... the investigation is ONLY about Apple banning software such as Flash from converting code to iPhone language-friendly apps. Even I see a problem with that. This doesn't hurt just Adobe. It hurts anyone out there that might have been trying to create a business around app portability between various app storefronts. And that in turn hurts app developers with limited resources attempting to port their apps to broader markets. This is where I see the harm. If the app code is written in Apple's accepted languages, it should be allowed regardless of being ported from another language. If the app is buggy or harmful, reject it as any other natively written app.
I believe this is the only plausible judgment the FTC or EU could enforce. The iPhone AppStore is the leading storefront with the most apps available and the most apps sold, making it a market leader. Therefore opening up the AppStore to portable apps invigorates competition between storefronts and, through that, devices themselves.
The thing wrong with your analysis though, is that Apple actually does already allow any app into the store written in their accepted languages regardless of origin. The Flash product being argued over doesn't actually produce Objective C code at the end of the day, at least not for the whole app. If it did, then the developers of such apps could just open the code in XCode and upload it and no one would be the wiser.
Also, even if what you say is true, it's a dangerous precedent for any government body to be telling a private company or individual what they can and cannot allow with their own products. This is the same thing as the government mandating that you use a certain kind of gas in your car, or forcing you to allow someone who doesn't like the colour of your house to paint the side facing them another colour.
Yes, Apple's decisions in this regard put a total damper on developers wanting to engage in cross-platform solutions, but no, there isn't anything wrong or illegal about that. It's just the way it is.