US Justice Department and FTC looking into Apple’s subscription service; EU monitoring as well
February 18, 2011 | 9:21 am
By Paul Biba
According to the Wall Street Journal, the US Justice Department, through its antitrust division, is looking into Apples terms for media companies who want to sell subscriptions on Apple devices. Evidently the investigation is in a preliminary stage and it might, or might not, end in the Department taking action.
Banning apps from linking to external sites “sounds like a pretty aggressive position,” said Eric Goldman, director of Santa Clara University’s High Tech Law Institute. “It seems like that’s purely in the interests of Apple trying to restrict people doing transactions they don’t get a cut from.”
Apple’s condition that its own customers should get the best deal available from media companies could also attract scrutiny. Such conditions, sometimes known as “most favored nation” clauses, can be deemed anticompetitive if they distort pricing.
The Justice Department recently sued a Michigan health-insurance company for allegedly using such clauses to hobble rivals.
However, things are not that simple in the antitrust world. The Department would have to show that Apple is abusing its market power. This, in turn, depends on how you define the market. A major part of any litigation will center around this concept. For example, the Journal reports that the iPhone is “the phone of choice for many affluent consumers, but it has only a 16% share of smartphone sales and a sliver of the broader mobile phone market”.
There’s a lot more interesting information in the article about the problems surrounding bringing an antitrust suit at this stage of the market.
In addition, the European Commission has said that they are aware of the new subscription service and is “carefully monitoring the situation.”