Digital Top Stories

US regulators reviewing Apple’s new app subscriptions policy

By | Published on Monday 21 February 2011

Apple

It is thought the US Department Of Justice has begun a preliminary inquiry into Apple’s announcement last week that it will force content providers who offer subscription-based services via an iPhone or iPad app to accept regular subscription fees through their App Store in addition to any existing payment system said provider may already be using.

Apple will charge a 30% commission on any payments made through its store, which is enough to throw the budgets of most streaming music platforms currently offering an iPhone service totally off-kilter, given most operate on very tight profit margins once they have paid license fees to record companies and music publishers and covered bandwidth costs.

US music provider Rhapsody was most critical of the announcement, and admitted it was consulting its lawyers as to whether Apple’s new policy breaches American anti-trust laws. You could argue the IT giant is able to force arguably unfair terms onto content service providers because if they refuse to comply they’ll have to withdraw from the iPhone and iPad completely, cutting themselves off from a sizable slice of the market.

According to various reports, officials at the US Department Of Justice have approached both affected content providers and Apple to discuss the IT giant’s new system. Whether that will lead to a fuller investigation remains to be seen, probably not. More likely it would require one affected party or another to launch an anti-trust action. Given the costs of doing so and the uncertain conclusion of any such action, presumably affected content owners will continue to negotiate with Apple for better terms first before taking any major legal action.

In Europe, according to Billboard, a European Commission spokeswoman confirmed that competition officials there were monitoring the situation, but added that no formal inquiry is likely just yet as some feel the apps market is too new for regulators to form opinions on market dominance and the alleged abuse thereof, especially given the rise of the Android platform in the smartphones market and the recent launch of various iPad rivals.



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