Apple Facing New Antitrust Investigation

mantis2009 writes "After recent complaints of anti-competitive behavior, the US Department of Justice has opened an inquiry into Apple's business practices for selling music. Investigators have specifically asked whether Apple colluded with record labels to thwart Amazon.com's music download store, according to the ever-present anonymous 'people briefed on the situation.' Allegedly, Apple threatened to retaliate if any music label participated in Amazon's 'MP3 Daily Deal' promotion, which offered early access to some MP3 tracks." So it looks like the Justice Department won the DoJ vs. FTC fight for the regulation bully pulpit.

Comments

Maybe

[Space cowboy]

Today wasn't the best day to become the highest-valued IT company in the world - edging out MSFT (219.18B) by having a market cap of 222.07B.

To give an idea of the scale of that achievement, Apple's share price has climbed about 560% in the past five years. Microsoft's is up 4%. Sure, market cap isn't a hugely useful measure (beyond bragging rights) of the value a company brings, but the trend is an interesting one, at least for Apple shareholders

Simon.

Re:Maybe

[WankersRevenge]

Reminds of Forest Gump when Forest says he invested in a "fruit" company that turns out to be Apple. If people invested their money into Apple right after that movie came out, they'd be living like Gump themselves right now.

Re:Maybe

[pushing-robot]

Today wasn't the best day to become the highest-valued IT company in the world - edging out MSFT (219.18B) by having a market cap of 222.07B.

That also gives Apple the second largest market cap period, behind only Exxon Mobil (278.64B). Rather incredible, since Apple only nudged into the top five last quarter and the top ten the quarter before that.

Re:Maybe

[Darkness404]

it will become a hamstrung corporate slushy, just like Microsoft did.

All the DOJ did was say "yep MS, you are a monopoly", the damage was already done. Microsoft managed to squash Netscape, BeOS, and all of their established competitors from the '90s.

Other than making MS more subtle in their EEE tactics, the ruling didn't do too much. Microsoft managed to come out on top with the DOJ hearings, yeah they got a stern talking to and some bad PR, but look at post-hearing MS, it was doing remarkably well and not losing marketshare till the disaster of Vista.

Apple has a lot more to fear than MS did. Apple doesn't supply the OS for most of the government's computers, MS does.

Re:Maybe

[evilbessie]

Err, why not get the Europeans to sort out this mess? They actually manage to do something* about Microsoft... *It could have been better, I grant you but they have effectively forced their hand on opening up protocols and standards. There is however more time which needs to pass, not quite sure how much though.

Re:Maybe

[Anonymous Coward]

As a consumer, and owner of several Apple products, I find their behavior to be far monopolistic than Microsoft's ever was. (Want to run Apple software? Buy Apple hardware. Want Apple hardware? It will always be loaded with Apple software. Want to load something on your iP*? Use ITMS, etc...)

The word you're looking for is 'proprietary' not 'monopoly'. You'll notice in the FS that it's about putting a competitor out of business as opposed to keeping people on their platform, which is what you just described.

Re:Maybe

[MobileTatsu-NJG]

Reminds of Forest Gump when Forest says he invested in a "fruit" company that turns out to be Apple. If people invested their money into Apple right after that movie came out, they'd be living like Gump themselves right now.

It's just mind-blowing what you could do if you had 20 years of hindsight 20 years ago.

Re:Maybe

[hairyfeet]

Uhhh...You DO know that Apple owns over 90% of the HDD based PMPs and more than 70% of ALL PMPs, yes? And since we are talking about music I'd find it hard for anyone to say that Apple was anything BUT a monopoly in that field.

I don't see how their lock in with iTMS and using that lock in to hamstring competitors is ANY different than MSFT using Windows to kill Netscape. So I'm sorry Apple fanboys if old Steve is using iTMS to screw over competitors they need to be busted. How is this any different from MSFT or Intel screwing those that refuse to play ball? MSFT said "Want good prices on windows? Screw BeOS and anybody else that wants to sell a desktop" while Intel said "Want a good deal on chips? Screw AMD and take this Netburst and like it" while Apple is saying "Want to be on iTMS? Screw Amazon". I don't see ANY difference in the tactics.

Just because old Steve has good taste doesn't mean he can screw his competitors with monopolistic behavior, hence the investigation. If the allegations are true it seems pretty open and shut to me. And before any fanboys scream "MSFT shill!" I would point out that to this day I STILL think MSFT should have been broken up. Too much power concentrated into a single company is never good for the market.

Re:Maybe

[AmigaMMC]

It will get to that, for example: According to European law, people have the right to remove the batteries off a device and buy 3rd party... something Apple is not kin to do as they make way too much money in battery and replacement service.

Re:Maybe

[ColdWetDog]

So, replace the battery. There are literally hundreds of third party solutions to the 'sealed' battery in your iWhatever. Instead of screwdriver, you need a plastic spud. Not exactly the end of the world.

Re:Maybe

[Runaway1956]

"As a consumer, and owner of several Apple products,"

I see a hint of hypocrisy here. You complain that they are to powerful, but you support them with your hard earned cash money. If they are bad, why do you give them money?

BTW - I've taught my kid properly. He bought a USED iPod, and immediately jailbroke the damned thing. He uses it as he wishes. He sent no money to Apple, and he got exactly what he wanted, and uses it in exactly the way he wishes. At this point in time, I believe he is aiming at an Android next. Of course, he has more plans than money, so he may or may not have an Android in his future. ;^)

Re:Maybe

[Strudelkugel]

Apple has a lot to fear because you never know what will happen in court, if it gets to that. Judge Jackson considered the drive space used by IE DLLs an example of monopolistic behavior, because consumers were deprived of the use of that space, no matter how minuscule it was. He had a number of other reasons that were quite questionable, too. Didn't matter though.

A good prosecutor could have a field day with Apple's marketing tactics in music, books, hardware and software sales. Probably the app store, too. No doubt they are smart enough to settle, but who knows what DoJ might demand. If they decide to go to court, anything can happen.

Re:Maybe

[Lars T.]

Funny that, because their share price wasn't doing so well when Microsoft pumped money into Apple to keep them solvent just a few years ago.

Yeah, $150 Million, when Apple only had $1.2 in cash. What a float. http://news.cnet.com/2100-1001-202143.html

Bully?

[Anonymous Coward]

Since when is stopping companies from breaking the law bullying?

Re:Bully?

[Monkeedude1212]

Since the country was run by corporations.

Re:Bully?

[steelfood]

Engaging in anti-competitive practices is completely justified by the improvements in shininess of the next toy such a practice would bring if Apple's doing it.

I don't understand this FTA

[pgmrdlm]

The Justice Department has also reportedly been investigating the hiring practices at Apple and other top technology companies, including Intel, I.B.M. and Google, asking whether the companies have improperly agreed to avoid hiring each other’s employees.

I would like to see specifically what this investigation is about. I don't see why companies can't make this type of agreement. It sounds like an agreement to respect each others trade secretes by not hiring each others employees.

Re:I don't understand this FTA

[Monkeedude1212]

Or a friendly agreement not to snipe each other's talent, but on the other hand, it makes someone at Apple kind of trapped at Apple, since they might not be able to get a job at the other big corporations who would use them.

Re:I don't understand this FTA

[Darkness404]

Because it reduces competition. If I work with software at Apple, I'm essentially barred from entering the job market at other similarly-sized corporations in the same field.

If I'm unhappy at Apple for some reason I have to stick with them because the other companies won't hire me, not because I'm not qualified but because of my previous employer.

If this was Burger King don't hiring former McDonalds employees, we wouldn't see the point, but when its software companies its ok?

Re:I don't understand this FTA

[melted]

I'm sorry, this is retarded. Agreements like this amount to indentured servitude for the employees. In my experience, moving from one company to another was the surest way to boost my pay. Had I stayed with the same company for a decade, my merit rises would merely beat inflation. I would also be worth a lot less to a prospective employer due to not having a varied background.

I would like not only these pacts to be outlawed, but non-competes as well. For trade secrets, there's the court of law where trade secret disputes can be adjudicated.

Re:I don't understand this FTA

[Actually, I do RTFA]

I don't see why companies can't make this type of agreement

For the same reason Nintendo, Sony, and Microsoft cannot sit down and coordinate the prices of consoles, games and accessories: cartels are bad. Therefore the regulation of an oligopoly is considered okay. In a oligopsony, similar affects arise from collusion: the buyers of services gain huge price setting power, because they no longer have to out-bid one another.

Re:I don't understand this FTA

[russotto]

Protection of trade secretes, protection of each companies expensive talent.

Hold on there, pardner. The trade secrets belong to the company, but the talent belongs to the employees.

Keep hating Microsoft though...

[Jackie_Chan_Fan]

As i've been ranting about for a while now... It's time to either let Microsoft run its business in the same manner Apple does... or force Apple to deal with the same nonsense all of you impose on Microsoft.

When will we end the hypocrisy? Leave Microsoft alone, and go after the real evil... Apple.

Re:Keep hating Microsoft though...

[dangitman]

But the only thing Apple has a monopoly over is Apple products. Microsoft had a monopoly that controlled an entire industry - other people's companies, not just Microsoft stuff. It would be different if Microsoft only made Windows for Microsoft computers.

Re:Keep hating Microsoft though...

[whisper_jeff]

Leave Microsoft alone, and go after the real evil... Apple.

Seriously, evil? We neuter words when we use them casually in a way they are not intended. We rail against politicians and marketers for bandying about certain words in the wrong situation while people here on Slashdot call Apple evil! You may not like them; you may not like their products; you may not like their policies; you may not like their procedures but, let's be serious, the company is not evil.

Gawd. "I don't like them" is not the same thing as "evil!"

I know. I know. I must be new here...

Re:Keep hating Microsoft though...

[tlhIngan]

That's right. Apple's simply better at it. They disguised their monopoly, and profited off it longer. Why do you think Apple's always pushed its elitist standard? To make it seem more niche, to avoid exactly what happened to Microsoft. There is absolutely no legitimate reason to lock an iPod or iPhone or iAnything to only use iTunes, except to promote hegemony. Sure, they could *optimize* their stuff to work best with their software. That's how it should be. But if I want to use Windows Media Player, or VLC, then I should be able to.

Actually, it is not illegal to have a monopoly. Natural monopolies aside, if someone is able to garner enough goodwill and purchasing power to be a monopoly in one area, it's not illegal. The only illegality comes when a monopoly is abused.

Microsoft took their Windows monopoly to put IE on the desktop. There was no need for any third-party browser now, and that desktop monopoly became an web browser monopoly as well, something we all are fighting to this day. IE6 will not die, and IE in general still holds a commanding share of web browser "marketshare".

Apple had a monopoly on selling music on iPods, but Amazon came up and took away that monopoly (because iPods play MP3s). In fact, the closest Apple had was when they were leveraging iPod sales and iTunes - this was why the EU was doing investigations into Apple. Now that Apple has gone DRM free, those concerns disappeared (because Apple sold music that only worked on iPods, thus limiting third party MP3 players from being able to play purchased music).

This case is that Apple is using it's "monopoly" on music sales to limit Amazon's ability to sell music. Namely, by demanding that the music labels cannot give preferential pricing to a third party without offering it on Apple's store as well. If a music label wants to make a track of the week 70 cents on Amazon, it also becomes 70 cents on iTunes.

Which seems bad, but remember that Apple and Amazon are also doing the exact same thing with each other on the ebook market. Apple gave publishers an option they liked better than Amazon's option, so publishers went with Apple, and Amazon relented. Apple's agreement with publishers is they don't give anyone but Apple preferential pricing. Amazon caved and went with the same agency model, and also demands that publishers cannot give preferential pricing to anyone else other than Amazon.

And Amazon's not exactly the innocent party as well - having "dealt with" publishers that refuse to go along with its pricing model by trying to "devalue" books from that publisher, or even worse, not offering to sell the book on its marketplace.

Apple's only real leverage is marketshare, and all it takes is someone to make a better iPod and all that advantage disappears. So Apple may have a monopoly on music sales, but it's far from a certain one and the iPod has to compete with everything else out there. Even music sold on Apple's store isn't locked to an iPod anymore, and modern MP3 players will play it just fine as well (say, Microsoft's Zune).

Re:Keep hating Microsoft though...

[Pharmboy]

Really? They used to charge manufacturers for every computer they sold whether or not it had windows, this is a fact. They have already said that Linux infringes on their patents, this is a fact. Assuming they would continue to charge manufacturers or pursue lawsuits on their "intellectual property" if they weren't restrained in some way isn't FUD, it is logical deduction.

Most people on /. are technical persons, and I wouldn't have to give them these direct links. Most people, including people like myself who actually use some Microsoft products, already have come to the same conclusion, that Microsoft has abused it's monopoly in the past and would likely do so even more if not for being partially restrained. No fear mongering needed, history speaks for itself.

Bah- Music industry sour grapes

[acomj]

The Music industry is probably still mad that Apple fought their 0.30 $ increase in prices and has the leverage to do so.

This doesn't seem like a big deal. The barrier to entry in creating an online music store seems pretty low, plus the files are now DRM free and playable on any player. Apple just seems to not want Amazon to get music before it does.

Not the mention it was a minor miracle that Steve Jobs got the major labels to sell their music online in the first place. I think that head start put itunes music store in the position it is in today.

Re:Bah- Music industry sour grapes

[dangitman]

Not the mention it was a minor miracle that Steve Jobs got the major labels to sell their music online in the first place.

This is one of the most fascinating things in recent tech/media history to me. I believe the labels' thinking at the time was that this was a test, and experimental roll-out. Because this new-fangled iPod and iTunes was a Mac-only thing at the time, and Macs had a tiny share of the computer market. So, they'd see if it worked. If it failed, no big deal, it's only a few Mac users. But to everybody's surprise, the iPod was insanely successful and Apple made the unprecedented move of releasing iTunes for Windows and adding USB support (early models were Firewire-only).

Basically, what the labels thought was a minor experiment turned into the future of their industry.

Cartel

[99BottlesOfBeerInMyF]

Heh, investigating Apple for leveraging dominance against the RIAA, A cartel convicted of antitrust abuses several times? How about dealing with them effectively first?

Re:Cartel

[99BottlesOfBeerInMyF]

They weren't leveraging their dominance against the RIAA, they were leveraging their dominance OF the RIAA against potential competitors.

Allegedly, Apple threatened to retaliate if any music label participated in Amazon's 'MP3 Daily Deal' promotion, which offered early access to some MP3 tracks.

Which is great and all, except Amazon is already being charged differentially less than Apple in music royalties by the RIAA as a way of intentionally decreasing Apple's market share so they have less influence compared to the RIAA. Amazon is a stalking horse as much as a competitor here.

Bully Pulpit

[SlashDotDotDot]

It says bully pulpit. Which is something else entirely.

Go to hell, DoJ

[Rogerborg]

Apple used its dominant market position to persuade music labels to refuse to give the online retailer Amazon.com exclusive access to music about to be released.

If that's all there is to the accusation, then Apple deserve kudos - in this one isolated instance - for forcing wider access to the works. Exclusive is the antithetis of the purpose of copyrights.

Some facts, some figures, and some hypocrisy

[hellfire]

Just from a quick google search on itunes music market share:

According to Wikipedia, as of 2006 Stevie said iTunes had 88% of the market for downloadable music
According to Cnet, that percentage was 70% in 2009.

Okay so Apple appears to have market dominance in downloadable music. Confirm monopoly stamp.

Now, from the article:

"But people briefed on the inquiries also said investigators had asked in particular about recent allegations that Apple used its dominant market position to persuade music labels to refuse to give the online retailer Amazon.com exclusive access to music about to be released."

So... Amazon got first and only dibs to specific songs, thus restricting competition, and Apple is using monopoly power to tell music distributors not to do that?

*brain explodes*

I'm sure I'm going to sniff some RIAA lobbiest involvement in this once I reassemble my head.

Fucking get it right....

[coolgeek]

It's an inquiry, NOT an investigation. An inquiry may or may not lead to an investigation.

Riiiiight!

[TRRosen]

So now its uncompetitive for Apple to complain about other companies trying to gain an unfair advantage. Amazon's program gave Amazon a monopoly since they would be the only ones selling the tracks early. I can only imagine what a sh*t storm Amazon would throw if Borders was able to sell select books a week before them or anyone else. Personally I feel all retail exclusivity agreements should be illegal. Including Cell phones and album/tracks. The only stuff that should be "available only at wal-mart" is bad taste and bad judgment.

Re:Riiiiight!

[eliotw]

TRRosen is on topic. Amazon wants to be able to sell content "exclusively" before anyone else can. Apple isn't happy with that and can you blame them. It seems like Apple is saying to the record companies "if you give preference to Amazon over us, then we'll do the same and give preference to other labels over you" That sounds pretty fair to me. If it were Apple asking for the exclusivity then it would be a different story.

Re:Riiiiight!

[pandrijeczko]

If I go to a supplier and say "I want you to supply me with 100 £5 widgets for £4 each and I want you to supply me with them first", that's competition.

If I go to a supplier and say "I don't want you to supply Fred Bloggs with £5 widgets for anything less than £4.50 and make sure he gets them late", that's monopolistic.

Like I said, wipe away the spittle and go back and *READ* the article more carefully, thanks.

Re:Apple also needs to open osx to all pc's

[dangitman]

Apple also needs to open osx to all pc's as well. As it they get bigger then M$ they they may be forced to.

That's a very strange logic, because if Apple licensed the Mac OS to generic hardware manufacturers, that would put them at greater risk of becoming an actual monopoly, because it would increase other companies' dependence on Apple.

If you could easily (and more importantly, officially) run Mac OS on cheap generic hardware, Windows might actually face a significant decline in marketshare, putting Apple in the same position that got Microsoft slapped with anti-trust suits.

Seems like a strange way to fight a supposed monopolist, by making it more monopoly-like.

Go after them for the crap they did to book sales

[Shivetya]

because they cut us out and favored the publishers.

As for their music policy, I bet the arguments over only a 30 cent spike were not as heated as many suspect, frankly I would not doubt Apple welcomed it.