Apple might be getting ready to get a good smack down.
Not only do they have some serious accounting/options
irregularities, now this:
Apple Faces Federal Monopoly Suit
by Paul Thurrott,
thurrott@windowsitpro.com
Apple Computer finally knows what it's like to be Microsoft: a company that thoroughly
dominates a market, shutting out its competition through artificial links between its products.
Unfortunately, with that kind of success comes increased scrutiny, and thanks to a recent
federal ruling, Apple is about to find itself in court facing illegal monopoly charges.
An intensely private company, Apple currently faces several lawsuits, most of which are in the
process of obtaining class-action status. But only one lawsuit has the potential to harm the
company in a manner similar to Microsoft's epic federal antitrust battle. Last July, a
class-action lawsuit alleged that Apple's decision to tie music sold from its iTunes Store to
its dominant iPod device was illegal, threatened competition, and harmed consumers.
In fact, the charges specifically refer to the Sherman Antitrust Act, which played a prominent
role in Microsoft's United States antitrust trial, and allege that Apple has unlawfully tied
and bundled products, obtained and maintained a monopoly, and attempted to extend that monopoly
into new markets. The charges also extend to various state antitrust laws, such as California's
Cartwright Act.
Apple sought to have the suit thrown out. But in a December 20, 2006, ruling, US District Judge
James Ware denied Apple's request, letting the lawsuit go forward. "Apple has presented no
reason for the Court to dismiss the Cartwright Act claim or the common law monopolization claim
while allowing Plaintiff's federal antitrust claims," the court order reads. "The Court denies
Apple's Motion to Dismiss Plaintiff's anti-trust claims."
The plaintiff's complaint presents a stark look at Apple's strategies in the digital media
market. "Apple deliberately makes digital music purchased at [the iTunes Store] inoperable with
its competitors'
digital music players," the complaint reads. "In order to play music from [the iTunes Store] on
a digital music player, then, a consumer's only option is the iPod. Apple sells the iPod at
prices far exceeding those that would prevail in a competitive marketplace. Apple also makes
the iPod unable to play music sold at its competitors' online music stores. In order to
purchase Online Music to play on an iPod, then, a consumer's only option is [the iTunes
Store]."
The plaintiffs also highlight a dirty secret about the iPod that hasn't gotten much press
outside of WinInfo: The underlying iPod hardware, which PortalPlayer manufactures, natively
supports Microsoft's Windows Media Audio (WMA) format, making the iPod compatible with most
competing online music services. But Apple shuts this compatibility feature off in the iPod
with what Ware calls "crippleware." The order also notes that Apple is using the same strategy
to shut out competition in the nascent video-download market.
According to Judge Ware, the plaintiffs in the case were able to make "sufficient" cause for
their tying and bundling claims. Regarding the monopoly charge, the judge did note that Apple
has a "qualified right"
to refuse to deal with competitors such as Microsoft. However, if that behavior "adversely
affects" consumers, the defendant must justify its behavior. "Accordingly, the Court finds that
Plaintiff has adequately alleged that Apple violated Section 2 of the Sherman Act," the order
reads. Judge Ware also found that the plaintiffs' argument for attempted monopolization was
valid.
The big question, of course, is whether the plaintiffs in this complaint can succeed in court.
Currently, Apple controls about 83 percent of the online music market, 75 percent of the online
video market, more than 90 percent of the hard drive-based MP3 player market, and more than 70
percent of the flash memory-based MP3 player market. Those are heady numbers, similar to those
Microsoft enjoys in the OS market. And certainly, Apple has actively worked to ensure that its
products work only with each other and not with competing solutions. Is that illegal? We might
just get the chance to find out.
More info:
http://www.theregister.co.uk/2005/01...ntitrust_suit/
http://blogs.zdnet.com/BTL/?p=4207
http://www.macworld.com/news/2005/01...tery/index.php
"Andre Da Costa[ActiveWin]" <andred25@hotmail.com> wrote in message
news:eaz2ITBMHHA.2232@TK2MSFTNGP02.phx.gbl...
> Apple also uses DRM in their software, how you think they got Hollywood and the Music
> Industry to sell their stuff through through the iTunes Store? Also, Apple also locks into
> its own DRM technology for example the proprietary AAC codec the iPod uses.
> --
> Andre
> Blog: http://adacosta.spaces.live.com
> My Vista Quickstart Guide:
> http://adacosta.spaces.live.com/blog...3DB!9709.entry
> "ChrisM" <chris_mayersblue@suedeyahoo.com> wrote in message
> news:%23tEkJEBMHHA.5064@TK2MSFTNGP04.phx.gbl...
>>
>> Not sure how much of this is true, but I believe most of it is, and even if only 1/4 is
>> true, it's enough to make me think twice or even thrice about going anywhere near Vista for
>> a long time yet...
>>
>> http://www.cs.auckland.ac.nz/~pgut00...vista_cost.txt
>>
>> Executive Summary
>> -----------------
>>
>> Windows Vista includes an extensive reworking of core OS elements in order to
>> provide content protection for so-called "premium content", typically HD data
>> from Blu-Ray and HD-DVD sources. Providing this protection incurs
>> considerable costs in terms of system performance, system stability, technical
>> support overhead, and hardware and software cost. These issues affect not
>> only users of Vista but the entire PC industry, since the effects of the
>> protection measures extend to cover all hardware and software that will ever
>> come into contact with Vista, even if it's not used directly with Vista (for
>> example hardware in a Macintosh computer or on a Linux server). This document
>> analyses the cost involved in Vista's content protection, and the collateral
>> damage that this incurs throughout the computer industry.
>>
>> Executive Executive Summary
>> ---------------------------
>>
>> The Vista Content Protection specification could very well constitute the
>> longest suicide note in history [Note A].
>>
>>
>>
>> --
>> Regards,
>> Chris.
>> (Remove Elvis's shoes to email me)
>>
>
>
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