Regulators Eye Apple Anew
Enforcers Interested in Whether Digital-Subscription Rules Stifle Competition — WASHINGTON—U.S. antitrust enforcers have begun looking at the terms Apple Inc. set this week for media companies who want to sell their content on its popular iPad and other devices …
Context & Ripple Effects
This is the second time in under a year that Washington has trained its sights on Apple's cut of digital commerce: in May 2010 the New York Times reported enforcers were already scrutinizing Apple's online-music tactics, a probe of how the company uses its App Store position against rivals. What changed this week is scope — Apple's newly announced terms requiring media companies to sell iPad subscriptions through Apple's system, with a revenue share attached, have drawn both the FTC and the Justice Department into what Ars Technica calls a preliminary investigation.
The story lands at the exact moment the subscription model for tablets is being defined: whatever Apple's terms end up being, they were set unilaterally this week, and the enforcers' question — whether those terms stifle competition among media sellers — will shape how every publisher prices and delivers content on the device.
First-order effects
- Apple's just-issued subscription terms are now subject to active review by two antitrust agencies rather than standing as settled policy for publishers to sign onto.
- Media companies deciding whether to sell subscriptions through the iPad face regulatory cover to negotiate or hold out instead of accepting Apple's terms as take-it-or-leave-it.
Second-order effects
- Publishers unhappy with the revenue split gain leverage from Washington's attention, pushing Apple toward softer terms or exemptions much as its music-era practices did when first questioned in 2010.
- Rival tablet and e-reader platforms can market themselves to media partners as the less-regulated distribution channel while Apple's store sits under review.
Third-order effects
- If enforcers conclude that gatekeeping a device's sole app marketplace with mandatory revenue sharing harms competition, app-store take rates become a recurring regulatory target rather than a private contract term — a precedent that would follow Apple across product lines and geographies.
- The pattern of repeated scrutiny since 2010 suggests platform gatekeeper conduct is shifting from an accepted feature of mobile economics to a standing enforcement concern.
The trend: App-store gatekeepers are moving from setting their own commerce rules to having those rules tested by competition authorities, with Apple's 2010 music scrutiny and this week's subscription probe marking the opening rounds.