Will Steve Jobs' 'Thoughts on Flash' put Apple in trouble with the Feds?

It's the question I'm asking after the New York Post reported that the "Department of Justice and Federal Trade Commission are locked in negotiations over which of the watchdogs will begin an antitrust inquiry into Apple's new policy of requiring software developers who devise applications for devices such as the iPhone and iPad to use only Apple's programming tools."

Yeah, yeah, some people can scoff and, say, "It's just the Post!" But the New York Post was packaging gossip and jamming scoops long before Gawker publisher Nick Denton was in diapers. The Post claims that regulators "are days away from making a decision about which agency will launch the inquiry." At issue is Section 3.3.1 of Apple's developer agreement, which prohibits cross-platform technologies like Flash and Java. (See Scott Fulton's excellent analysis about the antitrust issues.)

What timing! Just last week, Apple CEO Steve Jobs posted his "Thoughts on Flash" memo that had me wondering "Why?" I ripped into Jobs' logic in post "Steve Jobs' 'Thoughts on Flash' is just smoke." Days earlier, Adobe abandoned further develop on its Flash tools for iPhone OS devices. "Adobe's retreat seemingly should have been end of story, so why then did Apple's CEO write a long essay giving six reasons why Flash is prohibited from the iPhone?" I asked.

I reasoned that perhaps Jobs' responded to developer pressure or recognized that Adobe's cross-platform Flash tools would ship with Creative Suite 5. But what if there was another reason -- that Apple got wind of the investigation and Jobs proactively made his case for Apple ditching Flash. Worse, what if Jobs didn't know about the investigation and wrote a memo that the Feds could use against Apple? Either scenario is plausible and both could be trouble for Apple.

I have covered news about Microsoft's antitrust problems since 1997, when the last Democratic administration took out the antitrust two-by-four and started whacking heads. Strangely, the potential problems before Apple aren't that different from Microsoft:

1) The Justice Department claimed that Microsoft had a monopoly on Intel-based PCs. The DOJ never said all personal computers. Similarly, the FTC or DOJ could argue that Apple has a monopoly on iPhone -- or iPhone OS devices. Apple doesn't yet have market share to claim a monopoly over smartphones. But considering smartphone is the next big category for handsets, either agency might act now to prevent another Microsoft situation. More likely, the Feds would claim that Apple has a monopoly over mobile applications, over which it is acting anti-competitively.

2) The Justice Department claimed that Microsoft used its monopoly power to restrict third-party platform access to Windows. The Feds identified Java and Netscape's browser as competing platforms. By the way, it was Sun's complaint about Java that set off the Microsoft antitrust investigation. Now Java is back, being shut out on yet another computing platform. By restricting the development tools to its own, prohibiting cross-platform tools and favoring its own applications over third parties', Apple looks lots like Microsoft did to Clinton trustbusters in 1997 and 1998.

I was going to do two more similarities, but they can wait for any follow-up, should either agency take action. In any investigation or actual case, everything Apple says or has said publicly, and -- when subpoenaed -- privately by e-mail (or other electronic communications) can be used by the Feds. That makes Jobs' "Thoughts on Flash" exhibit 1 and Section 3.3.1 exhibit 2 (or visa versa).

The key section of Jobs' memo could work for or against Apple, depending on interpretation:

We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.

This becomes even worse if the third party is supplying a cross platform development tool. The third party may not adopt enhancements from one platform unless they are available on all of their supported platforms. Hence developers only have access to the lowest common denominator set of features. Again, we cannot accept an outcome where developers are blocked from using our innovations and enhancements because they are not available on our competitor's platforms.

Flash is a cross platform development tool. It is not Adobe's goal to help developers write the best iPhone, iPod and iPad apps. It is their goal to help developers write cross platform apps. And Adobe has been painfully slow to adopt enhancements to Apple's platforms. For example, although Mac OS X has been shipping for almost 10 years now, Adobe just adopted it fully (Cocoa) two weeks ago when they shipped CS5. Adobe was the last major third party developer to fully adopt Mac OS X.

Jobs freely admits that Apple prohibits cross-platform tools on iPhone. He's guilty by admission -- if either agency view the restrictions as being anticompetitive. Microsoft made similar arguments about the Windows user experience, justifying restrictions placed on developers and OEMs, such as control over branding during bootup or desktop icons -- two areas Microsoft jealously guarded. Microsoft argued that it wasn't in some of its partners' interests to protect the Windows experience, which isn't much different from: "It is not Adobe's goal to help developers write the best iPhone, iPod and iPad apps. It is their goal to help developers write cross platform apps."

If the Feds see "cross platform" as fostering competitive market and prohibiting the tools as being anticompetitive -- and they see Apple as having a monopoly over mobile applications -- then, yes, Apple could have problems. That's regardless of whether Jobs' memo was deliberately written with knowledge of a possible investigation or whether the timing was accidental.

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