Apple iTunes / iPod lawsuits

[BachQ]

APPLE MONOPOLIZING ONLINE MUSIC MARKET, CLASS ACTION SAYS

Somers v. Apple Inc.


Apple has illegally configured its popular iTunes online music store and iPod digital music player so that they work only with each other and not with competitors' offerings, a class-action lawsuit filed in California federal court alleges.

Somers v. Apple Inc., No. 07-6507, 2007 WL 4718675, complaint filed (N.D. Cal. Dec. 31, 2007).


The company's tactics violate the Sherman Act, 15 U.S.C. §§ 1 and 2, as well as California's antitrust law, according to the complaint Stacie Somers filed in the U.S. District Court for the Northern District of California.

Somers says she purchased a 30-gigabyte iPod from a Target retail store in San Diego in November 2005.

According to the complaint, Apple, which is based in Cupertino, Calif., controls 83 percent of the market for online music, 75 percent of the online video market and more than 90 percent of the market for digital music players that store files on hard drives.

The iPod, although marketed mainly as a music player, can also play video files.

Apple has used its dominance in these three markets to create a closed system in which the iPod will play only files purchased from iTunes, and iTunes files will work only on the iPod, the complaint says.

There is no technological reason why the iPod does not play music in other formats, the suit says, nor why Apple's music files do not work on other players. Apple deliberately "cripples" its products to restrict consumer choice, the suit says.

Somers requests certification of two classes. One class would seek injunctive relief under federal law on behalf of everyone in the United States who bought an iPod or files from iTunes from Dec. 31, 2003, until the date the trial in the case ends. The other would seek monetary damages under state law for everyone in the United States who "indirectly" bought an iPod during the same period.

Federal antitrust law allows only "direct purchasers" to seek monetary damages from antitrust violators. Some states follow that rule, but others, including California, allow indirect purchasers -- those who buy a product through a retailer or other third party -- to recover money.

The complaint alleges illegal tying in violation of Section 1 of the Sherman Act; monopolization in violation of Section 2 of the Sherman Act; and violations of the Cartwright Act, Cal. Bus. & Prof. Code § 1.6270; California's unfair-competition law, Cal. Bus. & Prof. Code § 17200; and the state Consumer Legal Remedies Act, Cal. Civ. Code § 1750.

The complaint seeks compensatory damages, injunctive relief, and attorney fees and costs.

[MN Dave]

Huh? I play non-iTunes mp3s all the time on my iPod.

[BachQ]

United States District Court, N.D. California.
Stacie SOMERS, On Behalf of Herself and All Others Similarly Situated, Plaintiff,
v.
APPLE, INC., a California Corporation, Defendant.

No. CV 07 6507 HRL.

December 31, 2007.


Demand for Jury Trial


Complaint for Violations of Sherman Antitrust Act, Cartwright Act, California Unfair Competition Law. Consumer Legal Remedies Act and Monopolization of Business Practices

CLASS ACTION

INTRODUCTION AND MARKET DEFINITIONS

1. Plaintiff Stacie Somers, on her own behalf and behalf of the classes defined herein (the "Classes"), based on information and belief and investigation of counsel, except for information pertaining to the named Plaintiff, which is based on her personal knowledge, alleges as follows:

2. Apple, Inc. ("Apple" or "Defendant") owns and operates iTunes Music Store ("Music Store"), an Internet site that offers digital music and digital video computer files for online purchase and download ("Online Music" and "Online Video"). Unlike most Internet sites, Music Store is accessed with proprietary Apple software, rather than with a Web browser. Apple designs the hardware and software of its iPod Digital Music Player, while manufacturing is outsourced to Asia.

3. The "Online Music market" is defined as the market for digital music delivered to the consumer by way of Internet download. Online Music presents consumers enormous advantages over purchasing music in CD form at retail stores. Online Music stores offer for sale hundreds of thousands of songs at once. many times more than even the largest traditional music retailer. Online Music is attractive to consumers because it allows them to purchase a la carte only the songs that they want, rather than having to buy an entire CD album in order to get only one or two desirable songs.

4. Online Music is also attractive because it is more convenient, reliable, and better for the environment. Consumers do not have to drive to a store to make their purchase, trucks do not have to transport the CDs from factory to warehouse to retailer, and there is no material or packaging produced only to be thrown away. Online Music also promises superior audio fidelity over time, because unlike CDs, Online Music lasts indefinitely and cannot wear out or break.

5. Apple has approximately an 83% market share of the Online Music market.

6. The "Online Video market" is defined as the market for digital video files that are purchased and downloaded via the Internet, and can be viewed both on a home computer and a video-enabled Digital Music Player. Popular examples of Online Video include commercial-free television shows, music videos, and short films. Just as with Online Music, the variety, reliability, convenience, and environmental friendliness of Online Video make it superior to DVDs purchased from traditional retail outlets.

7. Apple's share of the Online Video market is at least 75%.

8. The "Digital Music Player market" is defined as the market for portable battery-powered devices that can store and play large numbers of digital music computer files. For technology-savvy consumers, Digital Music Players are enormous improvements over portable CD players. While a traditional CD can hold no more than 15 to 25 songs, Digital Music Players, by playing music that has been compressed into small digital files, can store from 150 to more than 20,000 songs. Even larger Digital Music Players are now typically only a fraction of the size of a typical portable CD player, and by having few moving parts, are more reliable and offer a much longer battery life. Digital Music Players also dispense with the need to carry around CDs, and allow consumers to organize, categorize, and play their music in whatever manner or order they desire. Further advantages include superior skip protection, and models can play video games and files, and store digital photographs.

9. There are two major segments of the Digital Music Player market: those that store music files on miniature hard drives, and those that store music using flash memory. Apple's iPod line of Digital Music Players has more than a 90% market share of the hard drive-based player market, by far the larger of the two segments over the Class Period (as defined herein in the Class Action Allegations section), and approximately a 70% share of the flash memory-based segment of the market.

10. The three relevant product markets are the markets for Online Video, Online Music, and Digital Music Players, as defined above, or collectively "the digital music markets."

11. The relevant geographic market for all three product markets is the United States.

12. Apple has engaged in tying and monopolizing behavior, placing unneeded and unjustifiable technological restrictions on its most popular products in an effort to restrict consumer choice, and to restrain what little remains of its competition in the digital music markets. Apple's CEO Steve Jobs has himself compared Apple's digital music dominance to Microsoft's personal computer operating system dominance, calling Apple's Music Store "the Microsoft of music stores" in a meeting with financial analysts.

13. Apple has repeatedly acted to foreclose even the possibility of competition by using its market power to force consumers to choose its products based not on their merits, but on the fact that technological restrictions and incompatibilities prevent them from buying its competitors' products.

14. Apple deliberately makes digital music purchased at the Music Store inoperable with its competitors' Digital Music Players. Thus, in order to play music from Apple's Music Store, the dominant Online Music retailer, the consumer's only option in the Digital Music Player market is Apple's iPod. Given that other companies' products cannot even begin to compete for the business of most consumers, Apple can and does sell the iPod at prices far above those that would prevail in a competitive market.

15. Conversely, Apple also makes the iPod unable to play music sold at its rivals' Online Music stores. Consumers who have iPods can play only the Online Music they purchase from Apple's Music Store, allowing Apple to further entrench its nearly complete monopoly in both of these markets.

16. In the past year, as improved hard drive and video compression technology have made it possible to play video content such as television shows on Digital Music Players, Apple has begun using these same illegal tactics to block consumers from purchasing and playing Online Video from its rivals' online stores and video-enabled Digital Music Players.



PARTIES


17. Defendant Apple, Inc. is a corporation organized under the laws of the State of California and has its principal place of business in Cupertino, California. Though best known as a computer hardware and software company, the majority of Apple's revenues and profits now derive from its Online Video, Online Music, and Digital Music Player businesses.

18. Plaintiff Stacie Somers resides in San Diego County, California. On or about November 2005. while in San Diego County, Ms. Somers purchased a 30GB iPod from Target.



PLAINTIFF'S ALLEGATIONS


19. Beginning on or around December 2005, and periodically throughout the Class Period. Ms. Somers purchased music from the iTunes Music Store, and downloaded it from the Music Store to her personal computer. Ms. Somers then selected and uploaded the purchased music from her personal computer to her iPod.

20. Ms. Somers downloaded the songs she purchased from the Music Store and utilized her iPod in accordance with the instructions provided in the packaging and on the iTunes Music Store website.



JURISDICTION AND VENUE


21. Jurisdiction is conferred upon this judicial district pursuant to 15 U.S.C. §§ 15 and 26, and 28 U.S.C. §§ 1331 and 1337. The Court has supplemental jurisdiction over Plaintiff's state law claims pursuant to 28 U.S.C. § 1367(a).

22. This Court has original jurisdiction over this action under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2) ("CAFA"), as to the named Plaintiff and every member of the class, because the proposed class contains more than 100 members, the aggregate amount in controversy exceeds $5 million, and members of the class reside across the United States, and are therefore diverse from Defendant.

23. Venue is proper in this district pursuant to 15 U.S.C. §§ 15,22 and 26, and 28 U.S.C. §1391 because Defendant transacts business in this district, Defendant has its principle corporate office in this district, and because thousands of Class members are located in this district. Additionally, a substantial part of the interstate trade and commerce involved and affected by the alleged violations of the antitrust laws was and is carried on in this district. The acts complained of have had, and will have, substantial anti-competitive effects in this district. A substantial number of putative plaintiffs reside in this district. Finally, one other case is pending in this district concerning the subject matter alleged herein.

24. This Court has personal jurisdiction over Apple, because Apple's corporate headquarters are located in Cupertino, California, it is authorized to conduct business in California, and it has intentionally availed itself of the laws and markets of California through the promotion, marketing. distribution and sale of its Digital Music Players, Online Music, and Online Video in California. In addition, Defendant is headquartered in Santa Clara County, which is assigned to this Division of the Court. Plaintiff is filing concurrently herewith an affidavit stating facts showing that this action has been commenced in a proper county pursuant to California Civil Code § 1780(c).



INTRADISTRICT ASSIGNMENT


25. Assignment to the San Jose Division is proper because a substantial portion of the acts, events, and omissions giving rise to this action occurred in Santa Clara, which is within the purview of the San Jose Division of this District.



TRADE AND COMMERCE


26. During the Class Period, Apple marketed, distributed, and sold Digital Music Players, Online Music, and Online Video in a continuous and uninterrupted flow of intrastate and interstate commerce throughout the United States.



CLASS ACTION ALLEGATIONS


27. Plaintiff brings this action on behalf of herself, and all others similarly situated, pursuant to Rules 23(b)(2) and (3) of the Federal Rules of Civil Procedure. Plaintiff seeks to represent the following Classes:

(a) Injunctive Relief Class (for injunctive relief under the Clayton Act, 15 U.S.C. §26): All persons or entities in the United States (excluding federal, state and local governmental entities, Apple, its directors, officers and members of their families), that, during the Class Period, purchased an Apple iPod, or who purchased audio or video content from Apple's Music Store, from December 31, 2003 through the conclusion of the trial of this matter.

(b) Indirect Purchaser Damages Class (for damages under the Cartwright Act, Cal. Bus. & Prof. Code §16720): All persons or entities in the United States (excluding federal, state and local governmental entities, Apple, its directors, officers and members of their families) that during the Class Period purchased an Apple iPod indirectly from Apple or video content from Apple's Music Store from December 31, 2003 through the conclusion of the trial of this matter.

28. The Classes are so numerous that joinder of all members is impractical. There are thousands of members in each Class who are geographically dispersed throughout the United States.

29. Plaintiff's claims are typical of the claims of the members of the Classes because Plaintiff and all Class members were damaged by the same wrongful conduct of the Defendant alleged herein.

30. There are questions of law and fact common to the Classes which predominate over any questions affecting only individual Class members. Such common questions include:

(a) the definition of the relevant markets;

(b) Apple's market power within these markets;

(c) whether Apple monopolized and continues to monopolize the relevant markets;

(d) whether Apple attempted to monopolize and continues to attempt to monopolize the relevant markets;

(e) whether the contractual conditions Apple imposes upon its customers are unconscionable;

(f) whether Apple's conduct caused damage to the Plaintiff and members of the Classes, including the degree to which prices paid by the Classes are higher than the prices that would be paid in a market free from tying, monopolization, and other illegal conduct; and

(g) the appropriateness of injunctive relief to restrain ongoing and future violations of the law.

31. The claims of the Plaintiff are typical of the claims of the Classes, and Plaintiff has no interest adverse to the interest of other members of the Classes.

32. Plaintiff will fairly and adequately protect the interests of the Classes, and has retained counsel experienced and competent in the prosecution of complex class actions and antitrust litigation.

33. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. Such treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without duplication of effort and expense that numerous individual actions would engender. Class treatment will also permit the adjudication of relatively small claims by many Class members who could not afford on their own to individually litigate an antitrust claim against a large corporate defendant, There are no difficulties likely to be encountered in the management of this class action that would preclude its maintenance as a class action, and no superior alternative exists for the fair and efficient adjudication of the controversy.



APPLE ENGAGES IN ILLEGAL TYING CONDUCT


34. Online Music comes in both unprotected and protected digital file formats. Unlike unprotected formats, protected formats include technological encumbrances designed to prevent consumers from making illegal unauthorized copies of the digital file.

35. Given the increasing problem of music piracy, the major record companies that control the copyrights to most popular music are generally unwilling to license their music for online sale except in protected formats.

36. The protected music file format used by most Online Music stores is the WMA format. Online Music stores that sell their protected music files in WMA format include America Online, Wal-Mart, Napster. MusicMatch, Best Buy, Yahoo! Music, FYE Download Zone. and Virgin Digital.

37. Apple's iPod is alone among mass-market Digital Music Players in not supporting the WMA format.

38. There are no technological limitations preventing the iPod from supporting WMA playback. Apple outsources most of the production of the iPod to third-party manufacturers in Asia. One third-party part used in the iPod is its "core processor," the Portal Player System-On-A-Chip. The System-On-A-Chip by default supports the WMA format. Apple, however, deliberately designed the iPod's software so that it would only play a single protected digital format, Apple's FairPlay-modified AAC format. Deliberately disabling a desirable feature of a computer product is known as "crippling" a product, and software that does this is known as "crippleware."

39. The software Apple has designed for the iPod, which disables the iPod's inherent ability to play WMA format files, is a classic example of crippleware. By preventing the iPod from playing WMA or any other protected music format besides FairPlay-modified AAC format, iPod owners' only option to purchase Online Music is to purchase from Apple's Music Store. This conduct constitutes an illegal tie in violation of antitrust laws.

40. In place of the Portal Player System-On-A-Chip, Apple uses the SigmaTel STMP3550 in its low-end iPod Shuffles. Like the Portal Player System-On-A-Chip, the SigmaTel STMP3550 was designed to decode and play WMA files and does indeed play them on every Digital Music Player that contains the STMP3550 chip except the iPod. As in its higher end models, Apple's crippleware operating system software prevents the iPod Shuffle from playing WMA files.

41. The cost to Apple of licensing the WMA format would likely not exceed $800,000 per year, or approximately three cents per iPod sold in 2005.

42. Just as Apple deliberately makes the iPod incapable of playing any Online Music not purchased on Music Store, it makes the FairPlay-modified AAC music files purchased on Music Store incapable of being played by other Digital Music Players. Thus, consumers who have purchased Online Music from Apple to play on their home computers will have no choice but to buy an iPod if they want to play their music on a Digital Music Player.

43. Other consumers first buy an iPod and later buy Online Music for their iPod from Apple's Music Store. As described above, such consumers are not able to purchase Online Music for play on an iPod from any company besides Apple. After purchasing their digital music library from Apple, these consumers are locked into making all future Digital Music Player purchases from Apple. They might want to buy a non-Apple Digital Music Player for a family member, or to replace their original Apple iPod, but to do so would mean they could not utilize any of the songs they purchased from Apple in their new music player.

44. Defendant's refusal to allow its FairPlay-modified AAC music files to be played on any Digital Music Player besides the Apple iPod constitutes an illegal tie in violation of antitrust laws.

45. These ongoing injuries can be halted and abated by an injunction that would compel Apple to make iPod compatible with Online Music and Online Video purchased on stores other than Music Store, and to allow competitors to sell their music and video content using Apple's iTunes platform.

46. Apple has acted on grounds generally applicable to the Injunctive Relief Class, thereby making final injunctive relief appropriate with respect to the Class as a whole. Such an injunction would be of immense benefit to the Plaintiff, the Class, and the general public while imposing only a trifling burden upon Apple.



IN EUROPE APPLE'S MONOPOLY PRICING AND TYING CONDUCT HAS BEEN THE TARGET OF FORMAL GOVERNMENT INVESTIGATIONS, PRIVATE LAWSUITS, AND LEGISLATION SPECIFICALLY DESIGNED TO COUNTER APPLE'S ANTI-COMPETITIVE CONDUCT


47. European antitrust authorities are currently investigating Apple's pricing practices in the European Union. Leveraging its worldwide monopoly power in the Online Music market, Apple has set the price of music downloads in the United Kingdom substantially higher than in the United States and in countries that use the Euro as their currency, and maintains this higher price by placing technological restrictions on residents of the United Kingdom from purchasing music from Apple's non-UK Music Store sites.

48. In France. a consumer rights organization has filed suit against Apple for deliberately making the iPod and Online Music purchased from Music Store incompatible with competing products.

49. Also in France, the two chambers of Parliament have passed slightly different versions of a bill that would force Apple to stop making music files purchased on its Music Store incompatible with Digital Music Players other than the Apple iPod.

50. Also in France, the nation's Parliament has approved a law that specifically was designed to force Apple to allow other companies to sell protected music files on the iPod, and to force Apple to make music purchased on its Music Store compatible with competing Digital Music Players. In an interview, a French official explained that his government believes that "Someone who buys a song has to be able to listen to it, no matter which device or the software of choice" and that Apple's designing its products to prevent consumers from using other companies' products is "not in the interest of the consumer, nor the interest of the creator. It only benefits the company and we're there to defend the consumer, our citizens." Apple has unsuccessfully lobbied against the law, calling it "state sponsored piracy."

51. Denmark's Minister of Culture plans on introducing in 2007 legislation similar to the French law.

52. The Office of the Norwegian Consumer Ombudsman on July 6. 2006 ruled that Apple violates Norwegian law by tying purchases of music from its Music Store to the purchase of an Apple iPod. Using language that echoes the American common law standard of an unconscionable contract, Ombudsman Bjorn Erik Thon ruled:

[Apple] goes to great lengths to ensure that its standard customer contract protects the company's own interest.... "The contracts are both vague and hard to understand for the customers, and they're clearly unbalanced to disfavor the customer. The consumers are clearly the inferior partner in the contract, and this in itself is illegal ...." [¶¶] "[Apple's restrictive] technology renders the customers without rights in dealing with a company which on a whim can dictate what kind of access customers will have to products they have already paid for ...."

53. Sweden and Denmark's antitrust regulators have indicated that they are likely to duplicate any action taken against Apple by Norway. The Financial Times of London reported on June 14, 2006 that Finnish antitrust authorities are considering joining these three countries in their joint action against Apple.



ANTITRUST INJURY TO CONSUMERS


54. Through the unlawful acts and practices described above, Apple has harmed competition, consumers and innovation by causing consumers to pay supracompetitive prices for iPod Digital Music Players. Those practices, described herein, have also allowed Apple to obtain and maintain illegal monopolies in the aforementioned markets.

55. By preventing consumers who have purchased music files from Music Store from playing their music on its competitors' Digital Music Players, Apple has been able to charge purchasers of the iPod Digital Music Player a supracompetitive price.

56. Likewise, by preventing owners of iPods from buying music from any Online Music retailer other than Music Store, Apple deters consumers from even considering doing business with its competitors' music and video stores, allowing it to monopolize these markets.

57. Consumers have been further injured as innovative companies such as Dell, Olympus, and Rio have begun to withdraw from the Digital Music Player markets. These companies had little choice but to give up and exit the market because Apple's anticompetitive conduct excluded them ]0 from reaching the majority of their potential customers, no matter how much cheaper or how much better their products were. There can be no real competition in the Online Music, Online Video, and Digital Music Player markets as long as Apple's conduct forecloses even the possibility of its competitors reaching most potential customers.

58. This anti-competitive conduct has deterred the development of competing products, damaging consumers by depriving them of a choice of products with different and possibly superior sets of features.

59. Normally markets for consumer electronic goods such as Digital Music Players are characterized by intense competition and narrow profit margins. Apple's pricing in the Digital Music Player market, by contrast, is exactly that of a monopolist, excessive and arbitrary. For example, the only difference between Apple IGB and 4GB models of its iPod Nano is the capacity of their NAND flash memory parts. At current spot prices in the NAND flash memory market the 1GB part costs approximately $4.15, while the 4GB part costs approximately $9.67. Nonetheless, Apple charges an additional one hundred dollars for the 4GB model.

60. Plaintiff and the Classes have been injured by this anti-competitive conduct and will continue to suffer injury unless the relief prayed for herein is granted.



COUNT I: TYING



(For Violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1)



Violations Resulting from Unlawful Tying or Bundling of Online Video and FairPlay Protected Music Files to the Apple iPod


61. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

62. Apple has substantial market power in each of the distinct Digital Music Player, Online Music, and Online Video markets.

63. All of these markets are for goods and not services.

64. There is no appropriate or legitimate business justification for Apple's use of technological restrictions to force those who purchase Apple's Digital Music Players to also purchase only Online Music and Online Video from Music Store that would counterbalance the clear anti-competitive effects of its tying conduct, including the foreclosure of competition in the Online Music and Online Video.

65. This unlawful conduct has harmed competition in that market and has caused injury to every person who has purchased Online Music and Online Video from Music Store. The supply and selection of products available is lower than it would be in a competitive market; and the number and effectiveness of competitors have been diminished by unlawful means.

66. The anti-competitive conduct described herein has damaged Plaintiff and the alleged Classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. §1.



Violations Resulting from Unlawful Tying of the Apple iPod to Online Video and FairPlay Protected Music Files


67. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

68. Apple has substantial market power in each of the distinct Digital Music Player, Online Music, and Online Video markets.

69. All of these markets are for goods and not services.

70. There is no appropriate or legitimate business justification for Apple's use of technological restrictions to force those who purchase Online Music and Online Video from Music Store to also purchase only Apple's Digital Music Players that would counterbalance the clear anticompetitive effects of its tying conduct, including the foreclosure of competition in the Digital Music Player market.

71. This unlawful conduct has harmed competition in that market, and has caused injury to every buyer of an Apple iPod. Prices in the Digital Music Player market are higher than they would have been in a competitive market; the supply and selection of products available is lower than it would be in a competitive market; and the number and effectiveness of competitors have been diminished by unlawful means.

72. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. §1.



COUNT II: MONOPOLIZATION



(For Violation' of Section 2 of the Sherman Antitrust Act, 15 U.S.C. §2)



Violations Resulting from the Unlawful Acquisition or Maintenance of Monopoly Power in the Digital Music Player Market


73. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

74. Through the actions described herein, Apple has willfully acquired and maintained monopoly power in the Digital Music Player market. This conduct has harmed competition in that market, and has caused injury to every buyer of an Apple iPod. Prices in the Digital Music Player market are higher than they would be in a competitive market; the supply and selection of products available is lower than it would be in a competitive market; and the number and effectiveness of competitors have been diminished by unlawful means.

75. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's monopolization of the Digital Music Player market.

76. The anti-competitive conduct described herein has damaged Plaintiff and the alleged Classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. §2.



COUNT III: ATTEMPTED MONOPOLIZATION



(For Violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. §2)



Violations Resulting from the Unlawful Acquisition or Maintenance of Monopoly Power in the Online Music Market


77. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

78. Through the actions described herein, Apple has willfully acquired and maintained monopoly power in the Online Music market. This conduct has harmed competition in that market, making the supply and selection of products available lower in the Online Music market than they would be in a competitive market. The number and effectiveness of competitors have also been diminished by Apple's unlawful conduct.

79. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's monopolization of the Online Music market.

80. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. §2.



Violations Resulting from the Unlawful Acquisition or Maintenance of Monopoly Power in the Online Video Market


81. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

82. Through the actions described herein, Apple has willfully acquired and maintained monopoly power in the Online Video market. This conduct has harmed competition in that market. making the supply and selection of products available lower and making prices higher than they would be in a competitive market. The number and effectiveness of competitors have also been diminished by Apple's conduct.

83. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's monopolization of the Online Video market.

84. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. § 2.



Violations Resulting from Unlawful Attempted Monopolization of the Digital Music Player Market


85. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

86. Apple has acted with specific intent to monopolize the Digital Music Player market.

87. There was and is a dangerous possibility that Apple will succeed in its attempt to monopolize the Digital Music Player market because Apple controls a large percentage of that market and has the ability and actually does exclude its competitors through use of anticompetitive technological restrictions on its products. Further success in excluding competitors from the Digital Music Player market will allow Apple to obtain an illegal monopoly over the Digital Music Player market.

88. This conduct has harmed competition in that market, making the supply and selection of products available lower than it would be in a competitive market. Apple's unlawful attempted monopolization has also reduced the number and effectiveness of competitors in the Digital Music Player market and forced consumers to pay higher prices in the Digital Music Player market than they would in a competitive market.

89. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's attempted monopolization of the Digital Music Player market.

90. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. § 2.



Violations resulting from the Unlawful Attempted Monopolization of the Online Music Market


91. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

92. Apple has acted with specific intent to monopolize the Online Music market.

93. There was and is a dangerous possibility that Apple will succeed in its attempt to monopolize the Online Music market because Apple controls a large percentage of that market and has the ability and actually does exclude its competitors through use of anticompetitive technological restrictions on its products. Further success in excluding competitors from the Online Music market will allow Apple to obtain an illegal monopoly over the Online Music market.

94. This conduct has harmed competition in that market, making the supply and selection of products available lower than it would be in a competitive market. Apple's unlawful attempted monopolization has also reduced the number and effectiveness of competitors in the Online Music market.

95. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's attempted monopolization of the Online Music market.

96. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act, 15 U.S.C. § 2.



Violations Resulting from the Unlawful Attempted Monopolization of the Online Video Market


97. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

98. Apple has acted with specific intent to monopolize the Online Video market.

99. There was and is a dangerous possibility that Apple will succeed in its attempt to monopolize the Online Video market because Apple controls a large percentage of that market and has the ability and actually does exclude its competitors through use of anticompetitive technological restrictions on its products. Further success in excluding competitors from the Online Video market will allow Apple to obtain an illegal monopoly over the Online Video market.

100. This conduct has harmed competition in that market, making prices higher and the supply and selection of products available lower than they would be in a competitive market.

101. This conduct has harmed competition in that market, making the supply and selection of products available lower and making prices higher than they would be in a competitive market. Apple's unlawful attempted monopolization has also reduced the number and effectiveness of competitors in the Online Video market.

102. There is no appropriate or legitimate business justification for the actions and conduct which have facilitated Apple's attempted monopolization of the Online Video market.

103. The anti-competitive conduct described herein has damaged Plaintiff and the alleged classes and is in violation of the Sherman Antitrust Act. 15 U.S.C. §2.



COUNT IV



(For Violation of the Cartwright Act, Cal. Bus. & Prof. Code § 1.6270 et seq.)


104. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

105. Apple's actions as described above constituted an unreasonable restraint of trade or commerce throughout California and the rest of the United States in violation of the Cartwright Act, § 16270 et seq. of the California Business and Professions Code.

106. The Classes have been injured in their business and property as a result of Apple's illegal conduct, for which they seek damages (trebled where appropriate) including pre-judgment interest.

107. Apple's conduct is continuing and unless equitable relief is granted, artificially inflated prices for Portable Music Players and Online Video will continue unabated.



COUNT V



(For Violation of California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.)


108. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

109. The conduct alleged in this complaint constitutes unlawful, unfair, and fraudulent business acts and practices within the meaning of the California Unfair Competition Law, § 17200 et seq. of the California Business and Professions Code. Plaintiff and the Classes have suffered injury in fact and lost money or property as a result of Apple's violations of law and wrongful conduct.

110. Apple's actions are unlawful and unfair because it has violated, inter alia, the Sherman Antitrust Act. the Cartwright Act, the Consumers Legal Remedies Act and because it has monopolized the markets for Online Music, Online Video, and Portable Music Players in violation of California common law.

111. Apple's actions are unfair because in its pursuit of monopoly pricing it has made its products less useful to consumers and prevented them from choosing which companies to do business within the relevant markets based on the merits of each company's products. Moreover, there is no legitimate business justification for Apple's conduct, and any business justification is further outweighed by the harm Apple's conduct has caused to consumers and competitors.

112. Apple's actions are fraudulent and unfair because it does not inform the purchasers of its products that it has deliberately made them incompatible with the products of its competitors. Apple has deceived consumers who reasonably believed they could purchase Online Music and Online Video from any store to play on Apple's Portable Music Player products, and likewise that the Online Video and Online Music they purchase from Music Store are compatible with any standard Portable Music Player. This belief is reasonable under the circumstances given that consumers when purchasing media products are accustomed to the fact that the CDs, DVDs, audio cassettes, and VHS cassettes they purchase from any American store are compatible with any standard CD, DVD, audio cassette, and VHS cassette player.

113. Accordingly, Apple has violated the Unfair Competition Law proscription against engaging in unlawful, unfair, and fraudulent business practices.

114. As a result of this unlawful, unfair, and fraudulent conduct, Apple has been unjustly enriched at the expense of Plaintiff, other members of the Classes, and the general public.

115. Apple's conduct is continuing and unless equitable relief is granted, artificially inflated prices for Portable Music Players and Online Video will continue unabated.



COUNT VI



(For Violation of the Consumer Legal Remedies Act, Cal. Civil Code §1750 et seq.)


116. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

117. Plaintiff and each member of the Class are "consumers" within the meaning of Consumer Legal Remedies Act, California Civil Code § 1761(d).

118. The Consumer Legal Remedies Act applies to Apple's actions and conduct, described herein, because it extends to transactions that are intended to result, or which have resulted, in the sale or lease of goods or services to consumers.

119. Defendant violated and continues to violate the deceptive practices proscribed by Cal. Civ. Code § 1770(a)(19) by "Inserting an unconscionable provision in the contract."

120. Apple is a monopolist with market shares of 75% or more in each of the relevant markets and a stock market capitalization of more than fifty billion dollars. The unnecessary technological restrictions it places on its products offer no benefit to consumers while preventing them from using any Apple product they have already bought from being used with a competitor's digital music player or online store.

121. Apple's size, completely dominant market share, and unreasonable and unfair technological restrictions, place it in a greatly unequal bargaining position relative to consumers in each of the relevant markets.

122. Apple unconscionably exploits this unequal bargaining power by imposing prices, contractual terms, and one sided technological restrictions into contracts with consumers in the digital music markets. This behavior has violated and continues to violate the Consumers Legal Remedies Act, California Civil Code § 1750 et seq.

123. Pursuant to § 1782 of the CLRA, Plaintiffs have notified Defendant in writing of the particular violations of § 1770 of the CLRA and demanded Defendant rectify the actions described above by providing complete monetary relief, agreeing to be bound by its legal obligations and give notice to all affected customers of its intent to do so. Plaintiffs sent this notice by certified mail, return receipt requested, to Apple's principal place of business.

124. If Apple fails to rectify or agree to rectify the problems associated with the actions detailed above and give notice to all affected consumers within 30 days of the date of written notice, pursuant to § 1782 of the CLRA, Plaintiffs will amend their Complaint to seek actual, punitive and statutory damages and all other relief available to Plaintiffs and the Class under Cal. Civ. Code §



COUNT VII



(For Common Law Monopolization Business Practices)


125. Plaintiff re-alleges and incorporates by reference each of the allegations set forth above on behalf of the Classes.

126. The conduct described in this complaint is in violation of California common law prohibiting monopolization.



PRAYER FOR RELIEF


WHEREFORE, Plaintiff Somers, on her own behalf and on behalf of the putative classes prays that the Court declare, adjudge and decree the following:

A. That this action may be maintained as a class action pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure with respect to Plaintiff's claims for injunctive relief. and Rule 23(b)(3) of the Federal Rules of Civil Procedure with respect to the claims for damages and other monetary relief, and declaring Plaintiff as representatives of the Classes and her counsel as counsel for the Classes;

B. That the conduct alleged herein constitutes unlawful tying, monopolization, and attempted monopolization in violation of Cartwright Act, California common law, and sections 1 and 2 of the Sherman Antitrust Act;

C. That the conduct alleged herein is in violation of the California Unfair Competition Law and appropriate injunctive relief be granted pursuant to this law;

D. That the conduct alleged herein is in violation of the Consumer Legal Remedies Act;

E. For an order permanently restraining and enjoining Apple from continuing the unfair and anti-competitive activities alleged herein;

F. That Plaintiff and the Classes are entitled to damages. penalties and other monetary relief provided by applicable law, including treble damages;

G. That Plaintiff and the Classes recover their costs of suit, including reasonable attorneys' fees and pre- and post-judgment interest;

H. For an order requiring full restitution of all funds acquired from Apple's unfair business practices, including disgorgement of revenues and/or profits;

I. Awarding Plaintiff and the Class their expenses and costs of suit, including reasonable attorneys' fees, to the extent provided by law; and

J. That Plaintiff and the Classes are granted such other, further, and different relief as the nature of the case may require or as may be determined to be just, equitable, and proper by this Court.



JURY DEMAND


Plaintiff demands a trial by jury on all issues so triable.

DATED: December 31, 2007

[BachQ]

Music-Industry Initiative Comes Under U.S. Scrutiny
By ETHAN SMITH
February 8, 2008; Page B3

In a challenge to a music-industry initiative that has barely reached the planning stages, the Department of Justice has begun an inquiry into a new way of selling music that Vivendi SA's Universal Music Group has proposed to its three main competitors.

Universal and Sony BMG Music Entertainment, the No. 1 and No. 2 music companies world-wide by market share, have gotten letters of inquiry from the Justice Department, according to people familiar with the matter.

Of Universal's competitors among the so-called big-four music companies, Sony BMG has expressed the strongest interest in the project -- known as "Total Music" -- according to people familiar with the situation. The company, a joint venture of Sony Corp. and Bertelsmann AG, declined to comment.

A spokesman for Universal was traveling and couldn't be reached for comment. Spokespeople at EMI Group Ltd. and Warner Music Group Corp., the other firms in the big four, said the companies hadn't been contacted. A Justice Department spokeswoman, Gina Talamona, declined to comment.

Total Music would integrate a music-playing gadget and online or wireless delivery for a flat fee. In one version of the service that has been discussed, a fee tacked on to the price of compatible gadgets would give users unlimited access to a vast catalog of music from Universal and whichever of its competitors signed on.

Not much detail on Total Music has been proposed to the various music companies, the people familiar with the matter say, and the project has been generally viewed as an effort to create a strong competitor to Apple Inc.'s iTunes Store, which dominates digital-music sales. Record labels have been unhappy with iTunes' insistence on a single price for all songs and have been frustrated with the mixed performance of subscription music services like that of Napster Inc., which let users effectively rent unlimited amounts of music for a flat monthly fee.

It was unclear which aspect of Total Music the Justice Department was looking into, but competing suppliers cooperating to set the price of a consumer product could raise antitrust issues. In 2001, the major labels faced scrutiny over their work to create digital-music services named Pressplay and MusicNet. Both those efforts proved duds with consumers, for reasons largely unrelated to pricing.

[BachQ]

Northern California Judge Gives Green Light to Monopolization Suit Against Apple
Category: Industry Buzz - February 07, 2006   
By Alexander Grundner [23262 Reads] 





With all the hoopla of the video iPod and speculation that Apple was going to release a media center-style PC and switch to Intel chips, it seems that the media last September inadvertently – or knowingly – forgot to post the news (via Tera Patricks) that Judge James Ware, of the U.S. District Court of Northern California, has found the plaintiff, Thomas Slattery, as having "met all requirements for asserting [Apple's iTunes + iPod] tying claim... noting that the complaint alleges Apple has an 80 percent share of the market for legal digital music files and more than 90 percent of the market for portable hard-drive digital music players." Moreover, Judge Ware has given the green light to Slattery to proceed with his monopolization claim under the federal Sherman Antitrust Act.

As some of you know we've been having some thoughtful discussions on Apple, iPod, and its DRM in the forums (here and here), but I don't think any of us knew that the numbers were as high as the judge found the evidence to be. Also of interest was that Judge Ware specifically rejected Apple's argument that tying doesn't apply since consumers can buy iTunes music for playback on their computers without having to own an iPod. I'm sure some will say that this is not a monopoly, but ask yourself: What other online music services, other than the iTunes Music Store, offers Apple's Fairplay DRM wrapped music for you to purchase for your iPod? That's right, exactly zero. So unless you own a physical CD and have ripped the tracks to MP3 or AAC, there's no other way to add music to the device other than by way of iTunes. (OK, there are two non-traditional exceptions: 1) Services like eMusic that sell DRM-free MP3s, and 2) Real's Harmony software that can convert their copy protected music to a compatible format for the iPod – Note that Apple threatened Real with a lawsuit for providing this feature.)

On the flipside, if you've purchase DRM wrapped music from services like Napster or Yahoo! Music, you will be denied access to those files since Apple doesn't feel compelled to license Windows Media DRM (not that Microsoft hasn't offered). So you see, being the leader of "closed system," even if you're a small company, can get you into trouble when you have the majority of the market locked down and are unwilling to loosen your restrictions on allowing your player to work with other services and codecs.

[BachQ]

February 8, 2008 - Apple's fiscal first-quarter 2008 revealed that the company had one new lawsuit filed against it in the last part of 2007, and settled another four in the same time.


New Lawsuits

Somers v. Apple Inc. - Filed December 31, 2007, this lawsuit alleges various claims including unlawful tying of iTunes Store purchases to the iPod and vice versa. It is nearly identical to other lawsuits now collectively referred to as The Apple iPod iTunes Antitrust Litigation and the recently filed (and now settled) Black v. Apple Inc.. Apple's response is not yet due.

Lawsuits that were settled or dismissed as revealed in the fiscal first-quarter include:

Apple Computer, Inc. v. Burst.com, Inc. - filed on January 4, 2006, this patent infringement lawsuit brought against Apple by Burst.com was settled late last year, ahead of trial which had been scheduled for February 28, 2008. In a departure from the norm, the settlement included an agreement divulging the details of the terms, which involved a $10 million payment from Apple to Burst.com to license its technologies.

European Commission Investigation - this investigation stems from inconsistent pricing for iTunes tracks in the United Kingdom compared to other Eurozone countries. Apple has said the pricing discrepancy is the fault of the record labels. A hearing on the Statements of Objections took place September 19, 2007. On January 8, 2008, Apple announced it planned to equalize the price of iTunes Store content throughout Europe within six months. That same day, the Commission announced its intent to close the investigation.

Intertainer, Inc. v. Apple Computer, Inc. et al. - filed December 29, 2006, this lawsuit alleges that Apple is infringing U.S. patent number 6,925,469, "Digital Entertainment Service Platform". Apple answered the complaint February 21, 2007 denying all material allegations and asserting numerous affirmative defenses. A settlement has been reached but details were not disclosed.

Black v. Apple Inc. - this class action complaint, filed on August 27, 2007, is similar to other iPod/iTunes monopoly lawsuits Apple is facing (now collectively referred to as The Apple iPod iTunes Antitrust Litigation). On November 19, 2007, both parties entered into a Stipulation for Voluntary Dismissal and the Court dismissed all claims with prejudice on November 20, 2007, concluding the lawsuit.

Updates

Bader v. Anderson, et al. - filed in May 2005, the lawsuit alleged Apple failed to disclose certain information relating to the Apple Computer, Inc. Performance Bonus Plan; the case was dismissed with prejudice in favor of Apple on October 25, 2007. On November 26, 2007 the plaintiff filed a notice of appeal.

Birdsong v. Apple Computer, Inc - this lawsuit claims Apple's iPod is inherently defective because it can cause noise-induced hearing loss (like all music devices). The court held a motion to dismiss this lawsuit on June 4, 2007 and issued an order on December 14, 2007 granting Apple's motion, but allowed the plaintiff to submit an amended complaint, which they did on January 11, 2008. Apple's response to the amended complaint is not yet due.

Branning et al. v. Apple Computer, Inc. - filed in February 2005, this lawsuit alleges Apple was selling used computers as new and was failing to honor warranties. The Court denied Apple's motion for judgement on the pleadings on November 30, 2007. The case continues...

Harvey v. Apple, Inc. - filed August 6, 2007, this lawsuit alleges infringement of two U.S. patents regarding "Recharger for use with a portable electronic device and which includes a proximally located light emitting device" and "Recharger for use with a portable electronic device and which includes a connector terminus for communicating with rechargeable batteries contained within the device." A Markman hearing is set for October 28, 2009, and the trial has been scheduled for April 5, 2010.

In re Apple Computer, Inc. Derivative Litigation (Federal Action) - the lawsuit was filed by shareholders after it was disclosed that Apple had discovered irregularities in its stock option grants. Apple filed a motion to dismiss the suit on April 20, 2007, which was heard on September 7, 2007 and granted by the court on November 19, 2007, but with leave to amend. The plaintiffs field an amended complaint December 19, 2007 and Apple filed a motion to dismiss the amended complaint on January 25, 2008.

Mediostream, Inc. v. Acer America Corp. et al. - filed August 28, 2007, against Acer, Dell, Gateway, and Apple, this lawsuit alleges infringement of a U.S. patent entitled "Method and System for Direct Recording of Video Information onto a Disk Medium." Apple filed its answer to the complaint on January 25, 2008, denying all material allegations. Apple also filed a motion to transfer the case to the Northern District of California.

OPTi Inc. v. Apple Inc. filed on January 16, 2007, this lawsuit alleges infringement of three U.S. patents related to "Predicative Snooping of Cache Memory for Master-Initiated Accesses." Apple has denied all material allegations and asserted counterclaims for declaratory judgment of non-infringement and invalidity. The Markman hearing is set for November 26, 2008, and trial has been scheduled for April 6, 2009.

Quantum Technology Management, Ltd. v. Apple Computer, Inc. - filed December 21, 2005, this lawsuit alleges Apple has infringed upon U.S. Patent number 5,730,165, "Time Domain Capacitive Field Detector". A Markman hearing was held May 16, 2007, and on June 7, 2007, the Court issued a claim construction ruling and an order invalidating six of Qunatum's patent claims in response to Apple's motion for a partial summary judgement of invalidity. On November 28, 2007, Apple filed a motion for summary judgment for non-infringement and invalidity. On December 27, 2007, Quantum filed a motion for summary judgment for infringement on one patent claim. Trial has been scheduled for May 19, 2008.

SP Technologies LLC v. Apple Inc. - filed August 2, 2007 this is another lawsuit alleging patent infringement. The patent in question is entitled "Method and Medium for Computer Readable Keyboard Display Incapable of User Termination." Apple filed its response on October 23, 2007, and also asserted counterclaims for declaratory judgment of non-infringement and invalidity. A Markman hearing has been scheduled for September 18, 2008, and trial is set for June 1, 2009.

St-Germain v. Apple Canada, Inc. - this lawsuit stems from an "iPod tax" Apple collected as a result of the Canadian Private Copying Levy that was later overturned by Canadian courts. A trial was conducted October 15 and 16, 2007, and the Court ruled despite its best-intention efforts, Apple must pay the amount claimed to the 20,000 persons who purchased an iPod in Quebec between December 12, 2003 and December 14, 2004. Apple must submit a statement of account showing how much the Canadian Private Copying Collective received and the amount it has paid to class members already. Both parties must submit a further briefing regarding the collective recovery award by February 23, 2008.

Texas MP3 Technologies Ltd v. Apple Inc. et al. - filed against Apple and other defendants on February 16, 2007 this lawsuit alleges infringement of U.S. Patent No. 7,065,417 entitled "MPEG Portable Sound Reproducing System and A Reproducing Method Thereof." Texas MP3 Technologies filed an amended complaint on August 1, 2007, adding the iPhone as an accused device. Apple filed its answer August 20, 2007, denying all material allegations. The Markman hearing has been scheduled for March 12, 2009, and trial is set for July 6, 2009.

Vogel v. Jobs et al. - Apple filed a motion to dismiss this suit on June 8, 2007 that was heard on September 7, 2007. The case is related to improper backdating of stock option grants, similar to other suits. On November 14, 2007, the Court dismissed all securities claims with prejudice. On December 14, 2007, the plaintiff filed a motion for leave to file a first amended consolidated class action complaint; on January 23, 2008, Apple filed its opposition to this.

[маразм1]

lol! finally!

[BachQ]

UPDATE - Apple music monopoly lawsuit seeks class-action status
Jeremy Kirk (IDG News Service) 23/01/2008 13:57:29

A class-action suit filed against Apple alleges the company unfairly uses technological restrictions with its iPod line and iTunes Music Store to beat out competitors.

The suit, filed in U.S. District Court for the Northern District of California, is the latest one to accuse Apple of unfair business practices. Apple is facing similar legal actions and scrutiny in the U.S. and Europe.

The suit was filed Dec. 31 by Stacie Somers, a resident of San Diego County, California, who bought a 30G-byte iPod from Target, a retail store. Others who bought an iPod or content from Apple's iTunes store after Dec. 31, 2003, may join the suit.

The suit calls for Apple to forfeit money it earned from the unfair practices and pay the plaintiffs damages.

It alleges that Apple has constricted the market by not enabling iPods to play content in the Windows Media Audio (WMA) format, Microsoft's copy-protection technology. Further, Apple sells songs on the iTunes store with its own copy-protection technology, FairPlay, which is incompatible with music players other than the iPod.

The suit contends iPod-owning consumers can only buy music from iTunes, an unlawful tie-in that violates U.S. antitrust laws. Apple could license the WMA format for as little as US$0.03 per iPod, or for a total of $800,000 based on Apple's 2005 iPod sales, the suit reads.

The suit may quickly become less relevant as many online music retailers, including Apple, expand their offerings of music free of copy-protection restrictions, also known as DRM (digital rights management).

DRM-free tracks offer the advantage of being compatible on a wider range of devices. In May, Apple began selling songs from the label EMI without DRM. Also, Amazon.com now sells song in MP3 format, and Universal Music Group has tested selling DRM-free music.

Apple doesn't comment on pending litigation, a company spokeswoman said.

[BachQ]

Does Apple Have a Monopoly?

January 23, 2008
By Adrian Kingsley-Hughes


On December 31st a lawsuit was filed which hit Apple on several fronts. At first blush the suit looks like any other frivolous lawsuit filed by someone trying to make a name for themselves. But on closer inspection this suit actually homes in on a few chinks in Apple's armor.

The lawsuit, filed by Stacie Somers, a resident of San Diego, claims that Apple's domination of the market for online music, online video, and digital music players constitutes a violation of the Sherman Antitrust Act.

The lawsuit also questions why the iPod doesn't support WMA audio files when most other players on the market do. It claims that the SigmalTel STMP3550 chip that's used in the iPod shuffle is itself capable of supporting WMA but that this feature is deliberately disabled by Apple. According to SigmaTel's own documentation, the 3550 is capable of handling both MP3 and WMA and is upgradable to other formats. It would seem that it's also downgradable where needed.

Also, the lawsuit questions the huge price difference between the 1GB and 4GB iPod nano and claims that the $5.52 price difference that the memory modules cost translates into a whopping $100 price difference between the two iPods. Since it can be hard to put a price on individual components this figure is open to debate, but for comparison, the cost difference for the flash memory modules in a 4GB and 8GB iPod nano was estimated at $24 by iSuppli, back when the price difference between the models was $100. I'm not sure where the $5.52 figure comes from but it's clear that Apple charges a premium for higher capacities (though Apple isn't alone here – for example, Microsoft charges a premium for the higher capacity Zune players).


Finally, the lawsuit questions Apple's claims that music labels are unwilling to allow tracks to be sold free of DRM, given that an outlet such as Amazon has been able to strike DRM-free deals for its customers.

These issues – WMA support, the price difference between models of different capacity, and why most iTunes tracks still come wrapped in DRM – pale in comparison to the claims that the iPod/iTunes ecosystem that Apple has generated is monopolistic and violates the Sherman Antitrust Act. This one is the biggie and has to be the claim that Apple is most keen to distance itself from. Any form of antitrust court case would put Apple under the microscope and – for a company that likes to play its cards close to its chest – that kind of attention would be unwelcome.

According to the lawsuit, Apple controls about 70% of the flash-based media player market and 90% of the hard drive-based market, and iTunes is the source for 83% of all legally downloaded music. Are these numbers grounded in reality or just pulled out of the air?

Well, you can find sources to confirm that all three figures are roughly in the ballpark. Back in 2004 an NPD Group report claimed that the iPod accounted for 92.1% of the hard drive media player market while in 2006 a WR Hambrecht report backed up the iTunes market share figure. The sales numbers also speak volumes – the iTunes download store opened in April 2003, and by March 2005 over 300 million songs had been sold. This ballooned to a billion by February 2006, 2.5 billion by April 2007, 3 billion by July 2007 and 4 billion in January 2007.

Assuming that these figures are in the right ballpark, that's a whole lotta media players out there with the Apple logo on them. And these players are stuffed with music bought fron iTunes.

But the problem isn't just down to the numbers, but in the way that Apple locks users into buying more Apple products. At the core of this is the iTunes software that every iPod owner needs to install in order to make use of their iPod.

So, you've bought the iPod and installed the software. Then perhaps you begin ripping a few CDs or importing your content into iTunes. At that point the lock-in begins. While those users with an understanding of iTunes and audio formats know that iTunes doesn't totally lock you into using iPods forever more, for the average user, getting the tracks out of iTunes and into a form that another player can play is near to impossible. Once a consumer has made iTunes the hub for their digital media, the chances of them breaking free of Apple's grip becomes very small.

But does commanding the market share that Apple does constitute a monopoly? Does selling 20 million iPods a month constitute a monopoly? What about selling a billion iTunes songs in 6 months? Well, in the words of Homer Simpson, that's for the courts to decide, but these numbers are huge.

I think that if Apple is to avoid trouble, the company first needs to acknowledge that it commands a huge market share, and that with that kind of market share comes responsibility. It also needs to take a very careful look at the iPod/iTunes ecosystem and how that affects customers. Two things that Apple could do quite easily would be to first license their FairPlay DRM scheme to other music providers and hardware manufacturers. This would mean that DRM-encumbered tracks bought through iTunes could be played on other devices, and that other outlets could sell tracks that are DRMed for the iPod (although with DRM now losing traction, this is unlikely to be popular).

The second move that Apple could make would be to open up iTunes to allow developers to create plug-ins for other media devices. While I wouldn't recommend iTunes as a media repository to my worst enemy, it would give people caught up in the Apple ecosystem a way out if they choose a non-Apple branded player. All this would cost Apple time and money, but then so would fighting a lawsuit.

Now all we need is a credible alternative to the iPod.

[andy]

lol! finally!

Why finally?

Apple certainly doesn't have a monopoly over music sales in any sense. iPods will play any non-DRMed music... including music ripped from a cd, which constitutes the majority of music sales. iPods play music from Amazon's mp3 store as another example. Additionally, Apple's iTunes store allows the labels to sell non-DRMed mp3s which play on any portable music player. Any music sold on iTunes that only works on an iPod is because the label will not allow Apple to sell an mp3 version of it... hence it's the label's fault, not Apple's.

This lawsuit is asinine.

[Morigan]

That woman sure has a lot of free time... and money.

The iPod is easily mod-able. You can install a 3rd-party software on it, if you're not happy with the default Apple stuff. Some of them will let you play lossless formats like flac and ape.

Personally I use iTunes anyway because I think it's honestly well-made. Oh and I've never bought anything on their music store...

The iPod is easily the best hard-disc mp3 player on the market.

[BachQ]

That woman sure has a lot of free time... and money.

The iPod is easily mod-able. You can install a 3rd-party software on it, if you're not happy with the default Apple stuff. Some of them will let you play lossless formats like flac and ape.

Personally I use iTunes anyway because I think it's honestly well-made. Oh and I've never bought anything on their music store...

The iPod is easily the best hard-disc mp3 player on the market.

Well, if iPod / iTunes is intrinsically THE BEST on the market, then Apple^TM deserves to have a NATURAL monopoly.  The problems arise when Apple wields its monopolistic dominance to suffocate potentially superior goods/services, or to charge unnaturally high prices, or to "tie" its products unfairly .......

[andy]

Well, if iPod / iTunes is intrinsically THE BEST on the market, then Apple^TM deserves to have a NATURAL monopoly.  The problems arise when Apple wields its monopolistic dominance to suffocate potentially superior goods/services, or to charge unnaturally high prices, or to "tie" its products unfairly .......

I'm curious. Could you point to an example where Apple has unfairly suffocated other goods/services or changed unnaturally high prices?

[Brian]

Bogus lawsuit. There are credible alternatives to the iPod, and they're a lot cheaper, too: they're just not as well-marketed.
And as for iTunes - well, what morons use it anymore? DRM-choked crap. I've only ever downloaded two albums from there, and I thought eMusic, Rhapsody and the other competitors were doing okay.

[Keemun]

That woman sure has a lot of free time... and money.

It's a class-action lawsuit, she's not paying anything out of her own pocket.  Class-action attorneys generally find someone willing to be a plaintiff in the lawsuit and take a percentage of the money collected as attorney fees.

Bogus lawsuit. There are credible alternatives to the iPod, and they're a lot cheaper, too: they're just not as well-marketed.
And as for iTunes - well, what morons use it anymore? DRM-choked crap. I've only ever downloaded two albums from there, and I thought eMusic, Rhapsody and the other competitors were doing okay.

Gee, I guess I'm a moron.    I don't use iTunes very much for downloading music, but I am certainly not against it.  Most of my downloaded music comes from eMusic.  I like iTunes for organizing music and synching my iPod. 

[MN Dave]

Bogus lawsuit. There are credible alternatives to the iPod, and they're a lot cheaper, too: they're just not as well-marketed.
And as for iTunes - well, what morons use it anymore? DRM-choked crap. I've only ever downloaded two albums from there, and I thought eMusic, Rhapsody and the other competitors were doing okay.

This moron. And iTunes Plus tracks are not DRM-"choked."

[Brian]

Gee, I guess I'm a moron.   

This moron. And iTunes Plus tracks are not DRM-"choked."

I'm sorry my friends ... I didn't mean it. 

[MN Dave]

I'm sorry my friends ... I didn't mean it. 

It's all good, homey. 

[Bonehelm]

I don't see much point in an iPod anyways...they are ridiculously overpriced and a $20 Taiwanese MP4 sounds just as great and has just about 15 more functions than the Apple product.

[MN Dave]

...has just about 15 more functions than the Apple product.

Like what?