This is why Apple has a team of lawyers to figure these things out. I hear lots of Apple bashing without much substance behind it.
This has nothing to do with "legality." Apple is most definitely within their rights to do so. What we're talking about whether or not this is good for consumers as well as developers *and* in the long run Apple.
Because of Apple's ambiguity with what is "ok" and "not ok," it makes it *extremely* difficult to "think different" in developing 3rd party apps. Now, there's too much risk in time and money. Why bother when you don't know if it will be accepted or not? Nothing is clear cut.
This is what the problem is.
"Way back when, if software distribution for the Mac had been handled via a Mac App Store with a dont-duplicate-Apple-products policy, Photoshop might have been refused distribution on the grounds that it was too similar to MacPaint."
http://tinyurl.com/5o6zpj