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Apple’s market clout likely to draw more scrutiny

Kevork Djansezian/Getty Images

Tim Cook, Apple’s chief executive, spoke at a product launch for the new iPad in San Francisco last Wednesday. The firm has grown from a technology boutique to a trend-setting juggernaut.

SAN FRANCISCO - In everything it does, from product design to business deals, Apple strives for as much control as possible.

But as the world’s most valuable company sets out to define and dominate the rapidly evolving markets it created with the iPhone and the iPad, Apple probably will face antitrust regulators who want to curb its power.

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Apple’s clout is coming under scrutiny as the Justice Department considers filing a lawsuit against the company and five US publishers on allegations they orchestrated a price-fixing scheme on electronic books.

The involved parties are trying to avoid a high-profile court battle by negotiating a settlement, according to The Wall Street Journal. The newspaper broke the news last week about the government’s plans to allege that Apple Inc. and the publishers tried to thwart e-book discounts offered by Amazon.com Inc. and drive up prices since the 2010 release of the iPad.

“I think this might be a bit of a wake-up call for Apple,’’ says Ted Henneberry, an antitrust attorney for a Washington law firm.

Apple declined to comment.

The e-book case demonstrates the market leverage Apple has gained from its system of Internet-connected devices that tie into iTunes, its digital marketplace for mobile applications, books, newspapers, magazines, textbooks, movies, and music.

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“That platform has become really essential for a lot of people,’’ says David Balto, an antitrust attorney who was a Federal Trade Commission policy director during the Clinton administration. “Apple clearly has gained a lot of power in a number of markets.’’

Apple has sold more than 315 million iPhones, iPads, and iPods that run on its mobile operating system, giving it the keys to a market that will become increasingly influential as more people buy digital content for such devices.

Apple’s success has transformed the company from a technology boutique to a trend-setting juggernaut in the past decade. Its annual revenue has soared from $5 billion in 2001 to $108 billion last year. About three-quarters of that revenue comes from sales of iPhones, iPads, and iPods. The company, based in Cupertino, Calif., has a market value of about $510 billion, more than Microsoft Corp. and Google Inc. combined.

So far, though, government regulators have not paid as much attention to Apple as they did to Microsoft during the 1990s and to Google during the past four years.

Microsoft’s efforts to maintain and increase its dominance of personal computer software provoked an antitrust lawsuit that unsuccessfully attempted to break up the company.

Allegations that Google has been abusing its dominance of the Internet search and advertising markets have sparked wide-ranging government inquiries into the company’s business practices.

Apple may simply behave better than some of its rivals, or it may be doing business in areas that are so new that government regulators are still learning how those nascent markets function, says D. Daniel Sokol, a law professor who focuses on antitrust issues at the University of Florida. “To attract antitrust attention, you have to be more than just big. You have to be big and bad,’’ Sokol says. “It was only 2007 when Apple released the iPhone, and only 2010 when it released the iPad. The company hasn’t had that long to be bad yet, if it is indeed bad.’’

Apple has not fully avoided the government’s scrutiny.

In 2009, the Federal Trade Commission opened an investigation into whether Apple and Google had been stifling competition by sharing two of the same directors - Eric Schmidt and Arthur Levinson - on their respective boards. That inquiry ended when Schmidt, then Google’s chief executive, resigned from Apple’s board and Levinson, former chief executive of biotechnology company Genentech, resigned from Google’s board.

In 2010, Apple, Google, and several other Silicon Valley companies settled a Justice Department investigation into an arrangement that prohibited the employers from recruiting one another’s workers. Apple, Google, and four other companies, including Intel Corp., promised not to enter into any other “no-solicitation’’ agreements for five years.

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