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Apple ratchets down on apps -- again

February 2, 2011 |  4:53 pm

IPhone4 The New York Times set off a flurry of stories over the past couple of days when it reported that Apple had stopped Sony from selling e-books in the Sony Reader iPhone app. Apple instructed Sony and other app developers to stop steering users to their websites to buy products. Instead, they were told to make sales directly through the apps -- where Apple would be entitled to a 30% cut. 

The article in Wednesday's Los Angeles Times went so far as to suggest that Apple might be running afoul of federal antitrust law. Here's what analyst James McQuivey of Forrester Research had to say:

By dictating where digital books can be sold, Apple may be squelching innovation, he said. Secondly, the restrictions could be interpreted as restraint of trade, which is frowned upon by federal regulators such as the Federal Trade Commission.

"I wouldn't be surprised if phones were ringing at the FTC today about this," McQuivey said.

I wouldn't be surprised either, but I don't think Apple is doing anything wrong, at least not in the legal sense. As popular as the iPhone is, it's not a market-dominating smartphone, and certainly not a gatekeeper to mobile phone service. There are abundant alternatives -- in fact, smartphones based on Google's Android platform are likely to outpace iPhone sales in the near future, based on the trends charted by the Nielsen Co.

Apple's move could make the iPhone platform less attractive to retailers eager to use apps to sell digital goods, however, because it forces them to pay a significant percentage of their sales revenue to an additional middleman. Whether that drives them away from the popular iPhone platform remains to be seen; as long as Apple's market share holds steady, retailers have a powerful incentive to pay the Apple toll. But the fact that retailers could abandon Apple and still have access to most smartphone users (and the vast majority of all mobile phone users) makes it hard to justify the FTC trying to change Apple's approach.

By the way, retailers who abandon their Apple apps can still sell e-books and other digital goods to iPhone users. They just have to do so through the iPhone's web browser. The problem, though, is that some of that content may require an app to be viewed, played or heard.

The iPhone has never been an open platform. It's always been a vehicle for Apple to distribute the software apps and goods it endorses. The only change inherent in Apple's new instructions,  which Apple says are consistent with its longstanding guidelines for developers, is an additional degree of control over how the apps function. It seems particularly unfriendly to retailers and their customers, but then, it's Apple's platform.

Related: 

Apple shift on e-books may draw regulatory scrutiny

Verizon will launch 3G iPhone on Feb. 10

Android smart-phone sales leapfrog iPhone

-- Jon Healey

Credit: EPA / Andrew Gombert

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