The New Robber Barons: Google and Apple Go the Way of Standard Oil [Updated]

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Photo: Jed Egan, Library of Congress, David Paul Morris/Getty Images, Miguel Villagran/Getty Images

While tech start-ups are busying themselves inflating the bubble, the Googles and Apples of the industry have bigger ambitions: creating a monopoly. At least according to the antitrust lawyers. Less than a day after Steve Jobs unleashed Apple's new subscription plan for iPhones, iPads, and iPods — which forces publishers and developers to sell through iTunes and prohibits them from including a link to their own site — antitrust experts say the service is likely to draw scrutiny. The key questions, professor Shubha Ghosh tells The Wall Street Journal, will be whether Apple owns enough of a dominant position in the market to keep competitors out and whether it is exerting "anticompetitive pressures on price." (The new plan also prohibits digital magazines, for example, from offering subscriptions unless they offer it at the same price or less in iTunes.) Music services like Rhapsody are already teaming up to consider legal action. Unlike magazines, music companies already pay fees to record labels and music publishers. Rhapsody currently pays a 2.5 percent credit-card fee and alleges that Apple's 30 percent cut of all subscriptions sold in iTunes will kill its iPhone app.

Google's antitrust woes are much less theoretical. It's already under investigation in Europe. And the state of Texas, which is conducting its own inquiry, is now demanding that Google hand over its secret sauce for setting advertising rates to see if there was “manual overriding or altering of” search-result rankings. Assistant Attorney General Kim Van Winkle (yes, for real) is trying to get information on AdWords, the program Google uses to run ads next to search results and documents related to Google's shopping websites, Froogle, Google Product Search, and Google Shopping.

This isn't the first time Google has been accused of unfairly promoting its own products in search rankings. In fact, it points to the reason Google and Apple are willing to piss off advertisers, publishers, and developers to try to keep a stranglehold on their respective market: It's getting competitive at the top. Both companies might seem like monoliths, but Google's search engine is losing viewers — and advertisers — to Microsoft's Bing (which now powers Yahoo). Apple faces a threat in the apps market from Google's more open Android platform. Depending on how the antitrust inquiries play out, and whether there's backlash against Google for rigged, spammy search results or a backlash against Apple for not letting the apps that made its products so ubiquitous also stay competitive, in hindsight, Steve Jobs and Eric Schmidt might look less like robber barons and more like captains of the new tech industry. Either way, we're sure Mark Zuckerberg is taking notes.

Apple's Subscription Rules Raise Possible Antitrust Issues [WSJ]
Rhapsody Slams New Apple Subscription Rules [BI]
Texas Attorney General Seeks Google Ad Rate Formula [Bloomberg]

Update: Well, that didn't take long. Google has already come out with a way to (seriously) lowball Apple's new subscription plan. Google One Pass will allow publishers to keep 90 percent of their revenue from tablet subscriptions. What's more, unlike Apple's plan, Google will allow publishers to own all their customer data on any new subscribers — a big deal for publishers who are trying to attract, retain, and advertise to paying readers. In Apple's case, publishers get that data only if the iPad subscription is sold outside the App Store or if consumers within the App Store opt to share it. Popular Science has already signed up. Offering 60 percent better margins? Apple might have an easier time than we thought proving it's not the dominant player. [AdAge]