Will a federal monopoly suit against Apple be good for consumers?

Will a federal monopoly suit against Apple be good for consumers?

Summary: It seems that with success attracts lawsuits and huge success attracts antitrust lawsuits. Apple is currently facing a number of lawsuits, and one in particular has the potential to be on a similar scale to the federal antitrust battle that hammered Microsoft.

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TOPICS: Apple
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It seems that with success attracts lawsuits and huge success attracts antitrust lawsuits.  Apple is currently facing a number of lawsuits, and one in particular has the potential to be on a similar scale to the federal antitrust battle that hammered Microsoft.

The charges leveled against Apple are very serious indeed.The lawsuit relates to the link between iTunes and the iPod and how one ties you to the other.  Back in July of 2006 a class-action lawsuit was filed which alleged that was illegal, that it threatened competition, and, crucially, harmed consumers.  The charges leveled against Apple are very serious indeed and refer to the Sherman Antitrust Act and the Cartwright Act.  Apple had sought to have the lawsuit dismissed but last month US District Judge James Ware denied Apple's request and allowed the suit to proceed, claiming that "Apple has presented no reason for the Court to dismiss the Cartwright Act claim or the common law monopolization claim while allowing Plaintiff's federal antitrust claims."

[poll id=61]

So just how dangerous could this be for Apple?  Well, to begin with Apple is a super-secretive company and won't enjoy being at the focus of such intense scrutiny.  On top of that, when you compare Apple's iPod/iTunes market share to that of Microsoft's in the OS market, it becomes clear that if you thought that Microsoft had a monopoly when it comes to Windows, Apple could be benefitting from one when it comes to iTunes and the iPod.  70% of flash-based media players and fully 90% of hard drive based players have the Apple logo on them, while iTunes commands a massive 83% of the online music market.

I have to be honest and say that I'm no fan of iTunes.  In fact, I loathe it with a passion.  I extend these feelings to the Zune Marketplace and all other online services which make use of restrictive and complex DRM (I do buy a lot of content from Audible.com but in all the years I've been using that service I've never had a bad experience with the DRM, it's always been transparent).  Too many people are suckered into buying DRM-loaded media without knowing what the possible consequences are, and with iTunes you have the added hurdle of being locked into Apple hardware too (and don't try selling to me Apple's "Get out of jail free card" and say that you can always take the music to CD and then rip that - that's a cumbersome, time consuming process that few people can be bothered to undertake).  Over the 2006 holiday period the iTunes site saw a massive 413% increase in traffic over the same period in 2005.  How many of these people really knew what they were buying into?

I'm no fan of lawsuits either, but since launching the iTunes service Apple hasn't taken any steps to free up the service at all, instead it's been busy working out better and more effective ways to lock users into the iPod/iTunes ecosystem, even by going as far as crippling the iPod's support for WMA media files.  Aggrieved consumers are left with few options other than to turn to the law.

Would a federal monopoly suit against Apple be good for consumers?  What would it mean for the iPod and iTunes?  Could opening up iTunes to other media players be a good thing for Apple in the long run?

Topic: Apple

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  • Fairness and consistency in rulings.

    If Microsoft didn't get much more than a slap on their collective hands for a much
    more serious abuse of monopoly power (why the antitrust trials started), then why
    should Apple get more?

    It's also questionable if Apple even have any monopoly power to use or abuse,
    depending on how we decide to define the market they compete in.

    I do think monopolies are bad and should be constantly scrutinized and regulated
    by the state, but I don't think it works very well in the US of A. Anyone can sue
    anyone, and those who deserve regulation can afford good lawyers....
    Mikael_z
  • It depends...

    The problem here isn't Apple. The problem here is the distribution methods that use proprietary DRM.

    Apple is just the first target. MS will get a double-whammy when they go after PlaysForSure (maybe) and Zune.

    As long as their are proprietary lock-in DRM technologies restricting consumer choice, there will be no end to this madness.
    BitTwiddler
    • Nope, you are wrong

      [i]MS will get a double-whammy when they go after PlaysForSure (maybe) and Zune.[/i]

      Monopolies like Apple have to play by different rules. Suck it up.
      NonZealot
      • Monopoly

        How exactly does Apple have a Monopoly? There are plenty of other players &
        services out there to choose from. Apple is not stopping them or Hindering them
        from doing business. You've got issues. What's the matter mommy not hug you
        enough?
        SquishyParts
  • Is it really a monopoly?

    Is it really a monopoly though? A monopoly somehow implies that one company has an unfair advantage over the others in either access to goods or in price. Both the iPod and iTunes are hardly the only players in the market. It could even be argued that the mp3 market is over saturated with players and download sources. Further more the iTunes pricing system is hardly being forced upon any users. The iPod may be more expensive, but it is not vastly more so, and there are plenty of alternatives to chose from. The non-iPod mp3 player owners can hardly tell me that they do not have options when it comes to purchasing music online, and the music companies appear more then happy to deal with anyone but Apple in developing licensing system for online music.

    With the way the Universal media president stated he thinks all mp3 owners are thefts and now Zune purchases go towards that company I think breaking the muscle power of Apple in the market will only increase restrictiveness on music. There is nothing more frustrating then a graduated pricing system for products.

    The iTunes/iPod combo's success is largely due to its ease of use, and I think that is largely due to the fact that only one mp3 player works for the system. Plays4sure tried to accommodate everyone and look how that is working. Even the Windows OS tries to maintain infinite backwards compatibility with even the most mundane old DOS problems and look at the security and other problems the OS has. Trying to be everything to everyone makes you master of nothing.

    Would we even be having this discussion if say the Johnson & Johnson was sued because the Swiffer Duster only works with Johnson & Johnson brand pads?
    msupert@...
    • Re: Is it really a monopoly

      Those are some good points remember also iPod owners can transfer their
      existing music to their iPod. Transfering their music CDs to their iTunes Library
      and then straight to their iPod is possible -- most music CDs don't have copy
      protection although some do -- but that's not the point.

      The point is you don't need to buy music from iTunes to put on your iPod and
      even if you buy music from iTunes you can burn it to CD and rip the DRM out of it
      -- only problem is you have to re-enter the tags manually which can be a time
      consuming process.

      It would be easier to then just copy over your existing CD collection to iTunes or
      whatever media player software you use and transfer to your iPod or any other
      device for listening to music on the go.

      There is no DRM and you can legally take your music with you on your mp3 player
      of your choice, listen to it in iTunes or another software program that plays media.


      But what to do if you buy video on iTunes its not as simple to remove the DRM as
      iTunes music purchases and again you'd probably have to re-enter the tags all
      over again in iTunes or another media playback program.

      Just as Microsoft is a software monopoly as they monopolized the market years
      earlier for Intel compatible computer operating systems with their Windows
      operating system that replaced their MSDOS operating system it can be argued
      that Apple with iPod + iTunes is a hardware monopoly.

      With most PCs you buy you can run Linux but you still have to pay for Windows in
      some cases whether you use it or not. Recently, Apple switched to Intel chips
      making the Mac OS X an Intel compatible operating system -- in effect adding the
      Macintosh Operating System as the latest Intel compatible operating system but
      Mac OS X can still only be run on Apple hardware unless your a well experienced
      hacker capable of installing Mac OS X on a typical PC -- otherwise it will not run
      on a PC. Mac OS X is originally designed by Apple to run only on Apple Macs.

      All that's changed in regards to the Mac is Apple is using Intel chips in its
      hardware rather than PowerPC processors. Mac OS X does not run otherwise on all
      Intel compatible computers.

      Apple's goal supposedly has been to use iTunes to drive iPod sales and iPod sales
      to drive new Mac sales. I wonder what impact the Apple TV will have in all of this.
      Will it further strengthen Mac sales? Will iTunes movie sales contribute in higher
      Apple TV and iPod sales and likewise in higher Mac sales?

      iTunes DRM drawbacks are the content can only be played with Apple devices and
      we are buying broken hardware in a way and are paying them to fix it. Imagine
      buying something from Apple and then paying them once for the product and
      again to fix it.

      You should be able to play your content with the device of your choice. The whole
      point of DRM is for RIAA and the MPAA to create new revenue streams by selling
      the same content over again in newer formats rather than selling new content to
      you they sell the same content again and again and create scarcity in a way for the
      content by reducing the amount of content available and telling you if you pay for
      content they'll increase the amount of available content for you on a temorary
      basis but timeshifting or transfering existing content to a new format is out of the
      question. You have to waste money buying the same thing over again on a new
      format if you want it in the newer format.

      DRM is not about thwarting piracy but for the music companies and movie studios
      they want to sell you content with your fair use rights locked up and then sell your
      fair use back to you. Imagine buying a movie and then buying the fair use rights
      for your copy of that movie -- so paying for the same thing twice is what they
      want you to do.

      For playing movies on a video iPod why not convert a DVD to iPod video format,
      add it to iTunes and then transfer to an iPod. In a way you can do the same thing
      with music CDs transfer your CDs to iTunes and your iPod why not the same with
      DVDs? DRM in general is evil and iTunes DRM it can argued is the most evil and
      Zune could fit in this category also but has less market share so for the time
      being it hasn't gotten as much attention although Microsoft has in general.
      maneeshpan@...
  • Should focus on quality first

    I'm not a fan or DRM restricted files but you can legally purchase a lot of music on the net in non-DRM format. eMusic for example. If you're using a mac you should be able to burn your files to an image rather than an actual cd and reconvert them which saves using a disk. I haven't tried it but it seems logical enough. Still a hastle. I'm more concerned with the fact that Apple is charging 99c per song and it's only 128kb/s. I don't see any reason to want to play 128kb/s files so I have no reason to convert them. It's 128 AAC so it's way better that 128 mp3 but still not great. If they actually offered songs in 192 AAC or in lossless format maybe I'd be concerned about not being able to use them on another player. Most other online retailers offer 192 wmv format. eMusic uses mp3 files but they are up to 320kb/s.
    um.crouc0
  • Sueing the wrong company?

    If someone wanted to sue a company, why sue the company that is doing what the
    music industry is requiring of them? Apple had to choose a DRM strategy, in order
    to broker the deals with the music companies. They had to have an assurance that
    their property was minimally protected. So while Apple may be the perceived "bad
    guy" in all of this, I think people are barking up the wrong tree.

    Until the music industry relaxes some practices, we're not likely to see Apple,
    Microsoft, Real, Napster, etc., offer free-of-licensing-restrictions music. While not
    many people pay attention to it, we're even restricted with the CD's we buy - IF
    you follow the "license" that comes with the music. You are not allowed to do
    whatever you want with the music you think you own.

    It could all be worse - it could be the GM/OnStar model.
    filipiak
    • Very True

      Apple definitely can't get rid of their DRM as labels represented by the RIAA won't allow them to sell unrestricted files. If the labels had their way more popular songs would also be more expensive than the 99c standard and artist's digital royalties would be lowered (which they're currently trying to do). iTunes, Zune, PlaysForSure all restrict use of their DRM'd songs to their players. Since digital music sales are so small compared to profits made from the sale of iPods and since their music store has such a huge percentage of the market (which is directly related to their percentage of the player market), Apple wouldn't lose much if they removed the DRM. With the size of their library and quality of store (aside from low bitrate which they need to change) they might actually make more off of digital sales if the songs could be played on other players. People don't buy iPods because they use iTunes, they use iTunes because they have an iPod or just like the system.
      um.crouc0
    • In more ways than one ...

      First, the problem is that the RIAA wants control over what you listen to and when. If they could, they'd charge you for how often you listen. Very little of that money goes back to the performer/author of the music.

      The DMCA gave them control via DRM. The Congress is to whom we should be complaining about DRM -- not Apple, who, by virtue of their marketshare, was able to keep individual titles less than a dollar.

      In the end, Apple does not prevent the individual from moving their protected-AAC files to MP3 or WAV format. Nor do they refuse to convert your WMA files to AAC, or MP3, or whatever. Nothing in the Apple model keeps you from moving your music elsewhere. They just make it difficult to redistribute those songs enmasse -- which is exactly what the RIAA claims to want -- to protect them from piracy for money.
      M Wagner
    • Re: Suing The wrong company

      You are correct in stating that Apple had to choose a DRM strategy for iTunes --
      in fact when the iTunes Store first launched Steve Jobs wanted to sell DRM free
      music on iTunes but the music companies refused to license their music for sale
      on iTunes if it was not copy protected. Yet in some recent articles I read about
      iTunes in the past 2-3 weeks they mentioned Apple was asked if they would now
      consider removing the DRM since music companies apparently are not requiring it
      as much as they did earlier anymore. iTunes DRM only benefits Apple and not the
      companies selling the content on the service or consumers.

      Music companies and movie studios have always wanted DRM that benefits their
      bottom line and lets them keep control. There are 2 types of DRMs proprietary
      ones like iTunes and Microsoft's new Zune and then licensed ones like Microsoft's
      former Plays for sure system.

      In the latest article I read about iTunes DRM it mentioned an Apple representative
      was recently asked if they would remove the DRM in iTunes if the music
      companies did not require it anymore but the Apple rep said no. So even if they
      did not need to have DRM anymore the Apple rep in the article said they would not
      remove it. They only needed to add DRM when the music companies wanted it but
      now imagine the music companies telling Apple that they can now remove the
      DRM in iTunes and Apple deliberately choosing to keep it.

      I have read in some instances music companies are allowing Yahoo Music to sell
      music in downloadable form as mp3s with no copy protection. So yeah they are
      starting to move away from DRM -- if iTunes keeps DRM its Apple's choice that is
      their decision to continue DRM because it benefits them. During negotiations and
      re-negotiations for licensing and re-newing licenses of music for sale on iTunes
      Apple can dictate the terms to the music companies on the licensing and re-
      licensing of music contracts for how the music will be sold, the pricing of tracks
      on iTunes -- remember when music companies wanted to raise prices above 99
      cents for new music and keep old music at 99 cents. Steve Jobs called them
      greedy and refused to change prices on iTunes. When the time came for iTunes
      music licenses to be renewed at the negotiation table some wondered if music
      companies could force iTunes to offer variable pricing that is instead of fixed
      pricing allow prices to change -- and if Apple still refused to change prices they
      would remove their music from iTunes. They also tried asking for a slice of the
      profits from Apple's iPod sales last time I checked that has not yet materialized.

      In the end the music companies also faced with some investigations by New York
      Attorney General Eliot Sptizer caved to iTunes and renewed their music licenses
      with iTunes. They were put in situation where they were forced to continue selling
      music on iTunes under Apple's terms. They wanted DRM but not like this.

      iTunes DRM it can be argued in some situations is bad for consumers and the
      owners of the content selling their content on iTunes. It only benefits Apple.

      If you compared Apple's iPod + iTunes market share to Microsoft's Windows
      operating system market share = a monopoly -- but having a monopoly is not
      always a bad thing its the maintenance of monopoly power using unfair business
      practices.

      Microsoft has a software monopoly as they monopolized the market for Intel
      compatible operating systems years before the iPod + iTunes came to fruitition
      while Apple has built a hardware monopoly around the iPod. They make very little
      money from the iTunes Store -- most of the profit goes to the owners of content
      being sold online and whatever is left over they use to upgrade their bandwidth
      and make sure their servers continue working properly. So for Apple iTunes has
      been used primarily to promote iPod sales -- it will be interesting to see what
      effect the Apple TV formerly codenamed iTV will have when in the long term in
      regards to measuring iTunes sales. If iTunes has only been used by Apple thus far
      to promote iPod sales will the same apply for Apple TV?

      Now Apple has made the switch to Intel chips after Microsoft had monopolized the
      market for Intel compatible operating systems earlier and is now joining Linux,
      MSDOS and Microsoft Windows as the latest Intel compatible operating system.
      maneeshpan@...
  • Is it just another fallen angel?

    Like e.g. Google
    See my small cartoon:
    http://geekandpoke.typepad.com/geekandpoke/2007/01/the_new_evils.html
    or
    http://geekandpoke.typepad.com/geekandpoke/2007/01/darth_google.html

    Bye,
    Oliver
    owidder
  • Double Standards

    How does Apple prevent competition? Are we to punish them for success on
    merit? There are fundamental differences between the Apple and Microsoft
    situations. The broad and coercive licensing of the Windows/Browser combo was
    found to be monopoly maintenance. The crime was the maintenance not the
    monopoly. The agent of the crime was the license.

    So what's the first thing suggested by PC users who have operated under the yoke
    of a Windows monopoly? Apple should license broadly? You folks clearly don't get
    it. Licensing is the problem, not the solution. Windows users endorse a liable
    Monopolist daily, but you're worried about iTunes DRM? Give me a break. Agreed
    to any EULA's lately? This isn't DRM? What do you really have a problem with, the
    restrictive rights in the abstract, or their enforcement?

    I'm a little sick of the double standards and the inability to see the hypocracy. PC
    users are comfortable being forced to purchase preinstalled software from OEM's.
    The one choice is Windows. Want Linux? Buy Windows anyway. If you want brand,
    you get Windows with it, and the only alternate is... well it's free. Not really
    competition in the purest sense. Stop telling me hardware restrictions are evil, but
    software restrictions are not. You are over the same barrel and the only ones with
    bargaining power in this environment of contract law, are those with the ability to
    switch platforms in any direction, and or, demand interoperability between
    platforms. Your other options are trust a single vendor, steal from the talent pool,
    go back to vinyl, or give up Tom Petty altogether. Champions of choice have to
    understand that real and substantive choice only exists in the open market
    between platforms, and not within the sub-market of the platform itself. That
    goes for every platform. We've entered an age where hardware by itself, lacks
    consequence. Even the seemingly hardware centric iPod package, is actually
    software driven. Is this not obvious by now?

    iTunes is one value proposition among many that include rampant theft on peer to
    peer, and buying CD's. iTunes has served to fragment the power of big Music and
    redestribute it to the portal. It has empowered consumers, realized efficiencies
    and maintained price stability. It has in fact done more to break up an existing
    monopoly than start a new one. The hardware/software integration is the same
    fundamental proposition it has been from square one. Take it or leave it, just
    don't ask Apple Computer wipe your rear.

    This case will die on the vine because there is no cause of action. Meanwhile,
    anyone who endorses a real monopoly by writing cheques to Microsoft, doesn't
    get to pontificate about how ignorant consumers are being duped, and require
    protection.
    Harry Bardal
    • Hey Harry . . .

      Watch using that "Die on the vine" analogy. That's one of the things that got Gingrich in trouble <snicker> . . .

      You wanna know what I find funny? The members of the RIAA whining about Apple and iTunes not doing what they want, when all they have to do is rescind the contracts they have with Apple. After all, if you can't show any name artists as part of your catalog of songs for sale, you aren't going to get many customers . . .

      And as for Tom Petty - You can have him. WAAAY too whiny and nasal for me. . .
      jlhenry62
    • Long winded rhetoric

      Harry- You started off with two questions I'd like to address. But before I do, while most of what you say in your entire post is true, it doesn't appply to this iTunes talk. State your case and move on, don't whine about Windows and M$, we've all heard and read it enough.

      As for your two key questions:

      [b]How does Apple prevent competition?[/b]

      Simple, and in two ways. The do not license the algorithms that protect the content so that no one else can access the content. That means that competitors devices cannot play content that did not originate from Apple. Key part: [u]content that did not orginate from Apple[/u].

      Second, Apple locks out other DRM formats from playing on its own devices. Why would a company do this? To take proactive measures to prevent competitor's technology from working with your own?

      In summary, Apple proactively prevents anyone from being able to manipulate or even read content protected by their technology. It also locks the competition's technology out of their device. And my favorite part: you haven't paid for content. According to Apply, you've paid for their technology. If you, as a consumer want to take your content elsewhere, well, Apple will not provide an export mechanism for you. Do it yourself.

      [b]Are we to punish them for success on merit?[/b]

      Success on merit? A device with one of the higher failure rates is successful on merit? A competitor that snuffs out everyone else is successful on merit? A competitor that bites the hand that feeds it (RIAA)?

      Some people define success by a moment in time, and apparantly your views are biased. However, on a long enough timeline, every successful story has it's decline. And if my suspicions serve me well, Apple's days are numbered. Especially when you consider how Jobs publicly sh*t on recording insustry executives. My suspicion? Jobs will get his a$$ handed to him again by Gates n' crew.

      Time will tell.
      kckn4fun
  • Apple doesn't have a monopoly

    If you don't believe me just see for yourself. You can buy a thousand different MP3 players and get music from dozens of different web sites and select form several different licenses. Where is the monopoly in that?

    I recently bought an MP3 player. I looked at the iPod but it didn't do enough of the things I needed so I bought a different brand. I rip my CDs to mp3 files and put them on my player. I don't use iTunes for that and I didn't have to buy an iPod so again I ask: where's the monopoly?
    Beat a Dead Horse
  • I don't really care ...

    ... if I have to convert my WMA files to play them on an iPod and the effort to burn my AAC-prtected msic to MP3 or WAV for transport is a one-time effort that customers will either decide to do or not.

    When cassettes came out, no one sued Sony or Philips for forcing people to purchase cassettes and -- ripping LPs to cassette was one hell of a lot more trouble than burning protected-AAC to CD. Most people decided to buy the cassettes of their favorite albums anyway. When CDs came out, people threw away their old cassette players and re-purchased their favorite music all over again! Nobody sued Sony and Philips (again) because CDs weren't compatible with cassettes.

    So the iPod is incompatible with Zune. So what? And iTunes gives me a way to convert my WMA files to AAC and my protected AAC files to MP3 or WAV. I doubt MS would do the same.

    When a consumer spends over $200 on a device, and they don't like it, they won't buy it again. The tools are there to save their music elsewhere -- more likely than not though, they will just re-purchase their music again. Like they did will moving from 78s to LPs to cassette to CD to MP3.

    I dislike DRM as much as the next guy because (1) DRM holders can change their EULA on music ALREADY PURCHASED at will, and (2) because it inconvenineces the consumer while not addressing the crux of the problem, which is institutional piracy for profit. It only impacts casual piracy between friends. Piracy through peer-2-peer networking isn't even addressed effectively with DRM.

    In the end, suing Apple for it's iPod monopoly is just plain silly because their are lots of music player choices other than iPod (MP3, PlaysForSure, Sun's open-srouce DRM, now Zune). The fact that nobody wants to to buy them should not be Apple's problem.

    MS was found guilty of strong-arming OEMs to inprove its Windows OS position. That is a lot different than anything Apple has been accused of.
    M Wagner
  • there is a out

    you do not have to run apple software on a i pod.
    that will be the out that will kill the lawsuit.
    i hate itunes as much as anyone but i still prefer apple computers to windows (fewer driver issues, fewer software issues, hardware always works, never have to defrag or do maintenance i does its self at every startup) i still run mostly windows machines as i am first and foremost a gamer. but apple will win in the end the same as microsoft did either with lawyers or with money and we will be the only losers!!!!!!!!!
    cwhull
  • Who cares

    blah blah monopoly blah blah drm balh blah blah i want free music.

    That is the problem with people...everyone wants something for free, or well,
    almost free. Apple is doing what any company would; peotecting their assets.
    You want to buy an MP3 from an online store..that's great. However, those MP3's
    will end up on a P2P network somewhere and downloaded by many more than will
    pay for it. You want the ability to use WMA? Buy a Zune. iTunes and the iPod
    have been around long enough that even the completely pot-headed, couch
    potato knows that iTunes serves up a protected media file. No one forced Ms.
    Tucker to buy an iPod or download iTunes. Maybe she should have done her
    research before buying. Then she could have a crappy flash-based MP3 player
    and sit at her computer hours on end scouring Limewire for to steal.
    drsparks@...
  • RE: Will a federal monopoly suit against Apple be good for consumers?

    You mention Audible.com. Audible is the exclusive provider to audiobooks to iTunes. There's no independent audiobook artists because of this. iTunes is a great way for music performers to get attention, because it levels the playing field, and in this respect I support Apple. But that's not true for audiobooks. That is a monopoly and I wish it didn't take a lawsuit to fix thinks like that, but it might just have to.
    maisonneuve