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NYP: DOJ, FTC Talk About Antritrust Inquiry for Apple

Apple may be in the eye of regulatory storm

By JOSH KOSMAN

Last Updated: 4:33 AM, May 3, 2010
Posted: 1:36 AM, May 3, 2010

After years of being the little guy who used Washington to fend off Goliaths like Microsoft, Apple CEO Steve Jobs is about to learn what life is like when the shoe's on the other foot.

According to a person familiar with the matter, the Department of Justice and Federal Trade Commission are locked in negotiations over which of the watchdogs will begin an antitrust inquiry into Apple's new policy of requiring software developers who devise applications for devices such as the iPhone and iPad to use only Apple's programming tools.

Regulators, this person said, are days away from making a decision about which agency will launch the inquiry. It will focus on whether the policy, which took effect last month, kills competition by forcing programmers to choose between developing apps that can run only on Apple gizmos or come up with apps that are platform neutral, and can be used on a variety of operating systems, such as those from rivals Google, Microsoft and Research In Motion.

An inquiry doesn't necessarily mean action will be taken against Apple, which argues the rule is in place to ensure the quality of the apps it sells to customers. Typically, regulators initiate inquiries to determine whether a full-fledged investigation ought to be launched. If the inquiry escalates to an investigation, the agency handling the matter would issue Apple a subpoena seeking information about the policy.

Officials at both the Justice Department and FTC declined comment. Apple did not return calls seeking comment.

The threat of Apple being the subject of an investigation would be a remarkable turnabout for a company that has long seen itself as being outside the establishment, and one that has egged on antitrust officials to blunt the momentum of larger rivals.

However, thanks to the popularity of the iPod and iPhone, Apple is having a tough time continuing to play the role of David fighting against Goliath. Indeed, its market cap of $237.6 billion exceeds that of the world's largest retailer, Wal-Mart, whose market cap is $201.7 billion.

Apple put its might on full display last week when Jobs wrote a scathing explanation for why Adobe's Flash programming language was unfit to be used on Apple products. The day his missive was released, Adobe shares fell 2 percent.

In forcing computer programmers to choose developing an Apple-exclusive app over one that can be used on Apple and rival devices simultaneously, critics say Apple is hampering competition since the expense involved in creating an app will lead developers with limited budgets to focus on one format, not two. Generally, app developers are paid from a cut of the revenue generated when consumers buy the app.

Shaun Meredith, a former Apple employee who runs software development company InfoBridge, said that as a result of Apple's rule change, some of his customers are choosing to finance apps that are compatible with all of Apple's competitors instead of those that work only with the iPhone or iPad.

Indeed, though Apple has the most applications, it is a distant second in terms of operating system market share. According to comScore, RIM, which makes the BlackBerry, has a 42 percent share, while Apple's take is 25 percent. Microsoft has 15 percent and Google's Android software has 9 percent. j

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