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Report: Apple's subscription plan draws antitrust scrutiny

U.S. investigators are examining the terms Apple placed on publishers wishing to sell digital subscriptions through the App Store, according to The Wall Street Journal.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
3 min read

U.S. antitrust investigators are examining the terms Apple placed this week on publishers wishing to sell digital subscriptions through the App Store, according to a Wall Street Journal report that cited people familiar with the matter.

The Justice Department and Federal Trade Commission are interested in whether Apple is violating antitrust laws by routing customers through Apple's App Store and taking a 30 percent cut of each subscription, sources told the newspaper. Regulators' interest in the subscription terms is reportedly preliminary and might not lead to a formal investigation.

Representatives for Apple, the Justice Department, and the Federal Trade Commission did not immediately respond to requests for comment.

Apple announced Tuesday it was launching a subscription service for magazines, newspapers, videos, and music bought through its App Store. Apple said that publishers would be allowed to set the price and the length of the subscription terms but that Apple would handle the payments through its App Store, for which it would receive 30 percent of the revenue.

The relationship between the publisher and the App Store isn't exclusive; publishers can sell subscriptions on their own site or offer free access to existing customers, Apple said.

However, the Apple subscription system uses the same billing information already on file at the App Store, making it a convenient option for many consumers. And publishers wishing to use the App Store to get their content on Apple devices such as the iPad must make it available via the online store at the best available price. In addition, publishers' apps would be prohibited from linking to stores outside the App Store or offering more attractive prices elsewhere.

Apple's requirement that publishers offer the same subscription prices for the app as it does outside of it could "bump into the common publisher practice of selling subscriptions at different prices across [distribution] channel's," Chuck McCullagh, a former senior vice president with the Magazine Publishers Association of America, told CNET's Greg Sandoval this week. Some of those channels include the publisher's Web site, direct mail, and newsstands.

The day after Apple officially shared details of its new App Store subscription plan, Google announced the launch of One Pass, its online charging service for newspapers and magazines. Google's rival service offers two big differences from Apple's: content providers will get to keep 90 percent of revenue from One Pass sales and publishers will retain control of consumer data.

The App Store has raised antitrust regulators' interest before. At issue last May were the restrictions placed on programming languages used to create iPhone apps. Changes to the company's developer agreement prompted both the Federal Trade Commission and the Department of Justice to consider whether Apple might be unfairly squeezing out competitors.

The software development kit license for iPhone OS 4 precluded using other platforms that allow developers to make one application that runs on multiple devices. However, Apple announced in September it would allow developers to create applications with just about any tool they want, relieving that antitrust concern.

Disclosure: Chuck McCullagh is the father of CNET reporter Declan McCullagh.