Apple 2.0

Covering the business that Steve Jobs built

Could Apple lose an antitrust case?

February 18, 2011: 12:08 PM ET

That depends on how broadly or narrowly the market at issue gets defined

Source: Business Insider

The news that the Justice Department and the FTC are eying Apple's (AAPL) new subscription rules for possible antitrust violations has got experts taking a closer look at the markets in which the company competes.

"Typically when a firm reaches 60% or 70% of a given market is when authorities get interested," says Brett Gordon, an assistant professor at Columbia Business School.

There's no question, according to Gordon, that some of the terms Apple announced last week change the game for companies that have been doing business in its iTunes and App Store platforms. But, he adds, there are lots of anti-competitive practices that are not illegal as long as the company doing them is not too big.

Take, for example, the 30% cut Apple wants to take out of Rhapsody's music streaming sales -- a cut that Rhapsody describes as "economically untenable" and over which it has threatened to sue. If the dispute ever went to trial, says Gordon, the outcome would probably depend on whose expert witness made the best case for how the market should be defined.

Rhapsody could argue that the market in question is online music sales, which Apple clearly dominates. Apple's witnesses, in turn, would probably say the market includes all the places where music is available, from satellite radio to CDs.

That broader market, as the chart above suggests, is changing rapidly, but maybe not fast enough to give Apple monopoly control.

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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