DOJ vs. FTC: Apple knows when to hold 'em, when to fold 'em
Earlier today the FTC announced a $32.5 million decree against Apple over the way it handles in-app purchases. The FTC says that Apple failed to inform parents when their kids might run up huge bills in in-app purchases, and needs to do a better job. The FTC also wants Apple to pay out claims for those in-app purchases to the tune of (at least) $32.5 million.
Quite frankly, that's chump change for Apple.
Apple's revenue for its fiscal 2013 was $37.5 billion. That means that in 2013, Apple made more than $102 million per day. At that rate, Apple can afford to settle with the FTC three times a day and still come out ahead.
Obviously no company wants to be put under federal scrutiny - it's a public relations minefield and Apple doesn't want to be in the crosshairs of regulators any more than is absolutely necessary. But in the context of Apple's earnings and even its revenue from the App Store, $32.5 million still isn't a lot of money.
Last year Apple settled a class action lawsuit over the same thing; in June customers received notifications by e-mail that they were entitled to refunds. 37,000 customers have already stepped up for refunds that way, and I don't expect that they're entitled to double-dip. But it sounds like Apple may be worried about that very thing.
Tim Cook got a bit snarky in an e-mail he sent to employees immediately before the FTC announcement was made. Quoting Tim from the letter via Re/code:
It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.
In other words, Apple doesn't like the principle of the thing. They've already atoned for this past sin, but this is little more than a nuisance claim. Apple wants it out of its hair so it can focus on more important stuff. And everything the FTC wants Apple to do, Apple was going to do anyway, so there!
Success breeds scrutiny
Whether the stakes are wrist-slaps or fundamental changes to the way Apple does business, the company is having an increasingly hard time maneuvering around federal regulators.
Compare and contrast the situation Apple's in with federal appeals court judge Denise Cote over its iBooks licensing deal. Part of Cook's snarky attitude may stem from the skirmishes between the judge and the company.
In June Cote ruled that Apple conspired to raise e-book pricing with different publishers, a charge Apple vehemently denies. Cote then turned down Apple's request to suspend her own ruling pending appeal.
More recently, Apple's been upset with the bills they've been getting from the overseer appointed by Cote, former inspector general Michael Bromwich.
It's ironic and, at least to an outsider, appears a bit hypocritical. A company that can brush off a $32.5 million settlement as a nuisance claim loses its mind over a $138,000 legal bill. But that's just a sideshow.
Apple's publishing model for iBooks has entirely different stakes: For Apple, it's about business in the future. The iPad is a huge seller. iBooks represents a huge market opportunity for Apple.
Apple has a tough competitor in Amazon's Kindle, and it's the death of a thousand cuts by cheap Android tablets that can read e-books too. Like any business in the same position, Apple wants as much of that revenue as it can get.
E-books: a business that Apple isn't ready to concede any ground on, at least not yet. Ultimately it's not about what Apple pays today. It's about how much revenue they'll make tomorrow.
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