Thomas William Slattery has filed a class action suit against Apple Computer Inc. in U.S. District Court for the Northern District of California, alleging Apple is guilt of violating federal antitrust laws and California’s unfair competition law by requiring users who buy music from the iTunes Music Store to use an iPod if they plan to take their music on the road with them. Slattery’s suit cuts to the heart of an ongoing issue related to Digital Rights Management (DRM) technology present in commercial downloaded music.
Songs sold through the iTunes Music Store are protected using a DRM technology called FairPlay. Exclusive to the iTunes Music Store, FairPlay enables individually downloaded songs to be played back on up to five Macs or PCs, burnt to an unlimited number of CDs and downloaded to an unlimited number of iPods connected to authorized computers. The DRM technology is lauded by some as a model for the industry, but it has its detractors.
Apple’s “unlawful bundling and tying arrangement” of the iPod and iTunes Music Store violates federal and state laws “by suppressing competition, denying consumer choice, and forcing consumers to pay supra-competitive prices for their digital portable music players,” says Slattery’s complaint, a copy of which MacCentral has received.
The suit indicates that Slattery — defined as “typical of the claims of this class” — owns an iPod and has purchased files from the iTunes Music Store.
Playing fair, and FairPlay
One point of contention voiced by critics — and by the lawyers filing Slattery’s suit — is that Apple hasn’t licensed FairPlay to other portable music player makers and music stores: Only iPods can play songs downloaded from the iTunes Music Store, they say.
Apple competitor Real tried to work around the problem with Harmony, a technology that makes songs purchased through Real’s own music store look to the iPod like an iTunes Music Store song. Harmony was introduced by Real over the summer and almost instantly decried by Apple as “the tactics and ethics of a hacker”. Apple later closed that loop with a software update to the iPod preventing it from using Harmony songs.
By comparison, Apple competitor Microsoft Corp.’s Windows Media Player 10 technology is broadly supported by digital music players and used by some music stores. Microsoft has also begun a testing and branding program called “PlaysForSure,” which lets consumers know their music players can play songs encrypted with Microsoft DRM.
This combined effort hasn’t greatly improved the marketshare for these products and services, however: Apple continues to reign supreme. Apple has the best-selling MP3 player and the best-selling music store.
Monopolizing the situation
After years as the underdog with dwindling market share for its Macintosh computer, Apple’s become the big dog in the online music business. But with the iPod now the best-selling MP3 player on the market and the iTunes Music Store similarly at the top of the heap of online music stores, some have begun to wonder if Apple is guilty of being a monopoly and abusing its power. And that is one important point of Slattery’s class action suit.
“Within the relevant market for online legal sales of digital music files, Defendant Apple, through its iTunes online music store, possesses and has possessed through the Class Period monopoly market power sufficient to exclude competition,” reads the complaint, which cites Apple’s own estimate of having 80 percent share of the legal music download market as evidence that Apple has a monopoly.
The suit was filed on behalf of Slattery by three separate firms — the Los Angeles, Calif. firm of Braun Law Group P.C., The Katriel Law Firm, P.C. of Washington, DC and Murray, Frank & Sailer LLP of New York, New York. The suit asks for certification as a class action, and the award of “compensatory and statutory money damages, including trebled damages and punitive damages where appropriate.” The suit also asks the court to enjoin Apple from continuing its conduct.