February 8, 2011

Apple’s legal woes

by Kelly Burdick

In response to news last week that Apple would require e-book retailers like Amazon, Sony, and Barnes and Noble to sell on the iPad and iPhone via its in-app purchasing system, Forrester Research analyst James McQuivey told the Los Angeles Times that Apple’s rules “could be interpreted as restraint of trade” and invite the attention of the Federal Trade Commission. “One way to look at this is that Apple is leveraging its monopoly power over the iPad and iPhone platforms,” McQuivey said. “I wouldn’t be surprised if phones were ringing at the FTC today about this.”

In the UK, an analyst at Rethink Research, a London-based publishing and consulting firm, has now echoed this assessment, predicting that the recent change would either “put Apple into the middle of an anti-trust suit or lose huge market share to Google’s Android.”

“Right now, having seen this market develop for three years,” the Rethink report notes, “it could be said to be sufficiently stable to bring a suit against Apple right now. That could be done as a commercial anti-trust suit, a public one from the US Justice Department or the European Commission or even a user class action might be brought.”

If legal action is brought against Apple in the U.S. or UK, it would join a number of pending actions. In Belgium, an anti-trust investigation was launched in mid-January after the country’s newspaper and magazine industries raised concerns about the App Store, complaining in particular that Apple’s in-app purchasing rules put all customer data and payment details in the hands of Apple. (Something U.S. publishers have also complained about.) If publications can only be sold to iPad users via iTunes, it “appears to be an abuse of market power,” according to a statement by Belgian Economy Minister Vincent Van Quickenborne.

U.K. trade regulators are also investigating antitrust complaints related to Apple’s digital-book pricing moves—in particular the legality of selling books via the agency model, which results “in uniform prices for most of the popular e-books—potentially depriving consumers of competitive prices.” According to this recent Wall Street Journal piece, the agency pricing model is also being investigated by attorneys general in Connecticut and Texas.

Kelly Burdick is the executive editor of Melville House.

20 Comments

Chris at 9:53 am on February 8, 2011

Apple said that Publishers shall give iOS users an “option” to purchase books via iTunes, I didn’t understand why it concerned to unfair competition.
Chris at 9:53 am on February 8, 2011

Apple said that Publishers shall give iOS users an “option” to purchase books via iTunes, I didn’t understand why it concerned to unfair competition.
August at 2:52 pm on February 8, 2011

“If publications can only be sold to iPad users via iTunes, it “appears to be an abuse of market power,” according to a statement by Belgian Economy Minister Vincent Van Quickenborne.”

Except that’s not at all what the rule Apple is enforcing says. What it does say, is that if vendors sell downloads for use with their apps through, say, a website, they must *also* make those downloads available for sale through the app itself, using Apple’s API. (Not *only* available that way.) And again, this only applies to native iOS apps. Folks are still able to build web-based apps that do whatever the hell they want. Controlling APIs in this way is not exactly unheard of.

Also, Apple’s market share problem is largely a red herring. It’s true they dominate the tablet market, but that’s largely because they’re the only ones to ever field a serious product. *But*, the app store mostly services the iPhone, and despite making most of the industry’s profits, their actual market share is only in the neighbourhood of about 4%. Additionally, none of what Apple is doing actually dictates what the publishers/app makers/whoever can do elsewhere in the ebooks market (like, say, Amazon).
August at 2:52 pm on February 8, 2011

“If publications can only be sold to iPad users via iTunes, it â€œappears to be an abuse of market power,â€ according to a statement by Belgian Economy Minister Vincent Van Quickenborne.”

Except that’s not at all what the rule Apple is enforcing says. What it does say, is that if vendors sell downloads for use with their apps through, say, a website, they must *also* make those downloads available for sale through the app itself, using Apple’s API. (Not *only* available that way.) And again, this only applies to native iOS apps. Folks are still able to build web-based apps that do whatever the hell they want. Controlling APIs in this way is not exactly unheard of.

Also, Apple’s market share problem is largely a red herring. It’s true they dominate the tablet market, but that’s largely because they’re the only ones to ever field a serious product. *But*, the app store mostly services the iPhone, and despite making most of the industry’s profits, their actual market share is only in the neighbourhood of about 4%. Additionally, none of what Apple is doing actually dictates what the publishers/app makers/whoever can do elsewhere in the ebooks market (like, say, Amazon).
Einheri at 5:30 pm on February 8, 2011

Well, I can see the problem here. Publishers are afraid—and rightly so—that if they have to provide an easy to use way of buying subscriptions through iTunes, then who would bother using the Publisher’s own Web site to subscribe to a publication? This effectively funnels money away from publishers directly to Apple. Also, then if Apple doesn’t share customer information with the publishers, the publishers also suffer from not knowing how to sell publication advertisement.

That’s a bad position for old school publishers to be in. Still, it’ll be hard to make a case against Apple that they are denying customers of choice by insisting that customers be given an ADDITIONAL way of paying via iTunes. In the long run, though, they may be doing exactly that. Publishers may not be able to afford their own subscription services costs if fewer and fewer people are using them when they can instead use iTunes, and yet the publisher still has to try to accommodate their user base who do not wish to use iTunes.

I am surprised, though, that Apple apparently doesn’t share subscriber information information with the publishers. I can understand Apple not given the publishers specific information, like account numbers and so on (iTunes customers and their privacy needs to be protected from cyber criminals), but I would think that Apple would be able to share any general information: sex, age, etc. that they collect.
Einheri at 5:30 pm on February 8, 2011

Well, I can see the problem here. Publishers are afraid—and rightly so—that if they have to provide an easy to use way of buying subscriptions through iTunes, then who would bother using the Publisher’s own Web site to subscribe to a publication? This effectively funnels money away from publishers directly to Apple. Also, then if Apple doesn’t share customer information with the publishers, the publishers also suffer from not knowing how to sell publication advertisement.

That’s a bad position for old school publishers to be in. Still, it’ll be hard to make a case against Apple that they are denying customers of choice by insisting that customers be given an ADDITIONAL way of paying via iTunes. In the long run, though, they may be doing exactly that. Publishers may not be able to afford their own subscription services costs if fewer and fewer people are using them when they can instead use iTunes, and yet the publisher still has to try to accommodate their user base who do not wish to use iTunes.

I am surprised, though, that Apple apparently doesn’t share subscriber information information with the publishers. I can understand Apple not given the publishers specific information, like account numbers and so on (iTunes customers and their privacy needs to be protected from cyber criminals), but I would think that Apple would be able to share any general information: sex, age, etc. that they collect.
Einheri at 5:30 pm on February 8, 2011

Well, I can see the problem here. Publishers are afraidâ€”and rightly soâ€”that if they have to provide an easy to use way of buying subscriptions through iTunes, then who would bother using the Publisher’s own Web site to subscribe to a publication? This effectively funnels money away from publishers directly to Apple. Also, then if Apple doesn’t share customer information with the publishers, the publishers also suffer from not knowing how to sell publication advertisement.

That’s a bad position for old school publishers to be in. Still, it’ll be hard to make a case against Apple that they are denying customers of choice by insisting that customers be given an ADDITIONAL way of paying via iTunes. In the long run, though, they may be doing exactly that. Publishers may not be able to afford their own subscription services costs if fewer and fewer people are using them when they can instead use iTunes, and yet the publisher still has to try to accommodate their user base who do not wish to use iTunes.

I am surprised, though, that Apple apparently doesn’t share subscriber information information with the publishers. I can understand Apple not given the publishers specific information, like account numbers and so on (iTunes customers and their privacy needs to be protected from cyber criminals), but I would think that Apple would be able to share any general information: sex, age, etc. that they collect.
Einheri at 5:30 pm on February 8, 2011

Well, I can see the problem here. Publishers are afraidâ€”and rightly soâ€”that if they have to provide an easy to use way of buying subscriptions through iTunes, then who would bother using the Publisher’s own Web site to subscribe to a publication? This effectively funnels money away from publishers directly to Apple. Also, then if Apple doesn’t share customer information with the publishers, the publishers also suffer from not knowing how to sell publication advertisement.

That’s a bad position for old school publishers to be in. Still, it’ll be hard to make a case against Apple that they are denying customers of choice by insisting that customers be given an ADDITIONAL way of paying via iTunes. In the long run, though, they may be doing exactly that. Publishers may not be able to afford their own subscription services costs if fewer and fewer people are using them when they can instead use iTunes, and yet the publisher still has to try to accommodate their user base who do not wish to use iTunes.

I am surprised, though, that Apple apparently doesn’t share subscriber information information with the publishers. I can understand Apple not given the publishers specific information, like account numbers and so on (iTunes customers and their privacy needs to be protected from cyber criminals), but I would think that Apple would be able to share any general information: sex, age, etc. that they collect.
Anonymous at 5:58 pm on February 8, 2011

Here’s the reality of it all.
There is no restraint of trade since there is no monopoly in reading devices.
The solution to this non-question? Don’t sell to Apple iPad, iTouch and iPhone users…at all.
Sell to Android users, sell to Kindle and Nook users through the stores that those folks have set up for their users.
If Apple goes to the trouble to create an ecosphere and you want to play in that world of 150,000,000 customers, than you should pay, if you don’t want to pay Apple, then invent your own 150 million customer sandbox.
You whiners make me sick, this company stepped up and created something while you sat on your duff watching your business model blow up. Man up and join in or go away but whatever you do, just stop your whining about how unfair Apple is being.
You’re lucky they’re talking to you at all.
Anonymous at 5:58 pm on February 8, 2011

Here’s the reality of it all.
There is no restraint of trade since there is no monopoly in reading devices.
The solution to this non-question? Don’t sell to Apple iPad, iTouch and iPhone users…at all.
Sell to Android users, sell to Kindle and Nook users through the stores that those folks have set up for their users.
If Apple goes to the trouble to create an ecosphere and you want to play in that world of 150,000,000 customers, than you should pay, if you don’t want to pay Apple, then invent your own 150 million customer sandbox.
You whiners make me sick, this company stepped up and created something while you sat on your duff watching your business model blow up. Man up and join in or go away but whatever you do, just stop your whining about how unfair Apple is being.
You’re lucky they’re talking to you at all.
Einheri at 6:10 pm on February 8, 2011

The people arguing against this have to come up with better arguments. Instead of trying to scare people into believing that Apple is forcing them to sell ONLY through Apple, they need to come right out and say, “Look, Apple is going to make it easy for you to buy our product through their services. And you may think it’s not important whether that portion of your subscription money goes to Apple or goes to us, but we can produce a better publication if more of your money comes to us. Now, admittedly, it may be more of a bother to you to buy the publication from us directly, but we need your money more than Apple does.”
Einheri at 6:10 pm on February 8, 2011

The people arguing against this have to come up with better arguments. Instead of trying to scare people into believing that Apple is forcing them to sell ONLY through Apple, they need to come right out and say, “Look, Apple is going to make it easy for you to buy our product through their services. And you may think it’s not important whether that portion of your subscription money goes to Apple or goes to us, but we can produce a better publication if more of your money comes to us. Now, admittedly, it may be more of a bother to you to buy the publication from us directly, but we need your money more than Apple does.”
Anonymous at 6:27 pm on February 8, 2011

1. Apple says if you sell outside of App [that is OK], but you must offer the customer the option to buy “in the app.” Apple says if its in the app, then it there are costs and customers will have to opt-in for sharing personal information. Note this only applies to in app purchase.

2. Apple has merely said customers get two options in-app and not in-app. When in app, Apple is not providing customer information w/o customer OK and some information e.g., card numbers is not available. However, if customer chooses or is persuaded and uses the not in app option, then that is a customer publisher rules outside of Apple.

Bottom line is Apple is expecting equity of access options for customers and if in an app with app store, then Apple has some rules to protect its customers [customer expectation of a curated environment as recent lawsuits evidence] and its competitive business interests.

What would be interesting is to see the publishers have an opt-in process for information provided and that customer is not penalized if customer elects to not opt-in. Interesting to see if government agencies are including that in their assessments.

Regarding agency model, not sure I understand the competition issue since I think this is really a publisher and author conflicting interests and models, similar to the copyright music issues that Apple et al have struggled in Europe. It is interesting that Gov’t is looking to Apple et al to fix the publishing [books, music, movies, etc.] wilderness of rights, rules and payments.
Anonymous at 6:27 pm on February 8, 2011

1. Apple says if you sell outside of App [that is OK], but you must offer the customer the option to buy “in the app.” Apple says if its in the app, then it there are costs and customers will have to opt-in for sharing personal information. Note this only applies to in app purchase.

2. Apple has merely said customers get two options in-app and not in-app. When in app, Apple is not providing customer information w/o customer OK and some information e.g., card numbers is not available. However, if customer chooses or is persuaded and uses the not in app option, then that is a customer publisher rules outside of Apple.

Bottom line is Apple is expecting equity of access options for customers and if in an app with app store, then Apple has some rules to protect its customers [customer expectation of a curated environment as recent lawsuits evidence] and its competitive business interests.

What would be interesting is to see the publishers have an opt-in process for information provided and that customer is not penalized if customer elects to not opt-in. Interesting to see if government agencies are including that in their assessments.

Regarding agency model, not sure I understand the competition issue since I think this is really a publisher and author conflicting interests and models, similar to the copyright music issues that Apple et al have struggled in Europe. It is interesting that Gov’t is looking to Apple et al to fix the publishing [books, music, movies, etc.] wilderness of rights, rules and payments.
Anonymous at 7:00 pm on February 8, 2011

Apple is providing a venue where there are 150M potential customers.
If you choose to sell to these folks, then pay or invest in an infrastructure with online sales capacity and let’s see if that flies.
And it’s not my business as a customer what happens to my purchasing dollars after I’ve spent them, I could care lass if this one or that one get’s there’s, as long as I get what I bought, I’m done. If a vendor thinks that that argument/plea to spend here not there so they get theirs is going to fly, they’re nuts.
Anonymous at 7:00 pm on February 8, 2011

Apple is providing a venue where there are 150M potential customers.
If you choose to sell to these folks, then pay or invest in an infrastructure with online sales capacity and let’s see if that flies.
And it’s not my business as a customer what happens to my purchasing dollars after I’ve spent them, I could care lass if this one or that one get’s there’s, as long as I get what I bought, I’m done. If a vendor thinks that that argument/plea to spend here not there so they get theirs is going to fly, they’re nuts.
Einheri at 7:49 pm on February 8, 2011

Maybe not, but such an argument from a publisher is more honest than what we are hearing from them.
Einheri at 7:49 pm on February 8, 2011

Maybe not, but such an argument from a publisher is more honest than what we are hearing from them.
TheOneRoadRunner at 11:04 pm on February 8, 2011

For the security sake any downloads, in my opinion should be through itunes. This will keep the malware out . If they open it up who knows what will happen,but I don’t think it would lead to anything good.
TheOneRoadRunner at 11:04 pm on February 8, 2011

For the security sake any downloads, in my opinion should be through itunes. This will keep the malware out . If they open it up who knows what will happen,but I don’t think it would lead to anything good.