Is Apple Becoming the Next Microsoft?

Apple CEO Steve JobsApple (AAPL) may soon feel the wrath of American antitrust law. And it's only fair. After all, Apple is using many of the same techniques that Microsoft (MSFT) used in the 1990s that got it into a nasty legal battle with the U.S. and other governments.

While I think Apple CEO Steve Jobs is letting his unhinged bully side out in public more than ever, American antitrust law doesn't care about his tantrums, it just cares that Apple may be "tying" -- an illegal technique of using power in one market to gain a monopoly in another. And that's just as illegal for Apple in 2010 as it was for Microsoft in the 1990s. Back then Microsoft was charged with using its monopoly in the desktop operating system market, as evidenced by Windows 95's dominant share, to force customers to adopt its Internet Explorer browser in lieu of competitors' such as Netscape's Navigator.

What might the U.S. use as the legal basis for a suit against Apple? According to Monday's New York Post, the Department of Justice and the Federal Trade Commission (FTC) are considering whether to file a suit against Apple for using its market leadership in smartphones (iPhone), online music (iTunes) and tablet computers (iPad) to prohibit application developers from using third-party tools, most notably Adobe's (ADBE) Flash video software, to create applications for the iPhone and iPad. Bloomberg News reports that Adobe prompted the U.S. to consider the charges against Apple.

Apple may head off this antitrust trouble by changing the language in its developer agreement. According to the The Wall Street Journal, Apple may end up rewriting its contract with developers, leaving just enough wiggle room with it to avoid a government investigation into its alleged tying.

Closing off the Apple Ecosystem


As my DailyFinance colleague Sam Gustin notes, Steve Jobs seems to be frantically trying to consolidate the company's market power. Sam speculates that Jobs might feel a heightened sense of urgency because he's afraid of Google (GOOG) and its efforts to break into the smartphone market and that he's such a control freak that he's turning Apple and its ecosystem into a closed system -- the likes of which could stifle innovation and threaten its long-term growth.

If an antitrust probe is underway, it wouldn't be the first time Apple got government scrutiny. According to the Journal, over a year ago, the Securities and Exchange Commission made an informal inquiry into Apple's failure to disclose Jobs's health problems in a timely and open manner. And in 2009, the FTC looked into whether sharing directors, such as Google CEO Eric Schmidt, violated antitrust laws. Schmidt resigned from Apple and is now a target of Jobs's fear.

If Apple, like Microsoft, is shown to be engaging in unbecoming anticompetitive behavior, at least Apple's products are a lot more elegant.

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