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US antitrust regulators investigate Apple’s subscription plan

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Image used with permission by copyright holder

Federal regulators have begun to scrutinize the terms of Apple’s newly-announced subscription feature for apps, sources familiar with the matter tell the Wall Street Journal.

The US Justice Department and Federal Trade Commission (FTC) have begun preliminary investigations into whether Apple has violated antitrust laws by requiring app publishers to sell their content subscriptions through the iTunes App Store, and for charging then a potentially exorbitant fee for doing so.

It is so far not clear whether either the Justice Department or the FTC will conduct an extended investigation into the matter, or which agency would take up the task if they choose to do so.

Apple’s subscription payment service gives media publishers the ability to charge customers a recurring payment to access digital content through an app. According to Apple’s rules, publishers must offer subscriptions through iTunes, if they offer them elsewhere. For every subscription gained through iTunes, Apple receives a 30 percent cut.

In addition, Apple prohibits publishers from linking their app users to online stores outside the Apple ecosystem, which makes it difficult for those publishers to sell any subscriptions that don’t come burdened with the Apple fee — a rule some legal experts say could violate US antitrust laws.

Immediately following Apple’s announcement of its subscription service, online music subscription company Rhapsody said the 30 percent charge made it practically impossible for many media publishers to continue doing business through Apple.

The frustration from media publishers continued yesterday, when Last.fm co-founder Richard Jones lambasted Apple’s 30 percent fee, saying, “Apple just f***** over online music subs for the iPhone.”

Other publishers, however, have already signed on with Apple. Late Thursday, the publishers of Maxim magazine said they would adopt the subscription plan, joining Elle and Popular Science who have already agreed to Apple’s plan.

The day after Apple’s announcement, Google unveiled its own plan for digital subscriptions, which allows publishers wide flexibility in how they structure their payments, and lets them keep at least 90 percent of what they earn through their subscriptions.

As WSJ notes, this isn’t the first time the US government has investigated whether Apple had anticompetitive policies. Last year, the FTC looked into Apple’s rules that prevented developers from using tools made by Adobe, as well as its restriction on Google from selling ad that would appear on Apple devices. In both instances, Apple subsequently changed their rules.

Apple is currently under investigation by the European Union, which also suspects the company of having anticompetitive policies.

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