Apple's market clout likely to draw more scrutiny

Mar 12, 2012 By MICHAEL LIEDTKE , AP Technology Writer
In this photo taken March 7, 2012, the Apple logo is projected during an announcement in San Francisco. Apple has always been a control freak in its business dealings. And now that it has amassed tremendous power, government antitrust regulators in the U.S. and Europe will be closely monitoring the world's most valuable company as it attempts to define and dominate the markets hatched by the iPhone and iPad. (AP Photo/Paul Sakuma)

In everything it does, from product design to business deals, Apple strives for as much control as possible.

But as the world's most valuable company sets out to define and dominate the rapidly evolving markets it created with the iPhone and the iPad, is likely to face who want to curb its power.

Apple's clout is coming under scrutiny as the U.S. Justice Department considers filing a lawsuit against the company and five U.S. publishers on allegations they orchestrated a price-fixing scheme on electronic books.

The involved parties are trying to avoid a high-profile court battle by negotiating a settlement, according to The . The newspaper broke the news last week about the government's plans to allege that Apple Inc. and the publishers tried to thwart e-book discounts offered by Amazon.com Inc. and drive up prices since the 2010 release of the iPad.

"I think this might be a bit of a wake-up call for Apple," says Ted Henneberry, an antitrust attorney for the Orrick law firm in Washington.

Apple declined to comment.

The e-book case demonstrates the market leverage Apple has gained from its system of Internet-connected devices that tie into iTunes, its digital marketplace for mobile applications, books, newspapers, magazines, textbooks, movies and music.

"That platform has become really essential for a lot of people," says David Balto, an antitrust attorney who was a policy director during the Clinton administration. "Apple clearly has gained a lot of power in a number of markets."

Apple has sold more than 315 million iPhones, iPads and iPods that run on its mobile operating system, giving it the keys to a market that will become increasingly influential as more people buy digital content for such devices.

Apple's success has transformed the company from a technology boutique to a trend-setting juggernaut in the past decade. Its annual revenue has soared from $5 billion in 2001 to $108 billion last year. About three-quarters of that revenue comes from sales of iPhones, iPads and iPods. The company, based in Cupertino, Calif., now has a market value of about $510 billion - more than Microsoft Corp. and Google Inc. combined.

So far, though, government regulators haven't paid as much attention to Apple as they did to Microsoft during the 1990s and to Google during the past four years.

Microsoft's efforts to maintain and increase its dominance of personal computer software provoked an antitrust lawsuit that unsuccessfully attempted to break up the company.

Allegations that Google has been abusing its dominance of the Internet search and advertising markets have sparked wide-ranging government probes into the company's business practices in the U.S. and Europe.

Apple may simply behave better than some of its rivals, or it may be doing business in areas that are so new that government regulators are still learning how those nascent markets function, says D. Daniel Sokol, a law professor who focuses on antitrust issues at the University of Florida.

"To attract antitrust attention, you have to be more than just big. You have to be big and bad," Sokol says. "It was only 2007 when Apple released the , and only 2010 when it released the iPad. The company hasn't had that long to be bad yet, if it is indeed bad."

Apple hasn't fully avoided the government's scrutiny.

In 2009, the Federal Trade Commission opened an investigation into whether Apple and Google had been stifling competition by sharing two of the same directors - Eric Schmidt and Arthur Levinson - on their respective boards. That inquiry ended when Schmidt, then Google's CEO, resigned from Apple's board and Levinson, former CEO of biotechnology company Genentech, resigned from Google's board.

In 2010, Apple, Google and several other Silicon Valley companies settled a Justice Department investigation into an arrangement that prohibited the employers from recruiting each other's workers. Apple, Google and four other companies, including Intel Corp., promised not to enter into any other "no-solicitation" agreements for five years. A federal lawsuit filed on behalf of the workers at the companies is still seeking damages.

Government regulators in the U.S. and Europe are also monitoring Apple, Google and Microsoft for any sign they are wielding key patents to gain an unfair competitive advantage in the mobile phone market.

Apple's stable of popular mobile devices and the conjoined market for selling digital content will become even more pivotal if the vision of the company's late co-founder and CEO, Steve Jobs, pans out.

The way Jobs saw it before he died five months ago, technology is in the early stages of a phase that will de-emphasize the importance of personal computers running on Microsoft's software. Instead, people will rely on sleek, highly portable devices that traverse high-speed Internet connections to fetch content and other files stored in far-flung data centers.

If Apple fulfills its destiny as foreseen by Jobs, the company will dominate this "post-PC" era with its array of iPhones, and possibly a revolutionary television set. Jobs hinted at Apple's looming breakthrough in TV during interviews with his biographer, Walter Isaacson.

As it is, the iPad already has grabbed 62 percent of the tablet computer market, according to IMS Research.

Even if Apple's market share grows larger, the company may be able to minimize its potential antitrust headaches by pointing to what should still be fierce competition in both smartphones and tablet computers, Henneberry says. For instance, more than 300 million devices are already running on Google's Android software, and major PC makers such as Hewlett Packard Co. and Dell Inc. are hoping to make a dent in tablet computers this year with devices running Microsoft's new operating system, Windows 8.

Apple has already girded for more government attention. At the end of 2010, it hired Kyle Andeer, a former antitrust lawyer for the FTC and Justice Department. Andeer became the first antitrust specialist on Apple's internal legal team.

"Any big U.S. tech company understands that when they are successful enough to create and expand markets, they may get government scrutiny," says David Turetsky, an antitrust attorney with the law firm Dewey & LeBoeuf in Washington. "Apple is going to keep antitrust lawyers very busy for some time to come."

Explore further: Ticketfly buying WillCall for on-premise data

3.2 /5 (5 votes)
add to favorites email to friend print save as pdf

Related Stories

Apple director Levinson leaves Google's board

Oct 12, 2009

(AP) -- Google Inc. said Monday that Arthur Levinson has resigned from the Internet search leader's board, averting a potential showdown with government regulators over his overlapping job as a director for ...

Justice probing tech company recruiting

Jun 03, 2009

The US Justice Department has launched an investigation into whether the recruiting practices of some of the largest US technology companies violated antitrust laws, The Washington Post reported on Wednesday.

US regulators examine Apple media platform: WSJ

Feb 18, 2011

US antitrust regulators have begun to examine Apple's online platform for subscriptions for newspapers and other content through its App Store, the Wall Street Journal reported Thursday.

Google CEO doesn't see problem with his Apple role

May 07, 2009

(AP) -- Google Chief Executive Eric Schmidt is taking a government inquiry into his role on Apple Inc.'s board in stride, expressing confidence that the probe won't find any evidence that the ties between the two companies ...

US anti-trust inquiry into Google, Apple

May 05, 2009

US officials have begun investigating whether close ties between the boards of technology giants Google and Apple violate antitrust laws, the New York Times said Tuesday.

Recommended for you

Oregon sues Oracle over failed health care website

48 minutes ago

Oregon Attorney General Ellen Rosenblum says she's filed a lawsuit against Oracle Corp. and several of its executives over the technology company's role in the state's troubled health insurance exchange.

Google buys product design firm Gecko

1 hour ago

Google on Friday confirmed that it bought Gecko Design to bolster its lab devoted to technology-advancing projects such as self-driving cars and Internet-linked Glass eyewear.

Ticketfly buying WillCall for on-premise data

Aug 21, 2014

Ticketfly Inc., a San Francisco-based technology company among several posing a challenge to Ticketmaster, is acquiring WillCall Inc., a crosstown rival that turns your smartphone into a mobile wallet at live events.

HP revenue inches up after years of decline

Aug 20, 2014

Hewlett-Packard on Wednesday reported that its quarterly revenue rose for the first time in three years, nudged by improved computer sales everywhere except Russia and China.

Restaurants experimenting with pay-in-advance tickets

Aug 20, 2014

With restaurant patrons increasingly jumping on the Internet to make reservations, some high-end eateries here and across the country are adding a new tech wrinkle: having their clientele pay for their meal in advance using ...

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

Thex1138
not rated yet Mar 12, 2012
..along come the tall poppy lobbyists from Google, Samsung who want Apple's patents and tech for nothing... changing tact and now claiming anti-trust because consumers want Apple products and no body elses clunker crap...