Friday, January 7. 2005
The iTunes/Apple Lawsuit and a Much Overdue Comparision to Microsoft
In case you haven't heard by now, a gentlemen named Thomas Slattery has filed a lawsuit in the U.S. District Court in San Jose (9th Circuit I believe) against Apple and iTunes. He makes the argument that we at DRM Blog have been spouting for a while, that Apple is using its marketing strength to lock customers into their hardware and software.
Many people think that Slattery has no chance of winning, that the lower courts shy away from ruling on such matters. But we think that his lawyers know exactly what they're doing.
"Apple has unlawfully bundled, tied, and/or leveraged its monopoly in the market for the sale of legal online digital music recordings to thwart competition in the separate market for portable hard drive digital music players, and vice-versa," the suit charged.
No one's said it outright yet, but Slattery's lawyers are making the same arguments that were used against Microsoft and Internet Explorer several years ago when the courts ruled against the software giant.
So I'll call it how I see it. I think they have a shot, if for no other reason than that they can show precedence with a similarity of business predatory business practices and pricing between Apple and Microsoft. Actually, their business models aren't all that disparate, perhaps reversed but certainly similar. Microsoft makes software that will work on the lowest common denominator of computers to lock in the largest number of people to its software products. Apple makes unique hardware that locks users into using its software products. The same business model approached from different views.
Now it's time for a little history lesson. Microsoft's main legal downfall during their anti-trust battle was that they used their market position to predatorily price a product to undercut similar products that were being sold by the competition. In that case it was Internet Explorer which they gave away for free and bundled (key words there) it with their operating system. By doing so, they made it virtually impossible for Netscape and other companies to sell their browsers when another one was being given away for free.
Apple has essentially done the same thing. Apple gave away their iTunes multimedia player software completely free first to MacIntosh users then bundled (there's that word again) the player software with the iTunes store software for PC users.
Then Apple priced songs at far below market value, 99-cents, a level that many have argued Apple can not be making a profit on, and at best, can only break even. The courts understand that consumers will naturally choose a lower-priced product, and that predatorily low prices have routinely been used by market leaders to drive out competition.
Finally, Apple wrapped it all up in their FairPlay DRM agreement, to which all users are required to consent, that forbids all music purchased from iTunes from having the DRM removed. Although you can burn a back-up of your songs to CD (the Redbook CD format, the standard that all CD players recognize), but allows no transfer of said purchased songs to other mp3 players (i.e. Apple's competition). And since it breaks the DRM agreement to do so, a customer is forbidden to rerip that back-up CD to mp3 form. Thus, to truly take your digital music on the go, you have to buy their iPod. Check out iTunes Music Store's ToS. It says you're allowed to export your music for personal use, but literally can't because the songs won't play on any other device.
Another argument that begs to be made is that Apple took the open mp4 standard and changed it so that it would not work with standard mp4 players. By wrapping their digital rights management scheme around it, Apple broke an open standard. Compare this with Sony's approach. Sony took ATRAC and added DRM that locked it down. The difference is that Sony owns ATRAC and ATRAC was never an open licensed standard. This can also be compared to Nintendo and its console market. Nintendo was clearly the market leader in the console market but no other manufacturer could build cartridges for the Nintendo. This was challenged in court several times and Nintendo always won. The reason that both Sony and Nintendo will always win these cases is that those two companies were using proprietary technology that was never licensed to anyone else. The reason that this might hurt apple is that MP4 is an open standard that Apple licensed from another company and consumers have the assumption that their MP4s will work with any MP4 player.
Under the guise of intellectual property protection, Apple has created a very predatory business model intended to lock consumers into their technology. They sell the songs to sell the device, but the real problem is that they've potentially violated anti-trust laws to do it. One way that Apple could probably diffuse this issue would be to simply licens FairPlay to other hardware and software makers.
I should also add that the Ninth Circuit is one of the most liberal courts and tends to be overturned more than another other circuit. What this means is that regardless of the outcome, we may very well see this case, or another one like it, go all the way to the Supreme Court, or at least be remanded back down to the lower courts by the Supreme.
Author: Ginger Cox
Many people think that Slattery has no chance of winning, that the lower courts shy away from ruling on such matters. But we think that his lawyers know exactly what they're doing.
"Apple has unlawfully bundled, tied, and/or leveraged its monopoly in the market for the sale of legal online digital music recordings to thwart competition in the separate market for portable hard drive digital music players, and vice-versa," the suit charged.
No one's said it outright yet, but Slattery's lawyers are making the same arguments that were used against Microsoft and Internet Explorer several years ago when the courts ruled against the software giant.
So I'll call it how I see it. I think they have a shot, if for no other reason than that they can show precedence with a similarity of business predatory business practices and pricing between Apple and Microsoft. Actually, their business models aren't all that disparate, perhaps reversed but certainly similar. Microsoft makes software that will work on the lowest common denominator of computers to lock in the largest number of people to its software products. Apple makes unique hardware that locks users into using its software products. The same business model approached from different views.
Now it's time for a little history lesson. Microsoft's main legal downfall during their anti-trust battle was that they used their market position to predatorily price a product to undercut similar products that were being sold by the competition. In that case it was Internet Explorer which they gave away for free and bundled (key words there) it with their operating system. By doing so, they made it virtually impossible for Netscape and other companies to sell their browsers when another one was being given away for free.
Apple has essentially done the same thing. Apple gave away their iTunes multimedia player software completely free first to MacIntosh users then bundled (there's that word again) the player software with the iTunes store software for PC users.
Then Apple priced songs at far below market value, 99-cents, a level that many have argued Apple can not be making a profit on, and at best, can only break even. The courts understand that consumers will naturally choose a lower-priced product, and that predatorily low prices have routinely been used by market leaders to drive out competition.
Finally, Apple wrapped it all up in their FairPlay DRM agreement, to which all users are required to consent, that forbids all music purchased from iTunes from having the DRM removed. Although you can burn a back-up of your songs to CD (the Redbook CD format, the standard that all CD players recognize), but allows no transfer of said purchased songs to other mp3 players (i.e. Apple's competition). And since it breaks the DRM agreement to do so, a customer is forbidden to rerip that back-up CD to mp3 form. Thus, to truly take your digital music on the go, you have to buy their iPod. Check out iTunes Music Store's ToS. It says you're allowed to export your music for personal use, but literally can't because the songs won't play on any other device.
Another argument that begs to be made is that Apple took the open mp4 standard and changed it so that it would not work with standard mp4 players. By wrapping their digital rights management scheme around it, Apple broke an open standard. Compare this with Sony's approach. Sony took ATRAC and added DRM that locked it down. The difference is that Sony owns ATRAC and ATRAC was never an open licensed standard. This can also be compared to Nintendo and its console market. Nintendo was clearly the market leader in the console market but no other manufacturer could build cartridges for the Nintendo. This was challenged in court several times and Nintendo always won. The reason that both Sony and Nintendo will always win these cases is that those two companies were using proprietary technology that was never licensed to anyone else. The reason that this might hurt apple is that MP4 is an open standard that Apple licensed from another company and consumers have the assumption that their MP4s will work with any MP4 player.
Under the guise of intellectual property protection, Apple has created a very predatory business model intended to lock consumers into their technology. They sell the songs to sell the device, but the real problem is that they've potentially violated anti-trust laws to do it. One way that Apple could probably diffuse this issue would be to simply licens FairPlay to other hardware and software makers.
I should also add that the Ninth Circuit is one of the most liberal courts and tends to be overturned more than another other circuit. What this means is that regardless of the outcome, we may very well see this case, or another one like it, go all the way to the Supreme Court, or at least be remanded back down to the lower courts by the Supreme.
Author: Ginger Cox
Comments
except (1) the price of songs is not "predatorily low" and (2) there is huge selection of music vendors and players. And it is not even April 1.
#1
Anon on Jan 7 2005, 11:52
Also note that the reason the Ninth Circuit gets "overturned more than another other (sic) circuit" is because it's the largest circuit -- not because of any imagined biases from the author -- and therefore receives the most cases.
If you look at the percentage of overturned decisions, the Ninth fares no better or worse than its peers. Not that you'd get this distinction from the conservative-dominated media...
If you look at the percentage of overturned decisions, the Ninth fares no better or worse than its peers. Not that you'd get this distinction from the conservative-dominated media...
Apple's business model for ITMS is simple hassle-free convenience, for which it does not have exclusive control over the music sold. Why? because the Record labels and artists dictate how they like to make their work available. Thus the ITMS's DRM is a compromise and very likely a requirement for even having the music available at ITMS.
While I dislike the use of DRM. It is an issue of convenience that I dislike.
As a customer or even a potential one, you have to decide on which medium you would like to subscribe to. If DRMs are an issue, avoid it. Stick to what works for you.
We don't have an ITMS where we are, and yet iPods are flying off the shelves. Does this means the iPod owners here have been sold a product that is useless, since they have bought "unique hardware that locks users into using its software products"? The iPod owners I know seems to be doing quite well with non-DRMed but legally bought music from CDs.
If the same music can be bought in the form of CDs and then imported into iPod, how is it monopolistic since Apple does not earn the profits of selling you the CD. More hassle maybe but if you want less hassle: ITMS.
If the music is an exclusive with ITMS, then perhaps you should exercise self-control till it is available otherwise or petition for it.
iPod then does not have a lock on consumers, Apple is not so stupid. Music that is worth buying IS worth buying just as the buying experience that is offered by Apple. If you value that experience then Apple's business model is valid. The value of ITMS is to bring the customer a higher level of service and convenience.
The DRM is just a side issue that will no longer exist in a few years time because the music industry will be radically changed in that time. But the ITMS model is just a harbinger of that change. DRM is lever to pry open the vaults of the Record Labels to ensure that ITMS can exist as a business. After all, I don't think ITMS's success rides on completely unknown artistes whom no record labels would touch.
In other words, this DRM discussion is a complete waste of my time. SIGH!
While I dislike the use of DRM. It is an issue of convenience that I dislike.
As a customer or even a potential one, you have to decide on which medium you would like to subscribe to. If DRMs are an issue, avoid it. Stick to what works for you.
We don't have an ITMS where we are, and yet iPods are flying off the shelves. Does this means the iPod owners here have been sold a product that is useless, since they have bought "unique hardware that locks users into using its software products"? The iPod owners I know seems to be doing quite well with non-DRMed but legally bought music from CDs.
If the same music can be bought in the form of CDs and then imported into iPod, how is it monopolistic since Apple does not earn the profits of selling you the CD. More hassle maybe but if you want less hassle: ITMS.
If the music is an exclusive with ITMS, then perhaps you should exercise self-control till it is available otherwise or petition for it.
iPod then does not have a lock on consumers, Apple is not so stupid. Music that is worth buying IS worth buying just as the buying experience that is offered by Apple. If you value that experience then Apple's business model is valid. The value of ITMS is to bring the customer a higher level of service and convenience.
The DRM is just a side issue that will no longer exist in a few years time because the music industry will be radically changed in that time. But the ITMS model is just a harbinger of that change. DRM is lever to pry open the vaults of the Record Labels to ensure that ITMS can exist as a business. After all, I don't think ITMS's success rides on completely unknown artistes whom no record labels would touch.
In other words, this DRM discussion is a complete waste of my time. SIGH!
#3
Anonymous on Jan 7 2005, 13:02
Get you facts straight before frothing at the blog-
From Apple -
CONTENT USAGE RULES
You shall be authorized to use the Product only for personal, non-commercial use.
You shall be authorized to use the Product on five Apple authorized computers.
You shall be entitled to burn and export Products solely for personal, non-commercial use.
Any burning or exporting capabilities are solely an accommodation to you and shall not constitute a grant or waiver (or other limitation or implication) of any rights of the copyright owners of any content, sound recording, underlying musical composition or artwork embodied in any Product.
You agree that you will not attempt to, or encourage or assist any other person to, circumvent or modify any software required for use of the Service or any of the Usage Rules.
The delivery of a Product does not transfer to you any commercial or promotional use rights in the Product.
So let's reiterate here -
1. You can download songs from the iTunes Music store to 5 computers (Mac or Win)
2. You can make non-commercial copies (in whatever format you desire - like MP3)
3. You can't circumvent the iTunes' DRM software (this is a violation of the DMCA - http://www.arl.org/info/frn/copy/band.html)
From Apple -
CONTENT USAGE RULES
You shall be authorized to use the Product only for personal, non-commercial use.
You shall be authorized to use the Product on five Apple authorized computers.
You shall be entitled to burn and export Products solely for personal, non-commercial use.
Any burning or exporting capabilities are solely an accommodation to you and shall not constitute a grant or waiver (or other limitation or implication) of any rights of the copyright owners of any content, sound recording, underlying musical composition or artwork embodied in any Product.
You agree that you will not attempt to, or encourage or assist any other person to, circumvent or modify any software required for use of the Service or any of the Usage Rules.
The delivery of a Product does not transfer to you any commercial or promotional use rights in the Product.
So let's reiterate here -
1. You can download songs from the iTunes Music store to 5 computers (Mac or Win)
2. You can make non-commercial copies (in whatever format you desire - like MP3)
3. You can't circumvent the iTunes' DRM software (this is a violation of the DMCA - http://www.arl.org/info/frn/copy/band.html)
Geez--
Some people are just trying to warp their view so that Apple looks identical to Microsoft.
First of all, does iTunes have a monopoly on online music? At 70% marketshare, it seems not. Microsoft has 95% of computer desktops out there. Can online music even be considered a viable market to have a monopoly in? Some 95% of music sales are still through CDs, and these can be "ripped" to digital formats and placed on portable music players (including the iPods).
Even if (and that's a hugely doubtful "if") you think Apple has some sort of stranglehold on online music and music players, being a monopoly isn't illegal--abusing it is. Forcing other companies to do your bidding (as Microsoft did with all the PC makers by forcing them to have the Internet Explorer logo on the desktop and hiding other browsers in return for price breaks, etc.) in other markets if you are a monopoly is what is illegal.
Who exactly is Apple forcing to use their stuff. Are they holding a knife to HP (or Real or Napster)? This article claims price gouging? Priced songs at far below market value? What are you smoking? Did single songs have market value before iTunes? Actually, iTunes is one of the more expensive music shops--WalMart's music store sells songs at $0.89 per song I think, and at least a couple others are below iTunes prices. Oh . . . and Apple and the Music labels do make a profit on the store and the songs--that's been confirmed many times already.
So, Apple has a popular but non-monopolistic music service that they are not forcing on anybody, and they are selling music too cheaply (ugh . . . consumers hate that! right?!) but not as cheaply as others, and despite the author's efforts to make it look restrictive, I regularly burn CDs of iTunes music to listen to in the car with perfect sound quality, and I don't use an iPod, and can pretty much use the music however I wish.
Yeah, Apple is a monster. (That's sarcasm.)
Some people are just trying to warp their view so that Apple looks identical to Microsoft.
First of all, does iTunes have a monopoly on online music? At 70% marketshare, it seems not. Microsoft has 95% of computer desktops out there. Can online music even be considered a viable market to have a monopoly in? Some 95% of music sales are still through CDs, and these can be "ripped" to digital formats and placed on portable music players (including the iPods).
Even if (and that's a hugely doubtful "if") you think Apple has some sort of stranglehold on online music and music players, being a monopoly isn't illegal--abusing it is. Forcing other companies to do your bidding (as Microsoft did with all the PC makers by forcing them to have the Internet Explorer logo on the desktop and hiding other browsers in return for price breaks, etc.) in other markets if you are a monopoly is what is illegal.
Who exactly is Apple forcing to use their stuff. Are they holding a knife to HP (or Real or Napster)? This article claims price gouging? Priced songs at far below market value? What are you smoking? Did single songs have market value before iTunes? Actually, iTunes is one of the more expensive music shops--WalMart's music store sells songs at $0.89 per song I think, and at least a couple others are below iTunes prices. Oh . . . and Apple and the Music labels do make a profit on the store and the songs--that's been confirmed many times already.
So, Apple has a popular but non-monopolistic music service that they are not forcing on anybody, and they are selling music too cheaply (ugh . . . consumers hate that! right?!) but not as cheaply as others, and despite the author's efforts to make it look restrictive, I regularly burn CDs of iTunes music to listen to in the car with perfect sound quality, and I don't use an iPod, and can pretty much use the music however I wish.
Yeah, Apple is a monster. (That's sarcasm.)
#5
Anonymous on Jan 7 2005, 14:15
From 6 miles away, lots of things look the same - you might try actually examing the circumstances before opinioning your keyboard ... other than there are two tech related companies involved ... and if you didn't know, MS is a SOFTWARE company and Apple is a HARDWARE-SOFTWARE company so already there are differences:
The main case in MS' decisions are leveraging their monopolistic position and restraint of trade. Without going to in every judgment agianst them - it's as simply as threatening to withdraw Compaq's license to sell Windows if they place (sold) an desktop position icon position to Netscape ... In the Apple case:
There are thousands of other portable mp3 players.
There are thousands of portable mp3 players sold at hundreds of retailers (thousands if you count online).
Clearly no retraint of trade regarding hardware.
The ipod accepts and plays back EIGHT audio formats.
The ipod uses a software front-end that is FREE (itunes).
The ipod accepts EVERY audio file from EVERY music store on Earth - with CD's, you have to "rip" them into one of 8 formats, with WMA's, you have to burn it to a CD and then choose one of 8 formats.
In fact, the ipod is the ONLY portable mp3 that accepts and plays back THREE audio LOSSLESS formats (Wav, AIFF & applelossless) so you can't even complain your sound quality is lowered.
You can use the ipod (as I have) with thousands of songs and ZERO from the Apple store and/or ZERO with DRM. I can also export EVERY AAC m4P song to CD (if I had any) and then to whatever other format or to another player of MY CHOOSING.
That's the KEY.
The ipod/itunes store is only restricted if you leave it restricted.
Unlike Sony which insisted on converting all your formats to ATRAC3, the ipod tells you right upfront which file formats it plays natively.
Just because people have choosen it overwelhmingly does not make it an illegal monopoly. Think MOrton Salt. Competitors are able to enter and leave this market. Just ecause Apple offers a format no one else does is NOT ILLEGAL. You cannot buy Tiffany diamonds at WalMart - but you can buy diamonds at Wal Mart. Same with the Apple music store. I can buy it in AAC m4p format, in CD format or in WMA format. The AAC M4P format offers a few hundred exclusives out of a 1-million tracks.
You are told upfront what you get when you buy a AAC m4p format file - it has some restrictions but EVERYTHING is a tradeoff. Like buying a CD, you either have to drive & hope they have it in stock or wait a feww days for it by mail and in most cases, you have to buy the entire CD - but for some people, the digital track and its tradeoffs are worth it - EVERYTHING is tradeoff but in the case as a consumer, you have freedom of choice here to decide if it's what you want - NOTHING like the MS judgments.
The main case in MS' decisions are leveraging their monopolistic position and restraint of trade. Without going to in every judgment agianst them - it's as simply as threatening to withdraw Compaq's license to sell Windows if they place (sold) an desktop position icon position to Netscape ... In the Apple case:
There are thousands of other portable mp3 players.
There are thousands of portable mp3 players sold at hundreds of retailers (thousands if you count online).
Clearly no retraint of trade regarding hardware.
The ipod accepts and plays back EIGHT audio formats.
The ipod uses a software front-end that is FREE (itunes).
The ipod accepts EVERY audio file from EVERY music store on Earth - with CD's, you have to "rip" them into one of 8 formats, with WMA's, you have to burn it to a CD and then choose one of 8 formats.
In fact, the ipod is the ONLY portable mp3 that accepts and plays back THREE audio LOSSLESS formats (Wav, AIFF & applelossless) so you can't even complain your sound quality is lowered.
You can use the ipod (as I have) with thousands of songs and ZERO from the Apple store and/or ZERO with DRM. I can also export EVERY AAC m4P song to CD (if I had any) and then to whatever other format or to another player of MY CHOOSING.
That's the KEY.
The ipod/itunes store is only restricted if you leave it restricted.
Unlike Sony which insisted on converting all your formats to ATRAC3, the ipod tells you right upfront which file formats it plays natively.
Just because people have choosen it overwelhmingly does not make it an illegal monopoly. Think MOrton Salt. Competitors are able to enter and leave this market. Just ecause Apple offers a format no one else does is NOT ILLEGAL. You cannot buy Tiffany diamonds at WalMart - but you can buy diamonds at Wal Mart. Same with the Apple music store. I can buy it in AAC m4p format, in CD format or in WMA format. The AAC M4P format offers a few hundred exclusives out of a 1-million tracks.
You are told upfront what you get when you buy a AAC m4p format file - it has some restrictions but EVERYTHING is a tradeoff. Like buying a CD, you either have to drive & hope they have it in stock or wait a feww days for it by mail and in most cases, you have to buy the entire CD - but for some people, the digital track and its tradeoffs are worth it - EVERYTHING is tradeoff but in the case as a consumer, you have freedom of choice here to decide if it's what you want - NOTHING like the MS judgments.
The product is music. The delivery mechanism is a digital file. The market is music. Apple does not prevent you from obtaining the product from other sources, other than exclusives which are legal. There is no case here.
Apple has done nothing wrong. If people like Slattery would quit being a baby and simply go on the web they could find lots of alternatives. I use iTunes I do not use iTunes Music Store - I use another online retailer. I buy (yes all my music has been paid for!) MP4 -ACC music and it works seemlessly with my itunes and iPod. I download the music to my Mac - I tell itunes where it is and itunes puts it in the proper folders and finds that the track info and the music shows up in my library. This guy is just to lazy to do anything for himself. He expects everybody to make things work so he doesn't have to think just sit on his butt and have grapes peeled for him. Life is a job - work at it or die.
#10
Jay on Jan 8 2005, 07:12
Good. Glad to see a few others out there recognize an idiotic faulty description - one that conveniently overlooks SEVERAL key differences from the MS antitrust case - when they see it.
Jeez.
Once more:
(1) Nobody is forcing anyone to use iTunes. There are several competitiors out there. It is not integrated into any OS. Compare that to how MSIE was a part of every single Win9x install.
(2) Uninstalling it on OS X is as simple as any other software - trashcan it. Removing it from your Dock is as simple as dragging it off. Compare that to what MSIE needed.
(3) Tough to win this lawsuit when absolutely nothing FORCES a user to use it on an iPod. First off, they can simply play their songs through iTunes - oh, and again, on either OS X or Windows. Then you can rip a CD any time you want and play it on any CD player - oh and again, you can rip this CD on either OS X or Windows. And please sir, do not insult us by blaming Apple if your computer doesn't have a CD-RW.
You owe it to anyone reading this entry to post an update pointing out these flaws. Otherwise, YOU are guilty of FUD. LOL... moreso than Apple is guilty in this clearly frivilous lawsuit.
Could they lose? Sure they can. Everyone deserves their day in court. But, um, evenn MS appealed their case - and the penalties were reduced to a point they really never changed on thing.
Jeez.
Once more:
(1) Nobody is forcing anyone to use iTunes. There are several competitiors out there. It is not integrated into any OS. Compare that to how MSIE was a part of every single Win9x install.
(2) Uninstalling it on OS X is as simple as any other software - trashcan it. Removing it from your Dock is as simple as dragging it off. Compare that to what MSIE needed.
(3) Tough to win this lawsuit when absolutely nothing FORCES a user to use it on an iPod. First off, they can simply play their songs through iTunes - oh, and again, on either OS X or Windows. Then you can rip a CD any time you want and play it on any CD player - oh and again, you can rip this CD on either OS X or Windows. And please sir, do not insult us by blaming Apple if your computer doesn't have a CD-RW.
You owe it to anyone reading this entry to post an update pointing out these flaws. Otherwise, YOU are guilty of FUD. LOL... moreso than Apple is guilty in this clearly frivilous lawsuit.
Could they lose? Sure they can. Everyone deserves their day in court. But, um, evenn MS appealed their case - and the penalties were reduced to a point they really never changed on thing.
Despite the flames here (which make only one valid point: nothing in the iTMS TOS prevents you from re-ripping your burned CDs to MP3, WMA, etc. for personal use, as CDs burned by iTunes don't have DRM), I think you and Slattery have a point: Apple is using the iPod-iTMS link to monopolize at least two separate markets related to legal downloads--MP3 players and online music stores (and perhaps the market for DRM technology itself).
The mere facts that there are other MP3 players besides iPod, other online music stores besides iTMS, or other DRM systems besides FairPlay, do not prevent a court from declaring Apple a monopolist, just as much as Linux and Netscape didn't shield Microsoft. Nor does the mere fact that iPod's percentage of the MP3 player market isn't as big as Windows' in the OS market, as long as the court finds it's enough to be a "monopoly". Nor does the existence of "burn-and-rip" options, if the court considers them too cumbersome. Nor does the fact that Sony is doing the same thing; Sony is clearly not a monopolist here.
It's simple: If the court finds that Apple has a monopoly in any one of the these markets (even one obtained thru market forces, as was the Windows monopoly), and is using its proprietary technologies to corner one of the other markets, then Apple is guilty.
The crux of this case, like any other tying case, is in (a) the definition of the relevant markets, and (b) what the court considers a "monopoly" in those markets. Apple will say the entire digital media business is a single market, thus there's no tying; but I doubt that will fly. OTOH, Slattery is trying to exclude flash-based MP3 players (which, pre-iPod shuffle, would dilute Apple's market share) from his definitions, and I don't think that will fly either.
In a way, it's unfortunate that Slattery filed his suit before the iPod shuffle was introduced. I think that product brings new predatory-pricing issues--that is, it seems Apple may be intentionally underpricing the iPod shuffle to drive out its most effective competition (WMA flash players). That could bring new antitrust angles under the Clayton and Robinson-Patman Acts, in addition to Section 2 of the Sherman Act (under which Slattery is suing), which would not require Apple to be declared a monopolist--only that Apple is trying to create a monopoly by illegitimate means.
The mere facts that there are other MP3 players besides iPod, other online music stores besides iTMS, or other DRM systems besides FairPlay, do not prevent a court from declaring Apple a monopolist, just as much as Linux and Netscape didn't shield Microsoft. Nor does the mere fact that iPod's percentage of the MP3 player market isn't as big as Windows' in the OS market, as long as the court finds it's enough to be a "monopoly". Nor does the existence of "burn-and-rip" options, if the court considers them too cumbersome. Nor does the fact that Sony is doing the same thing; Sony is clearly not a monopolist here.
It's simple: If the court finds that Apple has a monopoly in any one of the these markets (even one obtained thru market forces, as was the Windows monopoly), and is using its proprietary technologies to corner one of the other markets, then Apple is guilty.
The crux of this case, like any other tying case, is in (a) the definition of the relevant markets, and (b) what the court considers a "monopoly" in those markets. Apple will say the entire digital media business is a single market, thus there's no tying; but I doubt that will fly. OTOH, Slattery is trying to exclude flash-based MP3 players (which, pre-iPod shuffle, would dilute Apple's market share) from his definitions, and I don't think that will fly either.
In a way, it's unfortunate that Slattery filed his suit before the iPod shuffle was introduced. I think that product brings new predatory-pricing issues--that is, it seems Apple may be intentionally underpricing the iPod shuffle to drive out its most effective competition (WMA flash players). That could bring new antitrust angles under the Clayton and Robinson-Patman Acts, in addition to Section 2 of the Sherman Act (under which Slattery is suing), which would not require Apple to be declared a monopolist--only that Apple is trying to create a monopoly by illegitimate means.
#13
Richard on Jan 22 2005, 21:49
The author has not allowed comments to this entry
