Apple Inc. (AAPL)’s Antitrust Dismissal Motion Denied to Protect Interest of Qualified Consumers

Apple Inc. (NASDAQ:AAPL)’s motion to dismiss the antitrust suit it is facing regarding its iPod product was declined, and U.S. District Judge Yvonne Gonzalez Rogers, who has jurisdiction over the case, noted that she has the responsibility of protecting the interests of about 8 million unnamed iPod consumers who may be eligible for damage claims. Apple Inc. (NASDAQ:AAPL) filed the motion for dismissal on grounds of the lead plaintiff’s ineligibility to be a party to the case, not having bought any of the covered devices included in the class action suit. Rogers, however, ordered the plaintiffs’ lawyers to look for a new, qualified lead plaintiff.

The class action suit was filed against Apple Inc. (NASDAQ:AAPL) on grounds that the tech giant has forcibly locked in its iPod consumers to buy only digital music from iTunes, its own software and store for digital music content. In effect, the plaintiffs argued, Apple monopolized the digital music market by leaving its iPod consumers with no choice but to give up digital music downloaded from iTunes if ever they wished to changed to other available music players, or even if they just burned their iTunes content onto CD’s and load them back. By blocking third-party syncing services, the company violated California antitrust laws,  the plaintiffs argued, further accusing iTunes of automatically deleting imported music without giving any notice to the user.

Apple (AAPL)

In a court testimony, Stanford University economist Roger Noll noted that any alternatives from the iPods incurred costs that had the effect of “locking-in” consumers to the iPod. He added that it had the effect of rendering iPod consumers less price sensitive, giving Apple a leeway to charge more. According to Noll, the iTunes 7.0 release that blocked digital music from RealNetworks Inc (NASDAQ:RNWK) lead to a 7.5 percent overprice of the iPod, at $16.32. Resellers were overcharged 2.38 percent at $149 million. Apple Inc. (NASDAQ:AAPL) argued that the changes delivered with iTunes 7.0 were genuine product upgrades. Cross examination had Noll admitting the probability of potential consumers being “locked-out” from the iPod because of incompatibility with content from RealNetworks.  He added that the “lock-out effect” would be insignificant compared to “lock-in effect” in light of the fact that RealNetworks has a small number of users, as against the millions of users that iTunes have.

This article has been written by Nonito Guntan.

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