Appeals Court Upholds Dismissal of iTunes Monopoly Suit

| Analysis

Apple in CourtAn appeals court has upheld a lower court's dismissal of a class-action suit that alleged "unlawful tying" of music sold through the iTunes Store to Apple devices. Tuesday's ruling from the Ninth Circuit upheld that ruling, finding many flaws in the plaintiff's reasoning and claims.

Chief among them, according to a report from The Hollywood Reporter is that Stacie Somers—the original plaintiff—and her attorneys attempted to rejigger their claims. At first, for instance, plaintiffs argued that Apple used FairPlay DRM charge more for iTunes downloads in order to charge more for its iPods.

They later "amended" that claim to be the exact opposite, that Apple had inflated the price of its iTunes music in order to deflate the cost of its iPods. The appeals court was having none of it. Judge Milan Smith, Jr. of the Ninth Circuit ruled that by changing her damages theory, she, "voluntarily abandoned her overcharge iPod claim."

Other problems with the case included the nit picky reality the market itself didn't back up plaintiff's claims. For instance, if Apple was using FairPlay to artificially keep the price of iTunes downloads higher, the entry into the market by DRM-free competitors like Amazon should have resulted in Apple charging less on iTunes.

That didn't happen. In fact, the labels insisted on price increases for Apple to sell DRM-free versions of its music. When the labels finally allowed Apple to do so, it came with a US$0.30 price increase (from $0.99 to $1.29).

In reality, the labels were using the right to sell DRM-free music on iTunes as a cudgel to win that price increase from Apple, and it did so by allowing everyone else to sell DRM-free tunes first.

Apple had argued for DRM-free files from the get-go, and it was Apple CEO Steve Jobs who used his bargaining skills to get the $0.99 price tag in the first place—the labels wanted more from the beginning.

Today, iTunes music is sold without DRM restrictions, but it was only after the labels tried out DRM-free downloads through Amazon. In fact, Apple's iTunes was the last major online music store to get label licensing that included the right to sell DRM-free music.

None of those arguments were involved in the ruling, but it seems relevant to me. For some reason, the Judges didn't ask me.

Be that as it may, the suit has passed one more step on its path of being squashed. It remains to be seen if the plaintiffs plan to appeal to the business-friendly Supreme Court.

You can read the full ruling as a PDF.

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