FTC, ITC Launch Separate Apple Investigations

Apple never made a sizable dent in the PC market, but its dominance in digital media and growing influence in the smartphone market are finally catching up with the overly aggressive company. This week, the US Federal Trade Commission (FTC) announced that it was launching an antitrust probe of Apple's business practices. And separately, the International Trade Commission (ITC) agreed to investigate patent-infringement claims launched by rival HTC.

The FTC investigation is particularly interesting in that the only mystery surrounding this probe involved which federal agency would be responsible; originally, both the FTC and the US Department of Justice (DOJ) wanted to be involved. But now that that issue has been resolved, the FTC has three areas it wishes to investigate: Apple's decision to ban Adobe Flash from the iPhone-based iOS platform, its preventing of developers from using non-Apple tools to develop iOS apps, and its entry into the advertising market via iAds, which Google argues will shut out third-party advertising suppliers.

Neither the FTC nor Apple would comment about the investigation, but the FTC previously noted that Apple's decision to enter the mobile advertising market "gives Apple the unique ability to define how competition among ad networks on the iPhone will occur and evolve ... Apple not only has extensive relationships with application developers and users but also is able to offer targeted ads by leveraging proprietary user data gleaned from users of Apple mobile devices."

Some argue that antitrust investigations of Apple's mobile efforts are premature since the company is only the number-two player in the smartphone market in the United States, behind Research in Motion (RIM). But the FTC believes that regulatory agencies have acted too slowly in the past, and wants to cut off any potential issues before competitors and consumers are irreparably harmed.

Meanwhile, the ITC has agreed to investigate claims by handset maker HTC that Apple is violating its mobile device patents. HTC seeks to prevent Apple from selling various mobile devices, including the iPhone and iPod touch, until this issue is resolved.

"The ITC has voted to institute an investigation of certain portable electronic devices and related software," an ITC statement reads. "The products at issue in this investigation are portable electronic devices that utilize certain power-management methods and may incorporate hardware and software for telephone directories within mobile telephone systems."

The Apple/HTC battle is a bit convoluted. Apple originally accused HTC—which makes both Google Android- and Microsoft Windows Mobile-based devices—of violating Apple patents earlier this year. HTC countersued, alleging that Apple had violated section 337 of the Tariff Act of 1930 "in the importation into the US and sale of certain portable electronic devices and related software that infringe patents asserted by HTC." The ITC investigation could take up to 45 days, and the agency is separately investigating Apple's claims against HTC.

These investigations are only the tip of the iceberg for Apple. The company controls roughly 70 percent of online music sales and is in the early stages of a DOJ antitrust review of that market, due in part to revelations that Apple has punished recording companies and artists for being featured on competing services. Apple is also being investigated for agreeing with other high-tech companies to not poach employees from each other.

On a less official note, Apple has also come under fire for a series of provably bogus claims made by the company last week at its Worldwide Developer Conference (WWDC). Among these is the exaggerated superiority of the iPhone 4's "retina display," which Apple says offers four times the pixel density of Apple's previous displays and exceeds the resolution that the naked eye can perceive. Not so, optics experts say: In fact, the human eye can see well beyond the pixel density of the retina display, over half again the density offered by Apple's device at 12 inches. Others took issue with the "four times" claim. Industry analyst George Ou effectively demonstrated that Apple's claims for the retina display are exaggerated in two ways. First, the examples it used suggest a much higher pixel density than the device actually offers. Second, the difference between the retina display and other displays were exaggerated with a far more pixelated look to the competition than is actually the case. The retina display, he ably explains, actually offers only about twice the pixel density of previous displays. Excellent quality, yes, but well short of the stated figure, and even further below the quality of the faked demonstrations Apple provides.

Also under dispute is Apple's claim that its Safari 5 browser is "the world's fastest web browser." Well, actually, there's no real dispute: Any number of industry-standard tests show that Safari falls well behind Google's Chrome in virtually every performance test available on both Windows and the Mac. And it often falls behind Mozilla Firefox as well. "If you are claiming that you are offering the world's fastest browser, you are inviting people to check," Wolfgang Gruener noted in a blog post describing his own tests. "Stating that it is the world's fastest browser is false. Period."

Finally, in a moment that offered a typical eruption of applause from its minions, Apple last week demonstrated a video-conferencing feature of its upcoming iPhone 4 smartphone. Despite the fact that this capability had been available on various phones before, Apple acted as if it had pulled a Jetsons feature out of the future and provided it, for the first time, to the public. "Apple pretends to invent video calling," one particularly funny—if truthful—headline reads.

Apple has been prone to exaggeration and worse ever since Steve Jobs returned to the company, but as the company has risen from plucky upstart to dominant goliath, those kinds of claims, once considered cute and harmless, are now seen as more insidious, a form of the Fear, Uncertainty, and Doubt (FUD) that Microsoft was routinely charged with a decade ago. And though Apple rarely introduces new technology ahead of the competition, the company does have a habit of improving others' ideas and running away with emerging markets. When you combine this fact with the series of investigations the company now faces, it's hard not to see the parallels: Apple is the new Microsoft.

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