USDOJ scrutinizing handset exclusivity contracts

If you've been complaining to the Department of Justice about your unhappiness that the iPhone is only available on AT&T Wireless in the U.S.

http://ethisphere.com/wp-content/uploads/2008/08/doj.gifIf you've been complaining to the Department of Justice about your unhappiness that the iPhone is only available on AT&T Wireless in the U.S. (a familiar refrain), your complaints haven't fallen on deaf ears.

The WSJ reports (Google link) that the the U.S. Department of Justice has opened an inquiry into potential anti-competitive practices by the country's largest wireless carriers. The government is apparently concerned that companies like AT&T Wireless are abusing the market power they have amassed in recent years.

The law that covers such behavior, the Sherman Antitrust Act, has been used in the past against giants ranging from Standard Oil to Microsoft Corp. It lay essentially dormant during the Bush years, with the agency bringing no major case. The telecom industry is among several sectors now coming under scrutiny. Others include health care and agriculture.

A hot-button issue that the government could take issue with is handset exclusivity contracts like the one that AT&T has with Apple to distribute the iPhone in the United States. Although the WSJ notes that the telecom review isn't a formal investigation of any specific company and that it is expected to cover a wide range of technologies including, but not limited to, landline voice, broadband and wireless services. The wireless carriers argue that limiting exclusive deals would hurt innovation.

Who's right in this situation? Do the carriers have the right to sign exclusive deals with handset makers? Or does that unfairly limit the choices that consumers have?

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