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Solving Non-Problems at the Speed of Government
An anti-trust lawsuit that shows again the absurdity and irrationality of anti-trust laws:
The case involves two plaintiffs, Melanie (Tucker) Wilson and Marianna Rosen. Both are consumers who purchased audio downloads and iPods directly from Apple. They argue they paid more for iPods than they would have paid if Apple hadn’t violated antitrust regulations. In a 2010 filing, the plaintiffs said they “suffered injury” to their property “in the form of overcharges.” A third plaintiff, Somtai Troy Charoensak, dropped out of the case.
In case you didn’t follow that, the article elaborates:
The case isn’t about iTunes pricing, though. The plaintiffs say because music from other stores wouldn’t work with iTunes and iPods, customers were forced to buy more music directly from iTunes. When it came time for consumers to buy new music players, they had to buy iPods because of all the iTunes music they owned. Because demand was higher for iPods, the prices increased, causing consumers to overpay for Apple’s music players, they say.
And if my grandmother had eaten only oranges I’d be a millionaire today.
Even by the perverted standards of modern American justice this is nonsense on stilts. The suit covers the millions of iPod purchasers between 2006 and 2009, which would also include me. I don’t want the few pennies this suit might unjustly entitled me to. The financial demand from Apple is $350 million. Petty change for the world’s most successful company. But petty larceny is still larceny.
When I bought my iPod in 2006, no one forced me. An Apple employee was not standing at the entrance heavily armed ready to blow me to Kingdom Come. I suspect my experience was pretty much universal. Millions of people willingly paid hundreds of dollars to buy what was — at the time — a state-of-the-art, exciting, and cool product. People literally stopped me in the streets when they saw me use it, and this was five years after the original iPod was released.
Then there is the stretch of logic that I was compelled to buy from iTunes. Actually, there was a very simple, well-known work-around to the DRM system at the time: burn the music to a CD then rip it to another MP3 platform. I’m a liberal arts major and I didn’t find it difficult. This was a loophole that could have been closed fairly easily, much like the various work-arounds Canadians use to access American Netflix today. Yet Apple never bothered to close them, suggesting that their heart was never really into the DRM (Digital Rights Management) model for music.
While various nefarious motives were ascribed to Apple’s policy at the time — it’s a big company and many geeks have an odd Leftist limp — the officially stated reason by Steve Jobs was that the record companies insisted on DRM. In January 2009 Apple struck a deal with the major record companies to completely remove DRM from its musical offerings.
You can argue that Apple was bowing to public pressure — or, more likely, to the simple commercial logic that DRM limits the value of any platform by limiting its inter-operability — but it still responded to market forces. It did so nearly six years ago. So now, the courts are getting around to solving a problem that wasn’t really a problem and — to the extent it ever was a problem — it was solved by Apple more than half a decade ago.
The entire case rests on the assumption that iPod prices were inflated because of Apple’s DRM practices, though it’s impossible to provide empirical evidence to support such a statement. The plaintiffs are hoping that the judge will assume that it was likely that such practices had some impact, however marginal, on pricing strategy. This is despite the obvious fact that DRM reduces the value of the network effect. I would be less likely to buy a product knowing that I would be “trapped” with the same supplier on an ongoing basis. This is especially true when other products were on the market without such restrictions.
But anti-trust laws aren’t simply absurd, they’re terribly slow. A famous case against IBM dragged on for more than a dozen years at which point the product in question was completely obsolete. The same thing is happening again. In the time it has taken this case to come to trial Steve Jobs has died, the DRM issue for music has gone away, the iPod is at the end of its lifecycle, and iTunes is on the verge of being eclipsed by music streaming services. By the time the judge issues a ruling, I fully expect Zefram Cochrane to have broken the light barrier.
You can dismiss this lawsuit as a legalized mugging, and so it is. But the real criminals aren’t the plaintiffs — loathsome though they are — it’s the lawmakers who refused to repeal America’s anti-trust laws.
Published in General
So does this mean I can now sue Canon for trying to force me to buy its expensive printer cartridges? Or Gillette for selling me a razor which is only works with their branded blades? Or even better, can I sue both Apple and Verizon for simlocking my phone to prevent me from using my iPhone with another carrier during the two years I contractually promised to stick with Verizon?
Or sue Mother Nature for making only men and women fully interlocking?
Been done (at least with respect to printer cartridges).
Whatever logic antitrust laws might have had at the turn of the 20th Century, they certainly don’t have in today’s global economy.
See if these people just stole their music of the internet like all rational adults they wouldn’t have had these DRM issues. Jeez its not that hard to figure out how bit torrent works, though I guess back then they might have had to use eMule.
Actually, yeah. You probably can. There are a lot of “bundling” cases in antitrust law, and the plaintiffs win some of them. But you have to show that the seller has monopoly power in one product, and uses that power to force you to buy their other products whether you want them or not. I doubt that Canon has any monopoly power in its printers. Gillette? Maybe. Verizon? Probably; especially since the other providers in that oligopoly follow the same practice.
I have been hoping to see an antitrust suit based on the practice of liability insurance companies of using standardized contracts with identical language. This prevents any real competition regarding coverage. Every carrier offers the same policy language. I understand why they do it. They get a favorable court ruling, and everyone adopts the language that the court upheld. They get an unfavorable court ruling, and everyone drops that language from their policy. But it still prevents competition.
As a libertarian, I favor sensible antitrust laws. Choice requires free and competitive markets.
Great information, thanks.
I don’t know enough about the issue to have a well-informed opinion on anti-trust issues. But there are two aspects of the current case which disturb me:
– In this age of rapid innovation, trendy new products which create new niches (such as the iPod or iPad) will have a natural monopoly for their first few years of existence until their competition sees the trend and decides to jump in. If we are going to consider that one- to two-year lag phase to be illegal anti-trust activity, we might greatly stifle the incentives for innovation.
– Seeing as how many new products involve physical devices carrying electronic content, the bundling tactic is also an obvious driver of innovation in the current market. Given my comment above about having a natural monopoly by being the first to market, I would find it dismaying if a company could not bundle its products just because it happens to be the first to exploit a new market.
There’s a workaround, but it’s still illegal. If I understand the law (no guarantee) it’s illegal to circumvent a manufacturer’s DRM, whether it’s easy and they give you a wink and a nod or not.
The idea behind the lawsuit isn’t so laughable either. If someone buys an iPod it’s not necessarily apparent at the time that they can only play music purchased through iTunes on it. Similarly, it’s not necessarily clear that music purchased through iTunes can only be played on apple brand devices. If I bought a crate of Canon brand ink cartridges, I wouldn’t get mad if you told me I could only use them in Canon printers. But if I go to refill a Canon ink cartridge and you tell me it’ll cost 20% more because they can only be filled with Canon brand ink, I’d be justifiably upset.
Monopoly power is not illegal, in and of itself. Obviously, patents confer monopoly power in innovative products. But monopoly power can be misused, and that is an antitrust violation. If a company uses its lawful monopoly in one market to crush competition in a different market, that is an antitrust violation.
For example, the old AT&T had a monopoly on local (not long distance) phone lines. But it abused that power by charging alternative long distance carriers (like Sprint) exorbitant fees to connect to its local lines. Which is why long distance phone calls used to cost a fortune until AT&T was broken up by the government’s antitrust lawsuit. Now long distance calls are essentially free. Ah, the benefits of antitrust laws when they are properly applied.
On a more specific level, I may not be reading the description closely enough but I don’t see how they have any standing in this anyway. The iPod plays MP3’s just fine and the iTunes computer app is free. I buy all my music from Amazon, download it to my Windows computer, import it to iTunes and sync it to the iPod in my iPhone. And I always have, for as long as I’ve used iPods. In what way does this limit my access to music or restrict me to the iPod?
The issue only applied to certain types of MP3 files before 2009. Apple resolved the matter years ago.