LITTLE ROCK — The U.S. Justice Department and the Federal Trade Commission are beginning to examine whether Apple’s new media-subscription service violates antitrust laws, according to two people familiar with the matter.
The agencies haven’t decided whether to pursue a more formal investigation as the examination is at a preliminary stage, said the people, who requested anonymity because the matter is confidential. The Wall Street Journal reported Friday on the preliminary investigations.
Justice Department spokesman Gina Talamona declined to comment, as did a trade commission spokesman. Steve Dowling, a spokesman for Apple, didn’t respond immediately to e-mails or phone calls for comment. Jill Tan, a Hong Kong-based Apple spokesman, didn’t immediately return two calls to her office and mobile phone seeking comment.
Apple on Tuesday said it was starting a subscription service for publishers to sell newspapers and magazines on the iPad and other devices through the company’s online App Store. Cupertino, Calif.-based Apple will take a 30 percent cut of any subscription purchased through the App Store. Participating publishers will have to offer their lowest subscription rates within Apple’s store.
Google Inc. unveiled a rival service Wednesday in which the company would keep 10 percent of fees charged by publishers.
Apple’s plan is “economically untenable,” said Jon Irwin, president of online music provider Rhapsody International Inc.
The Apple service also will prevent publications from providing different pricing and special subscription offers to readers, said John Sturm, chief executive officer of the Newspaper Association of America, an Arlington, Va.-based industry group.
“It appears to us that Apple is now insinuating themselves between us and our customer in a way that makes it difficult for the publishers to succeed long term,” he said.
Apple’s App Store offers more than 350,000 applications to users of the iPhone, iPod and iPad, according to the company. About $1.1 billion of applications were sold through the App Store in 2010, making Apple’s revenue share about $317 million, according to estimates from Brian Marshall, an analyst at Gleacher & Co. in San Francisco.
The FTC has been reviewing separate allegations that Apple is engaging in anticompetitive tactics to restrict rivals in the mobile-advertising market. The Justice Department is looking into Apple’s business practices regarding its iTunes digital music service.
Business, Pages 28 on 02/19/2011