Regulators mull antitrust look at Apple: source

A customer works with an Apple iPad during an iPad launch event at the Apple retail store in San Francisco, California April 3, 2010.

SAN FRANCISCO (Reuters) - Regulators are considering an inquiry into whether Apple Inc violates antitrust law by requiring that its programing tools be used to write applications for the iPad and iPhone, a source familiar with the matter said on Monday.

The news comes amidst a high-profile dustup between Apple and Adobe Systems Inc, which makes the widely used Flash software to provide video and build games.

Although Flash is nearly ubiquitous on the Internet, Apple calls it a balky battery hog and Apple Chief Executive Steve Jobs will not allow Flash on the iPhone or iPad, or as a tool to build apps on those devices.

Apple has sold more than 50 million iPhones since its debut in 2007, and 1 million iPads since its April 3 debut. The devices' popularity means extra scrutiny about every Apple move related to the smartphone platform.

Both the Federal Trade Commission and the Justice Department enforce U.S. antitrust law, and no decision has been made on which may take the probe on Apple, said the source, who spoke privately for business reasons.

The New York Post first reported regulators' interest in Apple's policy. The paper reported that the two agencies were locked in negotiations over which would handle the inquiry, and a decision was expected shortly.

"What they're (Apple) doing is clearly anticompetitive ... They want one superhighway and they're the tollkeeper on that superhighway," said David Balto, a former FTC policy director.

Apple, Adobe and the Justice Department declined to comment. The FTC did not respond to a request for a comment.

Apple has recently come under scrutiny from U.S. regulators for other reasons. Under pressure from the FTC, Google CEO Eric Schmidt stepped down from Apple's board of directors last year.

TECHNOLOGY WAR

After months of sniping at one another, the feud between Apple and Adobe broke into the open last week, when Jobs published an open letter where he slammed Flash as unsuitable for mobile devices.

Jobs called Flash "closed and proprietary" because Adobe controls the technology -- charges that have also been levied at Apple over the iPhone platform, which is also used for the iPad.

Apple has prohibited software developers from using Flash

-- and other programing languages -- to build apps for its newest iPhone platform, so these companies must use Apple-approved tools and custom-build their programs, which adds extra cost and work.

Apple said allowing third-party tools would result in "sub-standard" apps. But critics say the company is abusing its position.

"For us and the whole developers community, it really locks us into a single platform," said Michael Chang, chief executive of mobile ad network Greystripe, of Apple's rules.

Chang said a basic iPhone app might cost $75,000 to build on Flash, and a few thousand dollars more to convert it to work on Google Inc's Android mobile platform. But with the new restrictions, a developer must spend another $75,000 to build the app from the ground up for a non-Apple platform.

"For a small or medium-sized company, it becomes a real financial issue, and that's how it becomes anticompetitive," he said.

The iPhone has generated huge interest from app developers, who have created more than 200,000 programs, or apps, for the platform. Developers get 70 percent of the revenue they earn, while Apple takes 30 percent.

One developer, who spoke on the condition of anonymity, said Apple's new app development rules were just "incredibly broad. The fact that you can't use any other tools to build your app is just ridiculous."

But he acknowledged that apps built using Apple's tool look and run better than those built with third-party technology.

Simon Buckingham of the app blog Appitalism argued that developers could write for the Apple platform and other platforms easily using a WebKit open source browser standard.

"What they're (Apple critics) trying to do is make a mountain out of a molehill," he said.

(Reporting by Gabriel Madway, additional reporting by Diane Bartz in Washington; Editing by Steve Orlofsky, Leslie Gevirtz)