Thursday, February 17, 2011, 08:05 pm PT (11:05 pm ET)
FTC looking into Apple subscription terms, while first publishers get on boardUS regulators are examining the terms of Apple's App Store subscriptions, a new report claims, even as early adopter publishers have signed on to the new service.
In a followup to an earlier report, The Wall Street Journal said the US Justice Department and Federal Trade Commission are looking into Apple's terms, though interest is at "a preliminary stage" and a formal investigation has yet to be launched, according to people familiar with the matter. Meanwhile, the European Commission said Thursday it was "carefully monitoring the situation."
Apple drew criticism earlier this week when it unveiled its iOS App Store subscription service, which will take a 30 percent share of revenue and requires that digital subscriptions for an iOS app sold outside of the app also be available for the same price or better through iTunes.
One developer called the announcement "a huge dick move" on Apple's part, while distributor Rhapsody called the terms "economically untenable." "The costs don't leave any room for a sensible business model," said Rhapsody president John Irwin.
At the time, legal experts chimed in, saying Apple could be subject to antitrust scrutiny, though the iPad maker would need to have a "dominant market position" for its actions to count as antitrust violations.
Representatives of the Justice Department and the FTC declined to comment. Since both agencies enforce federal antitrust laws, the two would have to decide who would take the lead in the event of an investigation, the report noted.
Eric Goldman, director of Santa Clara University's High Tech Law Institute, told the Journal that forbidding apps from linking to external sites "sounds like a pretty aggressive position. "It seems like that's purely in the interests of Apple trying to restrict people doing transactions they don't get a cut from."
The clauses in Apple's terms of service that require pricing on iTunes to match external sites, also known as "most favored nation" clauses, could draw investigator scrutiny. According to the report, the Justice Department recently sued a Michigan health-insurance company, alleging that the company used similar clauses to block competitors.
The day after Apple announced the details of its in-app subscriptions, Google revealed a competing service called "One Pass" that will take just 10 percent of revenue. The service also would allow publishers access to subscribers' personal data, while Apple's model lets users decide which personal information publishers can see.
Despite attracting a largely negative response from publishers and developers, Apple has managed to sign on several high-profile publishers to its subscription feature. Men's magazine Maxim will take advantage of the new feature, the Journal reports.
We understand that Maxim can be consumed in many different ways and on many different platforms and it is our job to serve our audience wherever and however they choose, said Ben Madden, Maxims chief revenue officer.
Elle, Nylon and Popular Science also revealed earlier this week that they will incorporate the new service into their apps. News Corporation negotiated exclusive access to the feature and will utilize it in its The Daily iPad periodical.
For an in-depth comparison of Apple's new subscription plan with those of Google and Amazon, see the AppleInsider feature:
Inside subscription content: Apple iPad vs Google One Pass vs Amazon Kindle
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