updated 02:30 am EDT, Wed September 4, 2013
Judge rules plaintiff unable to show any anti-competitive harm done
A woman who initially sued Apple in 2005 over the iPod, the iTunes Store and the FairPlay DRM that Apple once used (at the insistence of the record companies) to prevent purchased songs from being pirated has lost an appeal in an attempt to reinstate the case. For a second time, a judge has ruled that Stacey Somers and her attorneys have been unable to show that Apple created or abused its iTunes "monopoly," that prices had escalated overall due to Apple's lock-in, or that consumers were harmed in any way by Apple's behavior.
The case was troubled from the get-go, since Somers had purchased the iPod from a third-party seller a year after Apple issued the DRM software that protected tunes bought from its own store, making the iPod "less competitive" than other device (even though the iPod was always able to play unprotected song files in other formats, including MP3 and WAV). In the original version of the suit, Somers claimed that because the iTunes-purchased songs were incompatible with other non-Apple music players, the action increased demand for the iPod, thus enabling Apple to charge a premium for it. Later in the initial lawsuit, she reversed the claim, saying that Apple's DRM had inflated the price of the music and lowered the value of the iPod.
However, as the judge pointed out, prices for songs from the iTunes Store stayed static at around 99 cents for many years, even after competitors emerged (such as Amazon and RealNetworks) that offered MP3 and DRM-free music files for (sometimes) less. The rise in the price of new songs to a standard $1.29 came not from Apple but from a request from the record companies -- a move that Apple and CEO Steve Jobs argued vociferously against, only agreeing to raise the price in exchange for the record companies' allowing Apple to remove the DRM from song files (which it had never wanted put on in the first place, but had to in order to strike deals to sell the music).
In the appeal, Somers changed her story again -- this time claiming that the period in which Apple placed FairPlay DRM on song files purchased from the iTunes Store allowed Apple to preserve its "monopoly" on music players, charge more than other competitors and restrict buyers' choices. The judge ruled in part that when Somers abandoned her original claims, she had no viable cause for the suit and no grounds for class certification.
He also said that her charge that Apple's prices were "supracompetitive" didn't hold water, since Amazon began selling lower-priced, DRM-free music in 2008 and was a competitor large enough to put pressure on Apple to change its prices -- but it didn't, because the prices were set by the record companies rather than by Apple. "Somers' overcharge theory is thus implausible in the face of contradictory market facts alleged in her complaint," the judge wrote.