

katiepea

apple hasn’t been raped by anyone, the bought a small ad company, then google bought a bigger one, google was unable to purchase admob until apple made their purchase. so essentially apple purchasing the ad company enabled google to purchase a bigger one.

this investigation is going into a sequence of events that has all started with decisions that apple has made. google didn’t ban themselves from the iAd. developers didn’t ban non objective C languages from the app store.

everything that apple has coming to them, they brought on themselves. when you manipulate competition at a disadvantage to your customers you get investigated by the FTC. the end.

James

In an effort to post timely news and opinion pieces, the last few month’s articles here are just horrible – filled with inaccurate statements, and sometimes complete lack of understanding of the subject. This is another one of those articles, and all the wicked backtracking by the author in the comments isn’t going to change that.

atics

maybe since it claimed as monopoly company and with its competition with other large IT company will make apple has big challenge to face it. Apple should keep moving after surpassed Microsoft as largest IT COmpany cause it has make huge great production in iPAD and others

johnny

ah!!!!!!!!!!!!!!! its all a conspiracy!!!!! i knew it all along!

katiepea

i think painting the picture that success = antitrust investigations is rather ridiculous. this doesn’t have anything to do with success. it has everything to do with the fact that there are anti monopoly laws in this country and agencies that regulate it. apple has a large consumer base and is in control of a lot of data/property. maybe i’m biased now, i sold my iphone 3g when apple unveiled the new iphone 4 and wasn’t upset about doing so in the light of the last year. the company is clearly not what it used to be and frankly i’m glad to part ways. maybe i’m bitter that they’ve turned into something way worse than microsoft ever dreamed of being.

AdamC

You are bitter because Apple is very successful.

One iPhone user less doesn’t make any difference to the water in the lake.

katiepea

apple’s success has come at the price of censorship and draconian control over how i operate my electronics. my departure has nothing to do with their success, only their failure to operate their company in a manner that complies with ideas which support the betterment of a bright technological future. just watch over the next few years as google demolishes apple.

MacTony

The FBI isn’t after Apple. The FBI investigates criminal activity. They are after the people that hacked AT&T’s database. Who besides this blogger doesn’t understand that?

Andy Boothe

I’ll just leave this right here (from the article):

Considering the circumstances, the FBI investigation should land entirely on AT&T’s side of the fence, but the FBI is being understandably tight-lipped about its work, so for now it’s impossible to know for sure.

Consultant

The FTC and the FBI want to go after Apple. That’s rich. And pathetic.

BP, Goldman Sachs, AIG, Bank of America, the list is endless. Where are investigations? Nothing.

The idiot Bush didn’t do anything, now Obama is doing nothing.

The FBI needs to go after companies that are productive and are actually doing HARM to people.

Are we a stupid country are what?

Gazoobee

The entire premise of this article is incorrect.

All the anti-trust suits, etc. are initiated by COMPLAINTS. In other words, to imply (as this article does) that various government agencies have concerns about Apple’s behaviour is entirely false. The DoJ, FCC, etc. investigate when a complaint is made, usually by a COMPETITOR. It’s their job to do so and they have little leeway in the matter.

Additionally, the FBI are actually NOT investigating Apple, they are investigating the hackers that hacked into the iPad through the poorly coded AT&T website. This has nothing to do with Apple’s business practices at all.

In other words, this entire article is bunk, and based on a misunderstanding of how the law (and the market), works.

The Feds are not “curious about Apple,” they are investigating a complaint from one of Apple’s competitors because they have to. That’s a completely different thing.

Uncle Boo

@jgarcia: you ask “Why do companies get penalized for being successful?” The simple answer is that they don’t. Many people don’t understand that it is perfectly legal to have a monopoly, as long as it was earned fairly, by “building a better mousetrap”. What is illegal is abuse of the monopoly power. Microsoft didn’t get in trouble for having a monopoly of the PC OS business. They got in trouble for twisting the arms (by threatening punitive treatment) of PC vendors to pre-install Windows on all PC’s, and not give customers the option to order a different pre-installed OS. that was abuse of their monopoly power.

Jennifer

Forgive any ignorance, but wouldn’t Apple be considered the vendor of their own device then?

Howie Isaacks

The Feds need to concentrate more on the Obama administration’s attempts to buy off Senate candidates. We know that was illegal. This B.S. with Apple’s alleged wrongdoing can wait until they clean up their own house.

jgarcia

Why do companies get penalized for being successful? If they are creating a product that is good enough that everyone is buying, why is that their fault? The fed is basically saying “You guys have been too successful…we’re going to have to ask you to not make your products as well.”

Uncle Boo

“For Apple to be anticompetitive, it’s necessary that it have a monopoly which it’s abusing to the detriment of the industry.”

Incorrect. This is a common misperception. There are different kinds of antitrust violations, and monopoly-related issues are only part of them.

The issues here have nothing to do with monopoly. They have everything to do with restraint of trade, which is also an antitrust violation.

When I worked at a major tech company, we were regularly cautioned to steer clear of restraint-of-trade violations.

Andy Boothe

You’re right, I’m oversimplifying. But the point remains.

Let’s say I’ve been working on a mobile platform of my own, and I finished it last week and have sold my first 10 devices. For my mobile platform, my policy for mobile advertising is that you can only run ads using my proprietary ad platform.

This is essentially the same circumstances that Apple has created with iAd and its recent user agreement.

Now, are the FTC and the DOJ going to come after me? Absolutely not. I’ve got 10 devices in the market, so even if my practices unfairly restrain competition, no one cares because I just don’t move the needle. Ultimately, this is the question that the investigations will answer. Even if Apple’s practices do unfairly restrain competition, does the scope of Apple’s practice significantly impact the industry? Scope matters here, and while using the word “monopoly” is technically incorrect, it is evocative.

Excellent point, and thanks for bringing it up. For those interested in reading more, the Sherman Antitrust Act is a great place to start. http://en.wikipedia.org/wiki/Sherman_Antitrust_Act

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