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Lawsuit: Apple has become a monopoly

updated 09:40 am EST, Fri January 4, 2008

Lawsuit: Apple is monopoly

Apple has become a monopoly, a recent lawsuit against the company alleges. The case was filed by one Stacie Somers, who says that the company's dominance in media players, and online music and video, violates the Sherman Antitrust Act; specifically, the Somers complaint revolves around Windows Media Audio, which is notably unsupported by both the iPod and iTunes, despite the fact that it is one of the most common music formats for sale, and it is said that Apple could easily afford a license from Microsoft. Somers estiamtes the maximum cost of a license at $800,000. Some vendors of WMA tracks include Best Buy, Yahoo, Napster and Virgin Digital.

This creates a problem, Somers says, because record labels are "generally unwilling" to publish their music without DRM restrictions, such as those imposed on most AAC and WMA files. Many people may thus have music collections that are suddenly incompatible if they decide to switch to Apple products.

The suit further alleges that while iPods have the hardware to play WMA files, Apple has installed "crippleware" to prevent every other protected format from working except for Apple's FairPlay. Moreover, Apple is said to be overcharging based on memory capacity -- the wholesale price difference between 1GB and 4GB of flash is estimated to be $5.52, but a Nano with 4GB costs a full $100 more than the now-defunct 1GB size.

Statistics in the suit suggest that Apple controls 75 percent of online video, 83 percent of online music, and over 90 percent of the hard-drive based media player market. Somers' attorneys are working to get the case upgraded to a class action.




by MacNN Staff

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  1. climacs

    Joined: Dec 1969

    0

    is Apple 'monopolistic'

    an interesting question. Before you all flame this woman (I had to resist the temptation too), check your fanboy instincts at the door and consider this:

    http://www.ftc.gov/bc/compguide/antitrst.htm

    "Section 2 of the Sherman Act makes it unlawful for a company to "monopolize, or attempt to monopolize," trade or commerce. As that law has been interpreted, it is not necessarily illegal for a company to have a monopoly or to try to achieve a monopoly position. The law is violated only if the company tries to maintain or acquire a monopoly position through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification."

    http://www.ftc.gov/bc/compguide/maintain.htm

    "While it is not illegal to have a monopoly position in a market, the antitrust laws make it unlawful to maintain or attempt to create a monopoly through tactics that either unreasonably exclude firms from the market or significantly impair their ability to compete. A single firm may commit a violation through its unilateral actions, or a violation may result if a group of firms work together to monopolize a market."

    Since merely having a monopoly position in a market is not illegal, I think this woman and her lawyers are going to have a hard time proving that Apple has sought to create a monopoly, "through tactics that either unreasonably exclude firms from the market or significantly impair their ability to compete." Compare and contrast how Microsoft has acted WRT Windows and PC manufacturers, vs. Apple. There's not exactly a great hue-and-cry among consumers for MP3 players which play WMA files. Plus, iTunes DOES offer the vast majority of its tracks with DRM, despite what Somers says.

    It sure sounds to me like this lawsuit is alleging that Apple is a monopoly simply because the iPod is staggeringly popular. f this lawsuit has any legs at all, then Microsoft could be sued merely because over 90% of PCs run Windows. Case dismissed.

  1. ~bash $

    Joined: Dec 1969

    0

    matter of time ...

    I was wondering when this would finally come to fruition. However I don't really like the suggestion that Apple should be made to do something like support WMA (gasp). What they are doing that might be anti-competitive is not licensing out FairPlay. Additionally, the practically strict marriage to iTunes for iPods is another potential problem. These issues, among others, present the core of my problem with my four iPods and 3 Macs currently. :)

  1. sgirard

    Joined: Dec 1969

    0

    Lock-in

    When did it become monopolistic to make it hard for someone to *become* a customer of the iPod? Maybe her complaint should be directed at Microsoft for locking her into the protected WMA format. Microsoft and the music labels who support DRM protected WMA are preventing this lady from moving her purchased music to her iPod. Why is her beef with Apple and not Microsoft and the music labels?

  1. climacs

    Joined: Dec 1969

    0

    here's the answer

    get rid of DRM. Then all MP3 players can play unprotected AAC and MP3 files. No more need for crappy WMA DRM-protected files.

  1. Mebsat

    Joined: Dec 1969

    0

    Stretching the limits

    So now it is a violation of the Sherman Act to not give money to your competitors? These attorneys are a real credit to the profession. Licensing WMA vs providing FairPlay is not relevant. How has Apple's DRM contributed to its monopoly? Has Apple leveraged the amazing demand for DRM to sell iPods? Um, no.

    Besides why is playing a licensed format considered an obligation to the dominant player in a market? No eminent domain issues (ala ATT and Sprint). Especially since Apple would never have put it on if the record companies didn't mandate it.

    Separately, in the future, if Microsoft comes up with a new DRM-free format, will Apple have to add support for it? Dominating a market is not a monopoly. Many people use the iTunes store, but many iPod owners don't. They don't have to. They can buy their music on CD and encode it themselves. Except that the RIAA is now trying to say that this isn't fair use. Good luck with that, guys.

    If the only music you could play on an iPod was from the iTunes music store, tehn this case might have a point, but if that was true, how many iPods would have been sold anyway?

  1. mgpalma

    Joined: Dec 1969

    0

    tard

    And how many mp3 players play FairPlay DRM AAC Files? How many play AAC files at all?

    As climacs posted there is a larger percentage of Windows boxes than iPods in the portable media market.

    Don't pass go and don't collect $200.

  1. cmoney

    Joined: Dec 1969

    0

    waaah waaah

    wait, hasn't even microsoft essentially turned its back on those files? does their own zune even work with plays for sure songs from other stores?

    and she adds that they're overcharging for memory? ha! she should add in that they no longer offer a white ipod while many competitors do.

    if they do succeed in getting this to class action, this may be the first case where i'd exclude myself from the class!

  1. dozx

    Joined: Dec 1969

    0

    she is confused

    You can only be considered a Monopoly if there is no other choice, however in this case there are plenty of other choices weather you choose to use them or not is your own choice. In this case there is no reason Apple must support any other formats if it chooses not to. The fact that she states that WMA is a format developed and used by Microsoft, and is used by many other stores and players is prof alone that Apple can not be considered a monopoly in this case. Also it is not a requirement that a company utilize every function of a piece of hardware if they don't want to "crippleware" is BS, you don't like it don't buy it, go to one of the many other options that are available that support WMA or any other format for that matter. The point here is no one is twisting your arm in this situation you have choice. Just because you really want an iPod but don't like exactly how Apple made their own product doesn't give you the right to sue them and try to force them to change it.

  1. testudo

    Joined: Dec 1969

    0

    Re: tard, confused

    And how many mp3 players play FairPlay DRM AAC Files? How many play AAC files at all?

    Um, none, because Apple has forbidden anyone from making a player with Fairplay capabilities. Another of their 'monopolistic' practices.

    You can only be considered a Monopoly if there is no other choice,

    Wrong, wrong, wrong. Or did you not notice MS being cited as a monopoly, even though there were a bunch of other choices (the Mac OS, and how many different versions of Unix/Linux???).

  1. hayesk

    Joined: Dec 1969

    0

    re: tard

    Some devices play AAC, but that's got nothing to do with Apple. Apple doesn't own AAC. Any company is free to add DRM-free AAC support to their products.

    That doesn't make Apple guilty of abusing their monopoly.

    Not only that, the woman claims WMA is the one of the most popular formats - then wouldn't that make Microsoft the monopoly? And the Zune doesn't even support the standard "Plays-for-sure" DRM - so why isn't she suing Microsoft?

    Ford doesn't have to make Toyota parts, Sony doesn't have to make HD-DVD players, so why does Apple have to make WMA players?

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