Apple likely to avoid antitrust battles

While US antitrust officials have been taking a more assertive approach in the past 18 months toward technology companies in the general and fast-growing Apple in particular, experts said on Friday that the rising Silicon Valley powerhouse is likely to avoid the sort of brutal legal battles that beset Microsoft for a decade.

Justice Department and Federal Trade Commission lawyers, emboldened by a broader interpretation of the law, have been making inquiries in recent weeks about Apple’s conduct in distributing digital music and in barring iPhone applications created with Flash.

On Wednesday, the Financial Times reported that regulators had also decided to examine Apple’s exclusion of Google and Microsoft from advertising within applications that run on the iPhone, iPad and iPod.

Those efforts will be a distraction for Apple and could help make sure it continues to step carefully as the technology landscape shifts and it faces off against competitors in new areas.

But the worst-case scenario for the company and its investors – litigation against an opponent backed by bottomless tax coffers – remains only a remote possibility, because of the facts and the state of the law.

On the facts, Apple benefits from its number two position in US market share for smartphones, behind Research in Motion’s BlackBerry.

Simply exerting extreme control over that platform isn’t enough to bring government retribution, said Christopher Yoo, a University of Pennsylvania law professor who writes on vertical integration at technology companies.

“You have to give Apple its reward for creating an incredibly innovative smartphone” Mr Yoo said, especially because there aren’t massive barriers to new phones coming along. “People who build the proverbial better mousetrap have to get some reward for it.”

That’s not to say that Apple’s actions are good for consumers. Barring programs developed with Adobe’s Flash means that some developers who now write applications for Apple and also phones running Google’s Android operating system will pick one horse or the other, said Bert Foer, president of the American Antitrust Institute.

“It sounds like it is more anticompetitive than pro-consumer. It sounds like it would slow innovation rather than speed it up”, Mr Foer said. “I hope that the government gives it very close scrutiny.”

Legal action, on the other hand, might not be forthcoming. The marketplaces at issue in the various inquiries wouldn’t be defined more narrowly than all smartphones and could be broader than that, said Herbert Hovenkamp, a University of Iowa authority on antitrust law. Advertising on mobile devices, he said, would “very likely” be determined to be just part of a larger market for internet advertising, where Google is the strongest player.

In theory, vertical monopolies raise issues as serious as those presented by the better-known horizontal monopolies, such as the one Microsoft has enjoyed with PC operating systems. The new generation of antitrust officials has also said it will look beyond current market share in determining where economic power might be misused.

But the reality is that Apple is among the very few vertical operations with market clout significantly affecting consumers, and regulators are having to revisit dusty treatises on when such operations can be curbed.

“They are not ready to rest on vertical issues in the courts if they can help it,” Mr Foer said. “They know it’s going to be an uphill battle.”