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Apple Facing Possible Antitrust Inquiry

Disallowing Flash and other development tools for making iPhone apps may get Apple in trouble.

Last week, Apple CEO Steve Jobs explained why his company does not allow applications created with Adobe's Flash technology on its iPhone, iPod and iPad devices. Flash, he said, is proprietary, insecure, energy inefficient, and ill-suited for touch devices.

Most significantly, he argued that third-party tools such as Flash lead to sub-standard applications and prevent developers from implementing new iPhone OS SDK technologies until tool makers support those features.

This week, it appears Apple may face an antitrust inquiry for its stance. The Department of Justice and the Federal Trade commission are negotiating over which agency will helm an inquiry into the legal terms in the beta version of the iPhone OS 4.0 SDK developer agreement, according to a report in The New York Post.

A decision about which agency will conduct the inquiry is reportedly days away. Spokespersons for the government agencies declined to comment.

Adobe, the company most profoundly affected by Apple's position, has also been considering legal challenge, according to a source with knowledge of the company.

In defending Apple's position, Jobs said, "[W]e cannot accept an outcome where developers are blocked from using our innovations and enhancements because they are not available on our competitor's platforms."

Yet in forbidding the use of most third-party development tools, Apple may be unlawfully violating the Sherman Act, by restraining trade or exercising monopoly power, said Mark Methenitis, an attorney with The Vernon Law Group, said in an e-mail.

"In either event, Apple would be using its position to diminish development and progress in the market," he said. "Of course, we've seen Microsoft settle out of a similar case with U.S. antitrust authorities. I have a feeling the results would likely be similar for Apple."

Methenitis added, "If the European Union decides to look into the matter, much like Microsoft's result, the result for Apple may be much different than in the U.S."

An antitrust inquiry won't necessarily result in a full-scale investigation or formal charges, but it could prompt Apple to clarify the broad wording of its iPhone SDK developer agreement so that competitors know where they stand.

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