A Closer Look at Apple & Antitrust

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I'm not a big fan of most monopolies, though some are handy. I'm fine with the government(s) having monopolies on roads, for instance, and I'm a big believer in having a strong, robust public education system, though even there I certainly support the additional presence of private, non-government supported schools.

In business, monopolies can get a little trickier. For instance, I think breaking up Standard Oil was an appropriate action on the part of government a century ago, though my Objectivist friends tend to vehemently disagree. I also think that breaking up AT&T in 1984 was a good thing, though I recognize the tradeoff in reliability we got with the increase in choice, innovation, technologies, and services.

On the other hand, there's the absurd claim Psytar made that Apple has a monopoly on Macs. Well, it's not an absurd claim -- Apple obviously has a monopoly on Macs, but it's like claiming that Toyota has a monopoly on Priuses, or that Dell has a monopoly on ugly-ass computers.

OK, the last one is just a dig on Dell. Plenty of other PC makers make ugly-ass computers. The point is that Apple is still merely one of many competitors in a thriving and cutthroat PC business. Apple's Mac business is merely one brand among many, and Psystar's claim that Apple should not be able to have a proprietary platform as a means of competing in this diverse marketplace is beyond laughable.

Anyway, back to the issue of non-imaginary monopolies. I also think that Microsoft should have been broken up, as was first ordered during the remedy phase of that company's famous antitrust trial in which it was convicted of being an abusive monopoly. I furthermore think that if the Bush Administration hadn't punted on this case that a breakup would have occurred, though we'll never know if that's so.

That punting was the result of a change in philosophy between the Clinton Administration's DoJ, which first brought the case, and the Bush Administration's DoJ, which inherited it. The former believed in vigorous monitoring of antitrust activity, while the later believed in the power of the free market to take care of itself.

This sort of change happens (in greater or lesser degrees) whenever we have a change in administration, and anyone cursing me for talking politics can A.) Boink themselves, and B.) Note that technology and politics often intersect, and such is the case today.

Getting to the Point

On Monday, I covered a report that the Obama Administration's DoJ is looking askance at the telecom industry, including the exclusive relationships that carriers and handset manufacturers have developed. For instance, and the reason I'm writing this column, the exclusive deal Apple and AT&T have developed.

That deal allows AT&T to be the sole authorized carrier of Apple's iPhone product line in the U.S. for a total of five years. It is mirrored by similar deals involving other high-profile smartphones and other carriers. For instance, Sprint is the exclusive provider for the Palm Snoozé Pré, and Verizon has, or at least had, an exclusive deal with Research In Motion for the BlackBerry Storm.

And these were hardly the first such exclusive deals. This industry has long seen flasgship phones being introduced in exclusive deals with this or that carrier, though the iPhone is easily the highest profile and most successful of those deals, and is likely the catalyst for the DoJ's attention on this industry.

The concern from the DoJ is that exclusive deals unfairly harm smaller competitors who don't have access to these devices, which results in the big getting bigger. AT&T has certainly raked in millions of subscribers eager for the iPhone. Companies like Apple, Palm, Blackberry, and Nokia have no incentive to strike such deals with those smaller competitors due to their lack of reach and resources, locking them out of the highest-of-the-high-end market.

It is frankly time that we have oversight on antitrust issues, even if it means Apple comes into the DoJ's crosshairs.

This could, in theory, result in harm to consumers as the monster telecoms consolidate power and eliminate choice. Looking at the iPhone microcosm, we can see a specific example of that: If customers want the iPhone and want to buy it at a subsidy, they have to agree to a very expensive data plan over a two year contract. There's no other choice in (authorized) carriers, and thus no competition (within the niche iPhone market) and therefore no pricing pressure.

So in this scenario, consumers face artificial barriers to lower prices in the form of these exclusive deals, while smaller carriers lose customers to the big carrier (AT&T in this case) because they don't have access to the iPhone.

This is part of the reason that numerous European regulatory agencies have forced Apple to offer the phone through non-exclusive deals with multiple carriers.

Winner and Losers

Who wins with these exclusive deals? Well, AT&T wins because it gets the iPhone and the millions of customers in the U.S. that want the device. In addition, its gets to collect those stellar data fees I mentioned above, making the device profitable for the carrier, despite the astronomical subsidies it pays to Apple.

Apple wins because it stays in control of its product. In this case, that control means its easier for Apple to ensure a great user experience, and it's far easier for Apple to get the subsidies from its carrier partner that make the device so profitable for Apple yet inexpensive enough for consumers to buy.

That last part is important: Apple's control and exclusive deal makes it easier for the company to get enormous subsidies from AT&T. Those subsidies result in this amazingly powerful device being available for as little as $199 for the newest, most bestest model. Were that system of subsidies jeopardized, it would make it more difficult for Apple and AT&T to offer the device so cheaply to consumers, making it a win for them.

I'd also argue that consumers win in another way, too. I think that the user-experience offered by Apple, including support for the device, is enhanced by the exclusive deal. Having but one carrier to deal with keeps everything nice and tidy. We pay the price of that, though, in the form of those high data fees I keep mentioning.

To Regulate or Not to Regulate?

Should the DoJ be mucking about with the free market? Should the government entity be investigating our precious Apple? After all, Steve Knows Best™, right?

The short answer is yes, it should. It is the DoJ's job to look for monopoly abuse that stifles competition and harms the consumer, and that applies even to companies we like (well, more or less -- I am still a tad tense about Steve trying to undermine the free press, banning books, and a few other things, but I am ever-so-slowly getting over it, and I do love those Apple products!) in markets we have taken an interest in (computers, digital media devices, and smartphones).

The long answer, however, is that I don't think there's much fire underneath the smoke of exclusive deals. RIM, Apple, and Palm (not to mention Nokia, Samsung, HTC, Sony-Ericsson, and other handset manufacturers) are competing fiercely. Yes, the top phones are going to individual carriers here in the U.S., but that's where the competition is.

More importantly, consumers will go to where the phones are, leaving the carriers beholden to the device makers, an important check on any power that those carriers might otherwise garner.

I think that consumers will benefit the most in the end by these manufacturers and carriers competing to add features and lower prices. That competition is currently taking place between pairs of companies, and as long as the competition between those pairs of companies remains vigorous, consumers will benefit.

For instance, if Palm can eventually make the Pré good enough, Apple and AT&T would be forced to lower prices and/or make their own improvements. Should RIM be able to make a Blackberry that puts the iPhone to shame, AT&T and Apple will be forced to react. And then there's Google's Android platform, which has enormous potential, and is sure to keep mixing it up in the market place.

Much Ado...

The only real threat I see in this news is if the DoJ decides to go after Apple and AT&T -- and make no mistake that it's the iPhone's success alone that makes exclusivity deals an issue -- to make a point or a statement, as opposed to to pursuing action based on the merits of the case.

I'm fine with the DoJ looking at the telecom industry for possible monopoly abuse, but my armchair reading of the industry is that there is no actual abuse of monopoly power happening...yet.

It is frankly time that we have oversight on antitrust issues, even if it means Apple comes into the DoJ's crosshairs. I'd rather they spend their efforts looking at the recording industry's practices, or perhaps some issue with energy production and distribution, but I don't think that Apple should be immune from examination just because the company makes best-in-class products that we know and love.

All that said, and for what it's worth, I'd be surprised if the DoJ took action against the telecom industry for this particular issue at this particular time.

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36 Comments Leave Your Own

jimothy

Wow, where to begin. Let’s start with public schools, and the sorry state that they are in, as a result of their government granted monopoly. It’s difficult, but not impossible to compete with “free” (even though public schools are, of course, not actually free), yet private schools manage. Even some lower middle class families choose to spend $10,000 plus a year to send their kids to private schools to escape from the sorry state of public education. But the underclass doesn’t have these resources, nor do they have the resources to move to a suburb with better schools. Public schools, ostensibly helping the poor, actually hurt them.

Regarding technology, which is more on topic: You recognize that Apple competes with Dell, HP, and so on in the general PC market, and so dismiss the notion that they possess a monopoly. And yet you fail to realize that Microsoft competes with Mac OS X and Linux in the OS market, and numerous others in the application market, so they also cannot have a true monopoly. See how their OS share is going down, albeit slowly, to both Linux and Mac OS X. See how advancements in Mac OS X are driving improvements and price decreases in Windows 7. See how general PC competition has driven down prices of the latest batch MacBook Pros. Competition works, and none of this required government fiddling.

You do at least acknowledge the competition that the iPhone faces, but I wish you had taken this a step further. Apple changed the game when it comes to how phone manufactures interact with service providers, and how people interact with their phones. Before, providers dictated feature sets, and these features were routinely crippled. Downloading and buying applications had to be done through the provider or a provider blessed store. The interfaces to these stores were unattractive, slow, and cumbersome. Apple changed this, but the competition they provided benefits even those who use neither AT&T nor the iPhone.

But the iPhone wouldn’t have come into existence without an exclusive agreement. If Apple had come to a phone carrier and said, “We want this unproven device on your network. Users won’t purchase applications from you, and they won’t be required to pay usage fees to email photos to their family and friends. We’re not going to let you install your own OS or cripple the phones features. Oh, and we’re going to provide the phone to your competitors, too,” that carrier would have laughed Apple out of the building.

But the game is changing, and it’s changing by market, not government, forces. Eventually, either the iPhone or a worthy competitor will be available on multiple networks. It’s inevitable. Many of the walls that made cell phone service have already come down, thanks in large part to the iPhone. More walls will crumble.

Natural monopolies cannot exist, or at least cannot exist for long. True monopolies (like public roads, schools, etc.) require coercion which only government can provide. Even the biggest corporation must attract the voluntary exchanges that compromise the free market. Neither AT&T nor Apple are immune from these forces, to let them operate and prepare to be pleased by the results.

jimothy

Let me also comment on your mention of Standard Oil. Standard Oil was so successful, and grew so large, because they were so efficient and could thus offer such low prices. Part of their efficiency came from making use of more components of crude oil. Standard Oil brought us petroleum jelly (Vaseline?), along with paraffin wax (used to coat fruits and vegetables), and other crude derivatives that their competitors would have simply discarded. They offered a superior product, more products, and offered them cheaper.

Naturally, their competitors, who were numerous (betraying any notion of a Standard Oil monopoly) and thus called in the government to undo what the market had created. If you were an inefficient competitor, you benefited from the anti-trust crusades (efficient competitors neither needed nor wanted government intervention). But if you were a consumer, your tax dollars, going to the anti-trust bureaucrats and courts, bought you the privilege of paying higher prices for oil from less efficient competitors.

Natural monopolies are a fiction, as is the notion that anti-trust cases benefit consumers. Anti-trust cases are always pushed for by less efficient companies, and never by the consumers whose interests are supposedly being protected. This is the case of Netscape vs. Microsoft and AMD vs. Intel, to give two recent examples.

lvrider

Ditto on the comments. No one has a “right” to an iPhone. Sorry, but if it’s too expensive, it is not the job of government to force Apple and AT&T to make it cheaper.

You also argued against your own thesis by bringing up Microsoft. Does anyone think Google and Apple haven’t picked away at that “monopoly”? And they did it by creating new technologies, not by ordering MSoft to stop competing.

jdmitch

Jimothy, they problem with M$ is not that they had an, effective, monopoly in the operating systems market. It’s that they leveraged said monopoly to buffer their other businesses. From the DoJ’s point of view, it’s ABUSE of monopoly power (define as somewhere above 70-80 % of market share) that is criminal. Simply having a monopoly is not, in and of itself, criminal. M$ abused it’s monopoly power, that is criminal. Standard Oil ABUSED their monopoly power. The only monopoly broken up by the DoJ that hadn’t abused their monopoly power was Alcoa.

geoduck

Let?s start with public schools, and the sorry state that they are in, as a result of their government granted monopoly.

Not even close
First private schools, charter schools, and home schooling exist so by your own definition public schools are not a monopoly.
Secondly, if public schools had $10k to spend per student (or more, private school tuition is amazing), they would get close to the same results. It’s the money. Public schools have been systematically starved for decades. It’s hardly surprising there is a difference in outcomes. It however has nothing to do with some absurd imaginary government monopoly on education.
/OT

Government has a place to oversee business to make sure it’s not abusing it’s power. I’m not sure that they will find anything this time, but I don’t have any problem with them letting the industry know that they are looking into this. The good cop prevents crime.

jimothy

Geoduck: Public schools do face competition from charter and private schools, but not on equal footing. They do not compete in the market as private schools must do against each other. And it’s not all about the money, as the liberals and unions want us to believe. Paying teachers more when bad teachers can’t be fired doesn’t mean we’ll have better education, it just means we’ll have better paid, bad teachers.

People are concerned about business abusing their power, so they turn to the government. What are we to do when the government abuses their power, and ignores their own laws? That, by the way, is exactly what has been going on for, at least, the past seven decades. Bush was probably the worst violator since FDR. That is, until Obama came along. The government is not a “good cop.”

Besides, the power of big business is amplified by the government. Wal-Mart lobbies for tax breaks and eminent domain to build their stores, privileges a small business cannot afford. Big banks help write the regulation they pretend to oppose. They can afford the overhead the regulation creates; small banks (or businesses of any sort) cannot, so they go out of business or are swallowed by the big banks, making them ever more powerful. Big businesses get politicians elected, through PACs that small businesses cannot create on their own. Government is the problem, not the solution.

jdmitch: I attempted to dismiss the myth of Standard Oil abusing their monopoly, but apparently not convincingly. I encourage you to look beyond what your history book text book taught you and actually read up on it. No consumers complained of Standard Oil’s dominance, because it resulted in lower prices. Only their competitors did. Anti-trust cases are rarely, if ever, actually brought out of concern for the individual.

http://www.dadyer.com/Economic Readings/witchhunting for robber barons.htm

jdmitch

jimothy, every company has done things that are laudable, even Micro$oft. The problem with Standard Oil was that they did, in fact, abuse monopoly power (the definition of anti-trust). Creating artificial barriers to entry, Standard Oil DID do. Alcoa, on the other hand, did not. Now, Standard Oil was not the worst of the monopolists (IMO, that designation goes to M$) and were not as bad as HISTORY books tend to portray them. However, they were not golden either, as many ECONOMICS texts document(however pro or anti free market the various authors may be).

You’re right, however, most often Government is more of the problem than the solution (as is the case of the Big Box stores, and in the case of not being able to fire teachers). Especially in things like this telecom thing. You can’t call something a monopoly unless it has > 70% market share in the largest market it can reasonably be defined as belonging to (the normal minimum threshold for considering monopolistic power, this number in reality needs to be much higher in most markets).

Apple / Dell / HP / Lenovo are part of the single-user PC market, not all computing devices (which would include calculators and PLCs). M$ Windows / Apple OSX / Linux compete in the single-user OS market (M$ still has ~90% of this market, and leveraged this to push other products… that’s anti-trust). Apple / RIM / Palm compete in the smartphone market (or more broadly, the cell phone handset market in general). In none of these does Apple have > 70% market share. So, yeah, in this case the DoJ should turn up no instance of monopolistic anti-trust abuse.

However, what they may turn up in the telecom market at large is proof of implicit collusion.

PS - I essentially minored in Economics, and would have pursued a MS in Econ in the wake of 9/11 due to lack of job availability, but actually stumbled into an opening where I could use my engineering degree.

allblue

Reading many blogs as I do, I worry that our language is being shaken apart. Therefore it is important that it is used correctly above the line, or mistakes become established fact. The sentence in the article that begins “AT&T has certainly reigned in millions of subscribers…” needs to be corrected. Presumably you meant to say ‘reined in’, as in using reins, because to reign mean to rule over. I would also question the contextual use of that term. To ‘rein in’ means to pull back on, to slow down, as that is what you do to a horse. To rein in new customers doesn’t make sense in the context of the paragraph, unless there is an American colloquial use that I am unfamiliar with, in which case I apologise for pointing it out.

Peter

“But the iPhone wouldn?t have come into existence without an exclusive agreement.”

Now, you see, I’m not sure I agree with that.

Think back to when the iPhone was released.  You had people waiting in line to buy a phone.  These people weren’t waiting in line for AT&T—they were waiting in line for an iPhone.  There was also no subsidy on those phones, but people didn’t seem to mind.

If Apple had sold the phone “unlocked,” do you think AT&T, T-Mobile, Advantage, Centennial, Viaero, and all wouldn’t have been waiting for those people to come out of the store to sign them up for mobile service?!  And they’d be competing against each other to provide better and cheaper service!

In my opinion, Apple missed the boat here.  Rather than signing up with AT&T, Apple should have offered the phone “unlocked” and let the market compete.

As an aside, regarding Microsoft, one interesting piece of trivia is that Microsoft was regarded as having a monopoly on Intel-based personal computers.  Microsoft tried to claim that they had competition from Apple and Sun in the early parts of the trial.  The judge struck this down by focusing on Intel-based PCs, excluding Apple as a competitor.

Bryan Chaffin

The sentence in the article that begins ?AT&T has certainly reigned in millions of subscribers?? needs to be corrected. Presumably you meant to say ?reined in

Actually, it was supposed to be “raked,” to which I have now corrected it. Not sure how I let that one slip through.

Thanks for the note.

Harvey Lubin

“Apple obviously has a monopoly on Macs, but it’s like claiming that Toyota has a monopoly on Priuses, or that Dell has a monopoly on ugly-ass computers.”

Apple obviously doesn’t have a monopoly on Mac hardware, since Apple’s computers use the same components and configuration as any other PC. But there are certainly anti-trust issues that should be examined regarding Apple’s restrictions on the use of Mac OS X.

Using your analogy, Toyota doesn’t have a monopoly on Priuses, but if when you bought a Prius you were only licensed to drive it on roads specified by Toyota (roads which required a toll paid to Toyota) then this would be considered to be a monopoly.

Mac OS X, like Windows, can be run on any PC whether made by Apple or any other PC manufacturer. Both are software products that you can purchase. But Apple restricts people who purchase this software from installing and running it on any PC other than those made and sold by Apple.

Would the DoJ come down on Microsoft if they began to produce their own PCs, and they then restricted anyone who purchased their Windows OS from installing and running it on any PCs other than Microsoft branded PCs?

They certainly would.

This is the issue at hand. And if Psystar uses this anti-trust issue as the basis of their legal battle, they have a good chance of winning this case.

JeremyAvalon

@Peter: You’re focusing on the consumer end. Bryan’s point is that without the exclusive agreement, Apple wouldn’t have had the leverage for, among other things, Visual Voicemail and the unlimited data plan. Telecom companies aren’t known to wait hand-and-foot on device manufacturers; Apple’s exclusivity gave them a lot more bargaining power, since AT&T knows they won’t necessarily lose money by upgrading their systems and getting a ton of new unlimited customers on board, because no one else is going to offer the same thing faster and cheaper. Things like that are what made people WANT to go and stand in line for an iPhone… beyond of course the regular Kool-Aid? crowd.

@jdmitch, @jimothy, & @allblue: clap clap clap clap clap clap clap clap clap clap clap clap clap clap clap clap clap clap clap.

jdmitch

Apple obviously doesn?t have a monopoly on Mac hardware, since Apple?s computers use the same components and configuration as any other PC. But there are certainly anti-trust issues that should be examined regarding Apple?s restrictions on the use of Mac OS X.

Using your analogy, Toyota doesn?t have a monopoly on Priuses, but if when you bought a Prius you were only licensed to drive it on roads specified by Toyota (roads which required a toll paid to Toyota) then this would be considered to be a monopoly.

Harvey, as I’ve stated before, without >70% market share of the LARGEST market a company can reasonably be inferred to be competing in (aka, the PC market, NOT the Mac market) there are NO anti-trust issue.

The more apt corollary is Toyota not licensing the Battery / Charge Indicator / Console software to Ford. No court in the world will find that objectionable.

Your analogy is more like OSX only allowing access to websites created by mac software, or some other asinine idea (something that M$ has, essentially, tried and failed).

I’ll give you another apt analogy, HP not licensing the firmware of their calculators to other calculator manufacturers.

Bosco (Brad Hutchings)

First they come for Apple and AT&T, then they’ll come for the TMO/iPO duopoly. I look forward to Congressional hearings overseeing DOJ action where Bryan denies using performance enhancing software.

jimothy

jdmitch: I don’t buy the collusion argument, either. The temptation and opportunity to gain a competitive edge by breaking the collusive agreement (e.g., lowering price, boosting production, selling outside of one’s “territory,” etc.) is too great, barring coercision.

If it wants to protect commerce, the economy, competition, and the consumer, the government do three things and three things only: investigate and prosecute fraud, protect individuals against coercion, and provide courts to enforce contracts. Anything less or anything more, and commerce is hindered.

Harvey Lubin

Harvey, as I?ve stated before, without >70% market share of the LARGEST market a company can reasonably be inferred to be competing in (aka, the PC market, NOT the Mac market) there are NO anti-trust issue.

One of the main tenets of the antitrust law is: “prohibiting agreements or practices that restrict free trading and competition between business entities.”. It is not ruled by how much market share the perpetrator has.

Also, a definition of the term “monopoly is: “the exclusive possession or control of the supply or trade in a commodity or service”. Again there is no stipulation on a condition of a certain percentage of the marketplace.

By these definitions, restricting the use of Mac OS X to Apple-made PCs only (when this software runs just as well on any other similarly configured PC), Apple’s behavior is anti-competitive.

geoduck

By these definitions, restricting the use of Mac OS X to Apple-made PCs only (when this software runs just as well on any other similarly configured PC), Apple?s behavior is anti-competitiv

I believe in the Psystar case that anti trust argument has already been thrown out by the judge.

jimothy

The more apt corollary is Toyota not licensing the Battery / Charge Indicator / Console software to Ford. No court in the world will find that objectionable.

Toyota did not license any hybrid technology to Ford. Ford’s independently developed hybrid technologies violated some of Toyota’s patents, so Toyota license some patents, but not technology, to Ford (in exchange, Ford licensed some of its diesel and direct-injection engine patents to Toyota.

(To my above comment, concerning collusion, I meant to add: I assume in your economics studies, you’ve come across the Prisoner’s Dilemma. This illustrates why collusion cannot last, even without government involvement).

Harvey Lubin

The more apt corollary is Toyota not licensing the Battery / Charge Indicator / Console software to Ford. No court in the world will find that objectionable.

Toyota is free to license a technology to whoever will pay for it. The point is that if Toyota sold this product to another car manufacturer, they do not have the right to then tell the purchaser that they cannot use that legally purchased product, except only in Toyota-made cars.

There are Toyota made parts that are general enough that they can be used just as well in another manufacturer’s car. If you bought a Toyota made part at a shop, Toyota has no right to restrict you from installing it on your non-Toyota car if you choose to do so. That would be anti-competitive behavior.

Aside from that, Toyota would be crazy not to sell as many parts as it could to owners of any car that could make use of them.

jdmitch

One of the main tenets of the antitrust law is: ?prohibiting agreements or practices that restrict free trading and competition between business entities.?. It is not ruled by how much market share the perpetrator has.

But, companies are not able to effectively do this without > 70% market share. There is NO LAW that requires companies to sell their IP.

Toyota did not license any hybrid technology to Ford. Ford?s independently developed hybrid technologies violated some of Toyota?s patents, so Toyota license some patents, but not technology, to Ford (in exchange, Ford licensed some of its diesel and direct-injection engine patents to Toyota.

Toyota, however would not have been required by law to license such patents.

jdmitch: I don?t buy the collusion argument, either. The temptation and opportunity to gain a competitive edge by breaking the collusive agreement (e.g., lowering price, boosting production, selling outside of one?s ?territory,? etc.) is too great, barring coercision.

If it wants to protect commerce, the economy, competition, and the consumer, the government do three things and three things only: investigate and prosecute fraud, protect individuals against coercion, and provide courts to enforce contracts. Anything less or anything more, and commerce is hindered.

I’m not sure I buy full collusion either. However, it may turn up because current telecom practices in the United States (the subsidy / long term contract lock in, and the fact that there is basically NO way to get around said lock in, many carriers will not sell unsubsidized phones or will not initiate a new contract without the lock in period), erects artificial barriers to entry / exit. These kinds artificial barriers to entry / exit are a form of coercion, and therefor need to be looked at with some amount of insight. I’m not preconcieving what the DoJ’s findings should or should not be, I’m just saying it needs to be looked into and implicit collusion MAY be the resulting finding.

jdmitch

Aside from that, Toyota would be crazy not to sell as many parts as it could to owners of any car that could make use of them.

Crazy and Illegal are two different things. Also, you keep confusing hardware (mass produced goods) and IP (which requires a LOT of R&D / D&E cost).

Harvey Lubin

Your analogy is more like OSX only allowing access to websites created by mac software, or some other asinine idea (something that M$ has, essentially, tried and failed).

Yes, this analogy would also be appropriate. You seem to be agreeing with my own analogy (unless you mean that you think that Apple does have the legal right to only allowing access to websites created by Mac software?).

jdmitch

Toyota is free to license a technology to whoever will pay for it. The point is that if Toyota sold this product to another car manufacturer, they do not have the right to then tell the purchaser that they cannot use that legally purchased product, except only in Toyota-made cars.

Another things, Apple did NOT sell / license OSX to Psystar (another computer manufacturer).

jdmitch

Yes, this analogy would also be appropriate. You seem to be agreeing with my own analogy (unless you mean that you think that Apple does have the legal right to only allowing access to websites created by Mac software?).

Yes, that would be objectionable. Yes, this action would be similar to your Prius / Highway argument. No, that is not what Apple is doing in the Psytar case.

Harvey Lubin

I?ll give you another apt analogy, HP not licensing the firmware of their calculators to other calculator manufacturers.

Nope. This is not an appropriate analogy.

HP does not sell it’s firmware as a product in a nice cardboard box, that anyone can pull off a store shelf and purchase legally.

But supposing that HP did produce a software product that fit this description, and that this software product could be installed and run on any PC. If they restricted the person who legally purchased this product from installing and running it on any PC other than an HP-branded PC… then this would be an appropriate analogy.

... And this also would be anti-trust.

jdmitch

But supposing that HP did produce a software product that fit this description, and that this software product could be installed and run on any PC. If they restricted the person who legally purchased this product from installing and running it on any PC other than an HP-branded PC? then this would be an appropriate analogy.

... And this also would be anti-trust.

Unless, said firmware was sold specifically as an upgrade to current HP calcs.

1) Apple ISN’T actually doing anything restricting people from building Hackintoshes. When’s the last time you saw them go after an individual for violation of EULA?
2) Apple licenses boxed copies as a way to upgrade current Mac computers.

A CORPORATION buying copies and violating the EULA is a WHOLE different ball of worms. This is what Apple is doing.

Harvey Lubin

Another things, Apple did NOT sell / license OSX to Psystar (another computer manufacturer).

Two points:

1) Apple has a case in saying that they did not license Psystar to be a reseller of their product. However Apple does not have the right to stop Psystar or anyone else to sell computers that use open-source firmware to allow the installation and running of Mac OS X. (If Psystar was smart they would not be selling their computers with Mac OS X pre-installed, but leave that up to the purchaser).

2) If you or I went into a store and purchased a boxed copy of Leopard, we should have the right to install and run this legally purchased product on any PC of our choosing… but according to Apple we don’t have that right. Although many people are “Hackintoshing” other PCs, Apple does not “allow” this and could decide to take an individual to court over it. The reason that they haven’t done this (and probably never will) is because they know that they are in the wrong, but they will continue to intimidate people with their EULA anyway.

jdmitch

EULA’s are PERFECTLY LEGAL contracts the purchaser willingly enters into in order to use Apple’s IP (intellectual property, I’m not sure I defined that earlier).

No one is coercing individuals into the terms of the EULA. Note, not selling an item sans EULA is NOT coercion.

Pystar is not only violating said EULA, it is attempting to profit from said violation.

Also, no, the reason they aren’t taking people to court is that they would be, at best, awarded punitive damages (difference in margin on hardware between an macintosh and hackintosh) which would not cover their court costs. It’s not a right or wrong decision for Apple, it’s a dollar’s and cents decision.

Harvey Lubin

Unless, said firmware was sold specifically as an upgrade to current HP calcs

But that has nothing to do with the price of cheese. wink

A firmware update for a specific piece of hardware, is totally different than a boxed retail software product that can be purchased and run on any generic hardware.

In this case, restricting the use of that purchased retail product is anti-competitive.

The software box may say “recommended minimum hardware requirements…”, but it can’t say “must not be installed on any PCs other than those made by HP”.

jdmitch

Note, at worst, by suing individuals Apple would be “awarded” a return of the physical discs by the court judge.

jimothy

Yes, this analogy would also be appropriate. You seem to be agreeing with my own analogy (unless you mean that you think that Apple does have the legal right to only allowing access to websites created by Mac software?).

As far as I know, Apple does have that legal right, but it’d be a stupid and suicidal thing to do. The law doesn’t need to regulate things like this; the market will do a perfectly good job of it.

jdmitch

As far as I know, Apple does have that legal right, but it?d be a stupid and suicidal thing to do. The law doesn?t need to regulate things like this; the market will do a perfectly good job of it.

Like I mentioned crazy (in this case stupid) =/= illegal.

The software box may say ?recommended minimum hardware requirements??, but it can?t say ?must not be installed on any PCs other than those made by HP?.

Yes it can. That’s called a EULA, and is a perfectly legal and enforcible contract.

jdmitch

Why did the comment show my quote of Harvey’s comment as coming from me?

Harvey Lubin

EULA?s are PERFECTLY LEGAL contracts the purchaser willingly enters into in order to use Apple?s IP (intellectual property, I?m not sure I defined that earlier).

We are not talking about intellectual property, are we.

When you buy a product of course you are not buying it’s IP. You are buying the product of that IP.

You could buy the IP to a successful product, but usually you are talking millions of dollars.

But when you buy a retail product, no matter what that product is, you own the product, not it’s IP.

Once you buy that product, the manufacturer can “suggest” how to use it, but they cannot control it’s legal use by you.

Harvey Lubin

As far as I know, Apple does have that legal right, but it?d be a stupid and suicidal thing to do.

Apple has as much legal right to block you from visiting Web sites that were not created on a Mac, as Microsoft had the right to block any Web browser other than IE from being installed in Windows (and we know how the DoJ liked that one).

rwahrens

I think Apple has an absolute right to restrict the use of OS X to Apple hardware.

OS X is not sold as a stand-alone product, even though it is a boxed product. It is sold as an upgrade to the OS you got as part of buying a Mac.  It is the Macintosh computer that is the product you bought, and in that product, the Operating System is designed to control THAT hardware.  It is part of an integrated product meant to provide as stellar a user experience as they can make.

The reason they CAN restrict it is because it is DESIGNED to run Mac hardware.  In order to run it on other hardware, you’ve got to hack it, and when you bought the box, you agreed not to do that.

Now, Apple hasn’t ever sued a user for that, and why would they?  The situation is similar to you buying a Ford Mustang and tricking it out with all sorts of neat after market stuff to make it work better and look cool.  Ford doesn’t care, but they damn well won’t fix it when you take it back if you break it while tricking it out!

Neither will Apple.  They won’t look twice at you running OS X on an intel box that doesn’t have their logo on it, even if by doing so, you broke the EULA.

What they will NOT do is help you fix it if you break it, specifically because you broke the EULA.  That is why that provision is in the EULA in the first place, to allow them to deny assistance to customers that have misapplied the OS to non-Apple branded equipment, not because they will ever actually try to stop you from doing it.

They will, as the Psystar case shows, damn well come after you if you try to PROFIT by doing it.

In short, they have the right to stop Psystar from selling OS X to run on non-Apple branded boxes because OS X is not a stand-alone product, but *part of* a product that Apple sells.  Since OS X is a product of Apple’s IP, they have the absolute right to control how that product is marketed, so they can refuse to license it for third party sales.

They tried that once, didn’t they?  And stopped doing it, for good reason, because it cannibalized their hardware sales.  Why did the third party companies stop making their own brand of Apple OS running machines?  Because Apple had pulled their license to do so, and they knew they’d lose a court case over it.

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