Apple could face EU probe under new antitrust rules

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Apple could face EU probe under new antitrust rules

EU wants to lower bar for 'abuse of market position'; criticisms in China too

By CAROLINE GABRIEL

Published: 5 July, 2010

READ MORE: Europe | Apple | Regulator | iPhone

Technical hitches with the iPhone 4 are not Apple's only headaches this month. It is facing pressures in Europe and China - both key markets as its US heartland saturates and it needs strong performance on a global basis. Pending EU legislation could force Apple to change its software policies, and EU Commissioner Neelie Kroes may also launch a probe into interoperability between various smartphone platforms, including iPhone.

Kroes has already fined Microsoft $1.4bn for lack of software openness, and is now focusing on whether smartphone vendors comply with new European interoperability rules. Kroes specifically named Apple's App Store as an example of a closed environment.

The comments come against the background of a massive EU initiative called the Digital Agenda, which among many items aims to redefine the ways in which companies can fall foul of antitrust rules. When considering abuse of a market position, the Agenda wants to change the standard from 'dominant' to 'significant' place in a sector. The document states: "Since not all pervasive technologies are based on standards the benefits of interoperability risk being lost in such areas. The Commission will examine the feasibility of measures that could lead significant market players to license interoperability information while at the same time promoting innovation and competition."

Kroes explained: "We need to make sure that significant market players cannot just choose to deny interoperability with their product. This is particularly important in cases where standards don't exist... This is not just about Microsoft or any big company like Apple, IBM or Intel. The main challenge is that consumers need choice when it comes to software or hardware products." Under these rules, Apple could face investigation into its barring of third party development suites, such as Adobe Flash, an issue already reportedly being examined by the US Fair Trade Commission.

Some analysts believe that Apple could be forced to allow developers to write apps without using Xcode or going through the vendor's approval process.

Meanwhile, despite a fairly strong performance by the iPhone in China, where it is distributed by second cellco China Unicom, there has been rising criticism that - unlike Nokia or local suppliers - Apple pays no attention to creating a user experience that is suited to Chinese subscribers. This is a common criticism of some phonemakers and app stores when they seek to transfer an experience created for western markets, without significant change, to new economies. Indeed, Nokia, which places strong R&D focus on localized UIs and content, has leveraged this difference in many key markets like India.

The concerns about Apple's approach to China were also taken up, to make a competitive point, by Chinese PC maker Lenovo, which recently reawakened its smartphone business with the launch of Android-based LePhone. Founder and chairman Liu Chuanzhi told the UK Financial Times that Apple was missing opportunities in the Chinese smartphone and PC sectors because of its approach. "We are lucky that Steve Jobs has such a bad temper and doesn't care about China," he said in the interview. "If Apple were to spend the same effort on the Chinese consumer as we do, we would be in trouble." He added that LePhone was competing well because it was customized for Chinese users.