Apple faces new antitrust investigation over iOS advertising restrictions
It was discovered this week that Apple, which plans to launch its own iAd service on July 1st for developers looking to monetize apps that run on its iOS-based devices, had modified section 3.3.9 of the iOS developer agreement to state that user data can only be obtained with the consent of the user, and only provided to "an independent advertising service provider whose primary business is serving mobile ads."
The terms specifically restrict the use of advertising services from companies that also develop or distribute their own mobile devices and mobile operating systems, which essentially blacklists Google's industry leading AdMob service and similar offerings from long-time rival Microsoft.
As such, U.S. regulators have "taken an interest in Apple's actions," according to two people familiar with the matter who spoke to the Financial Times, though it's reportedly unclear as of yet whether the investigation will be handled by the Federal Trade Commission or passed off to the Department of Justice.
Word of the probe comes less than a month after antitrust regulators concluded a similar investigation into whether Google was unjustly muscling its way into an overly-dominate position in the mobile ad space with its recent $750 million acquisition AdMob. Somewhat ironically, Apple's announcement shortly thereafter that it would launch its own iAd service helped the search giant's case, serving as evidence that substantial competition in the mobile space lay on the horizon.
On Wednesday, AdMob chief executive Omar Hamoui lashed out at Apple for the changes to its iOS terms via a blog post. "This change threatens to decrease — or even eliminate — revenue that helps to support tens of thousands of developers," he wrote. "The terms hurt both large and small developers by severely limiting their choice of how best to make money. And because advertising funds a huge number of free and low cost apps, these terms are bad for consumers as well."
"Let's be clear," he continued. "This change is not in the best interests of users or developers. In the history of technology and innovation, it's clear that competition delivers the best outcome. Artificial barriers to competition hurt users and developers and, in the long run, stall technological progress."
For his part, Apple chief executive Steve Jobs has argued that the changes were made to protect user privacy, and were not meant to be anticompetitive. During an on-stage interview at the Wall Street Journal's recent D8 conference, he singled out Flurry Analytics, which was collecting information about devices through App Store software, unbeknownst to Apple.
Proving that the changes will harm consumers will be key to the government's case, according to experts who spoke to the Financial Times. "It has to affect consumers, not just rival suppliers," said former US Federal Trade Commission chief economist William Comaner. It's unclear whether Apple could be considered to be breaking the law, given that the recent changes only appear to take aim Google and Microsoft, he added.
The probe is the latest in a growing string of investigations for which Apple finds itself a target thanks to the booming success of its mobile device business. It's already among tech companies being investigated by the DoJ over hiring practices that allegedly conspired to prevent competitors from hiring each other's employees.
Similarly, Apple is also under investigation from the US Federal Trade Commission over separate provisions in the iOS developer agreement which limit developers from using tools other than those provided by the company. That inquiry was initiated by a complaint from Adobe Systems, which was thwarted from using its Flash Professional tools to generate iPhone apps for sale in Apple's iTunes App store.
The DoJ is also looking into Apple's negotiating tactics with music labels related to sales and marketing within its ubiquitous iTunes Store.