Apple facing antitrust concerns

Federal regulators are reportedly set to turn a microscope on the company's actions.

By Kim Peterson Jun 14, 2010 1:25PM

Caption: Apple CEO Steve Jobs holds the new iPhone 4. Credit: (© Paul Sakuma/AP)Apple (AAPL) has become one of the most valuable companies in the world, and boy, is it ever throwing its weight around.

The company has gone from beloved underdog to ruthless competitor, squeezing out rivals like Adobe (ADBE) and Google(GOOG) in surprisingly bold ways.

And that's got the attention of antitrust regulators, who are set to begin investigating the company's actions. But has Apple really been that bad? Do shareholders have anything to worry about here?

Let's look a little more closely at the issues. Basically, it comes down to whether Apple, with its dominant positions in consumer technology, is gaining too much control in the areas of digital music, advertising and software development, according to Bloomberg.

Apple can get awfully cranky with software developers that don't use Apple-approved tools to build applications. Google, for example, says Apple's new rules ban the use of Google's advertising software on iPhones.


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Should Apple be allowed to keep Google out of the iPhone? Especially since Apple is developing an advertising system to directly compete with Google? That behavior is already raising red flags at the Federal Trade Commission, which Bloomberg reports is preparing to review the issue.

"It does really look like these agreements are designed to hamper competition," one law professor told Bloomberg. "The question really becomes, do they have any legitimate business justifications for that? It’s not hard to see how that can disadvantage a rival."

Then there's the now-famous decision by Apple to ban Adobe's Flash software from its iPhone and iPad systems. Apple justified its move by saying Flash downright sucks. But Adobe complained to federal regulators that Apple is squashing competition.
Some analysts say it's unlikely the government will take Apple to court, reports the Apple 2.0 blog. That's because Apple can justify its actions as competitive without being exclusionary.

Also, in the case of the iPhone, Apple is still far from the 70% market share that is generally the threshold for determining industry dominance, wrote Rebecca Arbogast and George Askew of Stifel Nicolas in a report.

Still, all this unwanted attention is likely to have an impact on Apple and its competitive practices in the future, the analysts added. And that's not a positive for the company.

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