Whether developers or customers like it or not, Apple has the obligation and the right to develop standards and approve iPhone applications. There are cultural and legal reasons for doing so.
In western society, we have developed a long standing value that organizations who offer a product or service are held accountable for the health, safety and well-being of the customers. Everywhere we look, we see examples:
- Schools dictate that adults in a position of trust are held accountable for their interaction with children.
- Federal agencies set standards for effectiveness, safety, labeling and health claims of food and drugs. Also, the air we breathe and water we drink.
- Local health departments set standards for food handling in restaurants.
- Federal and state agencies set standards for training, alcohol consumed and sleep for airline pilots, bus drivers, and so on.
- States dictate speed limits and driving rules to protect motorists and children in school zones.
- Companies set standards of conduct for behavior. In most cases, stealing from a company or drug use are grounds for immediate dismissal.
- Uniformly, even ISPs and Web services dictate that usage is prohibited for any activity that's illegal.
We are literally bathed in standards and values designed to justly protect people, and in almost every case, when someone is harmed, there is typically a lawsuit claiming that an organization or individual did not apply due diligence to protect customers, whether they pay by cash or taxes.

The principle applied here is that Apple has a business interest in selling products, but also must be held accountable for the security of personal data in this Internet age. It follows that Apple must put every iPhone app thru an approval process, its own due diligence, that the app is not malicious, won't steal or divulge personal data, and won't, in general, harm the user.
Once Apple accepts the liability for protecting the customer in obvious cases of malfeasance by a developer, it very likely assumes that liability for all the products it approves. Pornographic, lewd, obscene, illegal, hateful and sacrilegious material are also considered harmful by many adults looking out for the well-being of for whom they have responsibility.
There's no doubt that the Internet has great benefits. However, as Obi Wan would say, it is also a wretched hive of scum and villainy. PCs and Macs were developed before the Internet was turned over to public use, and historically, have been subject to few prohibitions on the design of software.
Fortunately, Apple has been able to define a new platform amidst all that villainy, and has found that in order to engender trust in its new platform, it must hold itself accountable for the products associated with the iPhone. It's an implicit obligation, not just a right.
I find it amazing that some people, customers and developers, still fail to distinguish the difference between what they would prefer and Apple's proper legal obligations.
With all that said, I don't disagree with (indeed encourage) the idea of an adult-only section of the app store, assuming that Apple develops a legally acceptable mechanism for establishing the age of the customer. After the app is purchased, it's then the customer's obligation to insure that the app is handled in socially and legally acceptable ways.


John Martellaro
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I think the problem is not that Apple has an approval process, but the process is not documented for developers, and not applied consistently/universally.
Documented:
There have been many stories of surprise app store rejections:
1) Podcaster for duplicating functionality built into the iPhone.
2) iFlash for requiring a companion desktop application
3) Drivetrain for “often used for the purpose of infringing third-party rights.”
I understand that the approval conditions may be a moving target, but as these are updated internally, publish them for developers.
Consistency:
1) I can site app’s that were already in the app store that broke these rules when the rejection’s were publicized.
2) Often a PR move of announcing, “my app was rejected because of x reason” gets enough attention to have Apple contact the developer (often after a long period of silence from Apple before the PR move).
3) In the case of iFlash, there seems to be inconstancy internally with some reviewers interpreting the approval process incorrectly.
I really liked Wil Shipley’s solution of a store front that has only approved apps, but a developer can at least share a direct iTMs link to their non-approved app. But let’s say for legal reasons, Apple has to approve apps. Then for the good of the platform, so as to not discourage development, they need to restructure this approval program to serve the needs of their content providers: the developers.