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

Gregg Keizer | Feb. 16, 2011
Regulatory pressure is more likely, says antitrust attorney

FRAMINGHAM 16 FEBRUARY 2011 - Apple faces little risk of antitrust threats to the new App Store rules that require content sellers to hand over 30% of their revenues, a legal expert said today.

"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% 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 Web site.

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% 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."

 

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