FTC And Department of Justice May Investigate Apple’s Subscription Model

Feb 18, 2011
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FTC And Department of Justice May Investigate Apple’s Subscription Model

According to the Wall Street Journal, Apple's new subscription model is catching the attention of U.S. antitrust enforcers. The Department of Justice and Federal Trade Commission plan to delve into the situation but may not develop any formal investigation or any action against the company. Many publishers including music streaming service, Rhapsody, have criticized Apple's new subscription policy, even saying it is "economically untenable."

Apple's subscription service requires a 30 percent cut on all revenue from online subscriptions. It also sets up restrictions that steer customers away from directly subscribing via the publisher's website--the only way publishers can avoid the 30% fee and acquire important customer sales and billing data. On top of this, publishers are not allowed to offer a lower subscription price on their websites than what they offer in-app. And there's even less wiggle room when you consider that subscription content can only be delivered to iPads, iPhones, and iPods via iTunes.

Apple has had a brush with federal regulators before for similar anti-competition strategies. In May 2010, the FTC and the Justice Department made inquiries on Apple's developer agreement in that seemed to be anti-Android. That situation restyled in Apple announcing greater developer freedoms. So it will be interesting to see whether Apple loosens its grip on the new subscription model.

[via Cult of Mac and Reuters]


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