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Why Apple's anti-trust woes are nothing to worry about

updated 12:45 am EDT, Wed May 12, 2010

Editorial: Apple at no real risk in short term

As the FTC and other government organizations consider whether or not they want to launch an anti-trust probe into Apple's iPhone OS development rules, the market is left wondering what will come of it. For now, the government has remain tight-lipped about its plans and rumors suggest that Apple might be planning to change its SDK to avoid a court battle. But such a move could be premature, especially considering Apple might have little to worry about.

The crux of the federal government's issue with Apple reportedly revolves around the hardware company's decision to force developers to use its own proprietary development software to build apps for iPhone OS. By doing so, it effectively eliminated the ability for developers to create applications for the iPhone or iPad using third-party cross-compilers, like Adobe's Flash CS5. Reports suggest the FTC believes such practices violate anti-trust regulations.

But determining the regulations that Apple might be infringing is extremely difficult. A key component in anti-trust regulation revolves around the outright control of "trade or commerce." I'm hard-pressed to find one instance where Apple is doing that. Yes, the company is ostensibly forcing developers to choose between developing cross-platform applications or an application designed specifically for the iPhone, but developers at least have that choice. Plus, there are still tools available that would allow those developers to bring the same app to other platforms with some extra work. It might be more costly -- $75,000 compared to a relatively inconsequential amount, according to one developer -- but the choice is there. Apple can't necessarily be held accountable for that price difference.

There is also concern over Apple's decision to ban Flash. But all that concern could be unfounded. Flash is an extremely successful Internet standard that is currently employed by a large percentage of Web-based videos and games. By banning Flash from its platform, a solid argument can be made that Apple is in fact putting its own operation in jeopardy by supporting alternative and unproven standards, rather than those that consumers (and companies) have grown accustomed to.

We also can't forget that the US government has a long history of attempting to take on anti-trust issues and time and again, little comes of it.

For example, Microsoft was embroiled in a legal battle with the US government over anti-trust allegations more than 10 years ago. After a long and drawn out battle, it received a slap on the wrist that, in retrospect, did nothing to limit the company's success in the industry. In fact, the European Union is arguably the only governing body that effectively took a bite out of Microsoft with its recent decision to force the software giant to give European Windows users the option to pick their browser of choice when they boot up Windows.

Apple's troubles are nothing like those experienced by Microsoft. And unlike so many other battles that the U.S. government takes on with companies, it doesn't necessarily have an open-and-shut case against Apple. After all, Steve Jobs and Company are taking a risk by eliminating Flash from the platform and forcing developers to use a single development tool. If it's successful, Apple will undoubtedly enjoy the financial benefits of that move. But if it fails, real trouble could await its platform. And even if Apple was forced to acquiesce to some of the government's demands, it's doubtful that it will affect its bottom line all that much.

Simply put, it's a win-win for Apple. The company can either stay the course and control its platform or lose out in a battle with the U.S. government and address concerns that will have little effect on its business. It's a great position to be in.

Analysis by Don Reisinger



By Electronista Staff
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Comments

  1. Spacemoose

    Fresh-Faced Recruit

    Joined: Feb 2004

    +11

    Horse = Flogged

    Next week will be an in-depth, hard-hitting journalistic piece about how the only reason this Apple anti-trust rumour exists is because the media took it and ran with it without bothering with things like veracity, and that the only reason it's still circulating is because the media outlets won't let it die.

  1. Makosuke

    Forum Regular

    Joined: Aug 2001

    +7

    Kind of silly

    I honestly find the widespread claims of Apple doing anticompetitive things, and in general the complaints against their restrictions. Note that I'm talking about people specifically complaining that they're doing something anticompetitive, versus people just saying that they think it's a bad decision. They're different.

    Apple is not a monopoly. End of argument. Apple is not even CLOSE to a monopoly. The app store makes more money for developers than anywhere else, but there are more Android phones being sold than iPhones, and that's before you even look at WebOS, Symbian, Win Mobile, and other smartphone OSes. If Apple does something that restricts developers on their platform, all they're doing is banking on the fact that some percentage of people will find that restriction to have enough benefit to outweigh the freedom available with Android or other competitors.

    It'd be like complaining that Ford required premium gasoline, or, say, some special Ford-branded additive in their cars. Would that be anticompetitive? No, because there are a dozen other car manufacturers with directly competing products that this decision has no bearing on. People very easily have the choice of buying a car from another company that doesn't require such things, and it'll work just fine.

    If you don't like the app store, there are many other solidly competitive smartphones available that directly compete with, and replace, an iPhone. Buy a Droid. Buy a Pre. Buy an Nexus One. Buy whatever else you want. It won't run your App store apps, but it runs any other apps designed for it, and Apple's restrictions in no way effect it.

    Now, if Apple had 90% market share in smartphones, that would be different. THEN, they would have an effective monopoly (see: Windows), and there would be anticompetitive issues. But they don't and unless (and until) they do, it's just not an issue.

    Also, I see no reason to believe that there won't be two, three or even more different smartphone platforms in the future--given the nature of the web, there's no particular reason that there can't be a bunch of successful options in the market. Nobody needs to "win". I, personally, wouldn't be at all unhappy if I were Apple and ended up with, say, a solid 25% of the smartphone market. Maybe that's all they want, since they're not really into low-end products.

  1. iphonerulez

    Fresh-Faced Recruit

    Joined: Nov 2008

    0

    I've been rather concerned about

    this anti-trust stuff because I figure it's going to keep happening every time Apple tries to do something on its closed platform. I'm sure a lot of this anti-trust buzz is being pushed by iHating bloggers, but I wasn't sure. I also figured that a company with small market share wouldn't have any monopoly problems, but I'm not familiar with how these things work. I want Apple to keep its iPhone platform closed tight so that rivals don't steal Apple's hard work. I hope that the anti-trust probe just goes away. So what if Apple has an advantage over ads on its platform. That's what good business strategy is all about.

  1. qazwart

    Fresh-Faced Recruit

    Joined: Apr 2001

    +1

    It has nothing to do with Flash or the SDK

    As pointed out, there is nothing Apple is violating with its SDK decision.

    The investigation is probably more about Apple's position that other ad platforms aren't allowed any user demographic data while iAds is allowed this data. This puts other ad platforms at a great disadvantage on the iPhone.

  1. Noflshnoandroidnowindows

    Fresh-Faced Recruit

    Joined: May 2010

    +3

    comment title

    While I agree that Apple is not a monopoly and not committing anti-trust violations; I disagree with your premise:

    "As the FTC and other government organizations consider whether or not they want to launch an anti-trust probe into Apple's iPhone OS development rules, the market is left wondering what will come of it."

    There was one news story from a questionable source that keeps getting repeated with no independent verification.

    So at this point there is no credible reason to believe" the FTC and other government organizations are considering whether or not they want to launch an anti-trust probe into Apple's iPhone OS development rules...".

  1. jfgilbert

    Fresh-Faced Recruit

    Joined: Jan 2010

    +2

    A good reason not to worry

    is that the whole story was fabricated by some graphic software company who disagrees with some of Apple's latest decisions. The FTC knows better than launch actions that have no basis in fact and no victims.

  1. JulesLt

    Fresh-Faced Recruit

    Joined: Jul 2005

    +2

    Monopoly money

    There are legal precedents around closed platforms - Nintendo tried to legally lock the SNES platform to only 'authorized' (i.e. licensed) developers, and lost.

    You can put a license on an SDK and development kit (determining how it can be used), but you can't restrict unlicensed development.

    Which is fine - Apple have never directly tried to restrict unlicensed development (you can, for instance, still use a lot of these 'blocked' tools for writing internal Enterprise apps - which is actually the main use for something like MonoTouch anyway. You can do the same if you're an iPhone developer).

    Apple's restriction is instead around the App Store - the legal precedent there is strongly in Apple's favour (a retailer isn't obliged to stock or sell products, and can specify whatever conditions they like to suppliers - particularly in determining a minimum quality for products).

    However, I think there is a potential argument that the App Store is a monopoly. It depends on whether 'iPhone applications' count as as a distinct market, distinct from the phone itself.

    Contrast this with other closed platforms - Sony, Nintendo, Microsoft, etc - they may act as publishers, but don't control the retail side (although their online stores are heading in that direction).

  1. testudo

    Forum Regular

    Joined: Aug 2001

    0

    Re: Kind of silly


    The app store makes more money for developers than anywhere else,


    Really? Wow, and to think we all thought Microsoft was raking in cash from Office and Windows before. Wait until they get on the appStore, and then they'll really start making money!

    Now, if Apple had 90% market share in smartphones, that would be different. THEN, they would have an effective monopoly (see: Windows), and there would be anticompetitive issues. But they don't and unless (and until) they do, it's just not an issue.

    No, at that point, the argument would switch and people here would be saying Apple has just a small share of the phone market, and you can't just look at smart phones when comparing things. Or how the iPhone is really just a small computer, and thus has a really tiny slice of the computer market, and isn't a monopoly.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    0

    Flash

    Well, you can't have it both ways. Everyone seems to be cheering Apple's decision of keeping flash off the iPhone, which in turn will spur web developers and the like to move away from Flash. But if Apple has such clout as to cause a technology to live or die based on their decision, then that is market power, and it could be claimed as anti-competitive.

  1. caleb45

    Fresh-Faced Recruit

    Joined: Mar 2010

    0

    your headline is worrying

    I'd rather Apple not tie developers into specific development routines, and I'd rather they not crowd out google voice, adobe, and other smaller competitors.

    h*** I'd rather they open their devices up.

    So yeah the biased headline? Thanks!

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