Antitrust fight against Apple's App Store rules faces 'steep' climb

Editor’s Note: This story is excerpted from Computerworld. For more Mac coverage, visit Computerworld’s Macintosh Knowledge Center.

Apple faces little risk of antitrust threats to the new App Store rules that require content sellers to hand over 30 percent of their revenues, a legal expert said Wednesday.

“It would be a steep, uphill climb,” said Hillard Sterling, an antitrust attorney and partner with the Chicago-based law firm of Freeborn & Peters. “The challengers would have to show that Apple has precluded competition in the marketplace. But there are plenty of platforms where publishers can offer their products outside the App Store.”

On Tuesday, Apple unveiled its App Store subscription model for developers and confirmed that it will demand 30 percent of the revenues from all content sold inside apps. The change also requires that current apps eliminate links to outside purchasing options by June 30.

The new model affects more than just magazine and newspaper publishers—who have been eager to offer subscriptions to iPhone and iPad owners—but also mandates changes by long-time apps such as Amazon’s Kindle. It will need to remove the inside-the-app access to the bookseller’s e-store and offer the same prices for in-app purchases as it does for e-books bought through its Website.

Almost immediately, questions were raised about possible antitrust actions against Apple. But Sterling believes that’s a dead end.

“Apple’s conduct, while exclusionary, is not anti-competitive,” said Sterling. “A time-honored axiom in antitrust is that it’s meant to protect competition, not competitors.”

To make an antitrust case, plaintiffs would have to show that the new App Store rules prevent companies from selling their content, argued Sterling.

“And that’s a no brainer. They can offer their products through alternatives, such as Google’s Android Market,” said Sterling.

Wednesday, Google announced One Pass, its own subscription plan for Android apps created by magazine and newspaper publishers. One Pass will mimic Apple’s model in some ways but reportedly levy only a 10 percent revenue sharing fee on developers.

A possible Apple defense would add to the difficulties facing developers thinking of suing Apple, or government regulators considering legal action.

“Apple can probably create a plausible technical explanation for its rules,” Sterling said. “Perhaps they’d argue that products need to be coded appropriately to operate through the App Store to minimize technical vulnerabilities.”

Yesterday, Apple made no mention of such a defense for its new rules, instead claiming that in-app purchases will be more convenient for customers and offer publishers “a brand new opportunity to expand digital access to their content.”

For all the hurdles facing an antitrust effort against Apple, Sterling believed the company could be pressured by regulators to modify the App Store terms. Apple has faced U.S. government scrutiny before, both in 2009 when the Federal Communications Commission (FCC) started an inquiry into Apple’s rejection of Google’s Voice app for the iPhone, and last year, when the Federal Trade Commission (FTC) questioned Apple’s plans to ban all apps created with cross-platform development tools.

Apple bowed to the pressure in both cases, eventually giving Google Voice the green light and dropping the tools ban.

“[Government regulators] may decide to step in, which as a practical matter, may make a judge [in any antitrust case] be more likely to moderate the App Store rules and accommodate competing products,” said Sterling. “But so far, the government has taken a prudent approach—rattle the saber and convince companies to reach an accommodation—rather than launch an ill-advised lawsuit that wastes time and money.”

If the Department of Justice or another federal agency takes that approach, Sterling expects that “cooler heads will prevail,” meaning Apple would likely back off its current stance if pushed.

Even so, it’s likely that concerns won’t disappear.

“We’ll see more of this, what with new markets like mobile phones and tablets, and with the lines between partner and competitor blurring,” said Sterling.

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