Federal regulators are looking once more into Apple’s control over the applications available on the iPhone and iPad, according to a report in the Wall Street Journal. This time it’s Apple’s subscription feature for apps (which the company unveiled yesterday) that’s attracting antitrust scrutiny.
The problem isn’t the subscription plan per se, in which Apple takes the same 30 percent cut that it does on App Store purchases, but rather the restrictions that Apple put around it. The company said that any app offering a subscription plan elsewhere has to offer it within Apple’s iOS app too, and at the same price. In addition, publishers cannot include links inside their app to purchase content or subscriptions elsewhere.
The Justice Department and the Federal Trade Commission are both in the preliminary stage of their investigations, according to the Journal’s sources (who are “people familiar with the matter”), so they may not take any action against Apple or even launch a formal investigation. Eric Goldman, director of Santa Clara University’s High Tech Law Institute, told the Journal that Apple’s prohibition of links sounds like “a pretty aggressive position.” And the restriction on offering a better price elsewhere could be considered anti-competitive too if it distorts pricing.
It’s widely believed that the FTC was investigating Apple last year for its ban on tools that converted non-native apps into iPhone apps, and that the investigation pressured Apple into backing off. So if this investigation gets real momentum, we may see another about-face.
It’s also interesting to see that much of the opposition to Apple’s plan seems to be coming from music startups. Rhapsody said yesterday that its subscription model won’t work if Apple takes 30 percent, and today Last.fm’s co-founder said Apple “fucked over music subs for the iPhone.” The Journal article also includes complaints from music startups, including Axel Dauchez, president of French startup Deezer, who says giving Apple 30 percent of a subscription is “so obviously anticompetitive that it will never survive in Europe.”
It’s not surprising that Apple is facing some of its loudest opposition from these companies, since the royalty costs for music make it notoriously difficult for startups in the music field to make money. Not even popular Internet radio app Pandora expects to make a profit this year.