Antitrust probe looms for Apple on mobile ads

Antitrust probe looms for Apple on mobile ads
By Joseph Menn and Richard Waters in San Francisco
Copyright The Financial Times Limited 2010
Published: June 9 2010 23:07 | Last updated: June 10 2010 01:43
http://www.ft.com/cms/s/0/e7ae5066-7408-11df-87f5-00144feabdc0.html


US antitrust regulators plan to investigate whether Apple is unfairly restricting rivals such as Google and Microsoft in the market for advertisements carried on the iPhone, iPad and iPod, people familiar with the move said on Wednesday.

Apple has introduced its own network to sell display, video and interactive adverts in the small programs known as apps, which have fuelled the rapid adoption of Apple’s devices. On Monday, it said it had sold $60m worth of adverts that will begin on July 1 and run for the rest of the year.

The case provoked a rare public dispute between Google and Apple on Wednesday as the internet group claimed its market-leading mobile advertising network was about to be unfairly excluded from the Apple’s devices.

The dispute comes less than a month after US antitrust authorities ended an exhaustive investigation into whether Google itself might end up with too much power in the mobile ads business, and highlights a rapid shift in the balance of power as Apple has set out to dominate advertising on its own devices.

According to two people close to the situation, US regulators have already taken an interest in Apple’s actions, though it is not yet clear whether it will be left to the Federal Trade Commission, which carried out the recent Google investigation, or the Department of Justice to take an investigation forward.

Apple’s latest rules for developers who create apps for its devices limit the situations in which they can send approved information about their apps’ audiences to advertising services. The information cannot be sent to advertising networks that are affiliated with companies developing or distributing mobile devices or operating systems – a definition that effectively excludes Apple rivals like Google and Microsoft.

Such information, including user locations, is critical for making mobile advertising more effective. Google complained on Wednesday that this would have the effect of barring its AdMob advertising service from apps inside Apple’s system.

Omar Hamoui, AdMob chief, wrote on a company blog: “This change threatens to decrease, or even eliminate, revenue that helps to support tens of thousands of developers. “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.”

Apple did not respond to a request for comment.

While the group takes pains to point out that it lags in the US smartphone market behind Research in Motion, maker of the BlackBerry, Apple has already triggered antitrust attention.

Regulators have been looking into its marketing of digital music, where it is top retailer by revenue, and its blocking of Flash, the Adobe software.

Proving the policy harmed consumers was vital to a formal antitrust argument, experts said.

William Comaner, a University of California professor and former US Federal Trade Commission chief economist, said: “It has to affect consumers, not just rival suppliers”.

He said it was not clear whether Apple could be considered to be breaking the law, especially because the most recent terms take aim at two Google and Microsoft.

Google’s complaint about the iPhone advertising restrictions marks an intensification of its public rivaly with Apple.

Until now, Google executives like Eric Schmidt, chief executive and until last year an Apple board member, have generally sought to play down their company’s growing competition with Apple. But in one sign that the gloves have come off, Steve Jobs, Apple chief executive, took direct aim at Google’s standing in the mobile operating system market when unveiling the latest model of the iPhone earlier this week.