If you don’t know antitrust law, why write a long article suggesting Apple has broken it?

Over at the ZDNet blogs, David Berlind has written a long article about how Apple has – get this – something approaching a monopoly in music downloads (gasp!) and that even so the US is telling other countries not to treat it as an issue meriting antitrust treatment.

Quoth Berlind:

For the Feds to bust up a monopoly, they must first prove it exists and proving it exists starts with (1) defining a market and (2) demonstrating how one company dominates that market. When US Department of Justice first started going after Microsoft for being a monopolist, it defined the market Microsoft was dominating as “Intel-based desktop operating systems.”

And he’s surprised. And Paul Thurrott, whose rehabilitation had been going so well, chimes in:

If Microsoft[‘s antitrust trial experience] can serve as a lesson, and they should, Apple should be stopped before the abuses get too great and harm too many consumers.

I’m surprised either is surprised. In case they hadn’t been watching or listening through the Microsoft antitrust trials, and the 1995 DoJ settlement that preceded it (and whose violation led to the big antitrust bustup), it is not illegal in the US to have a monopoly of a market. Got that? Absolutely nothing wrong with having 80%, 90%, 100% of any given market. No sir. That’s the American way.

What is illegal, and led to the late-90s trial, is to use a monopoly in one market to push out rivals in another. Such as having a monopoly of desktop operating systems, and using it to push out people in, oh, say, browsers. That’s what Microsoft was found guilty of having done.

Now, Apple has a lock on the music downloads market. Riiight… and where is it using that to push into other areas? Digital music players, you say? But it dominated that before the iTunes Music Store came along. And there’s a format which all music players can play – MP3 – and you can buy CDs which you can rip into that format. Apple isn’t getting into, say, the CD business (if it were to change the format on CDs from AIFF to AAC wrapped in its Fairplay DRM, now that would be an antitrust issue).

In all: this is not an issue, because it’s not an abuse of monopoly, which is what you need to get an antitrust case going in the US. Berlind and Thurrott have, strangely, revealed themselves as having taken no notice of the whole background to the US case. (See the Wikipedia entry on the Sherman Antitrust Act, which is the relevant one here.)

OK, other territories look at these things differently; France and Sweden are thinking about whether DRM is good or bad (not very clearly). But honestly..

Another Berlind quote, just to show that he’s not with the legal program:

When I first saw the DOJ come up with that definition, that I realized how a clever lawyer can make any company seem like a monopolist. All you have to do is define a market in such a way that the company you’re chasing after conveniently dominates it.

Yes, but that’s not illegal.

Looking back on Microsoft’s history of entanglement with US trustbusters, I still think it was right of the government to interfere.

Yes, because Microsoft used one monopoly to get another.
And why didn’t I put this at the end of the article? Because you have to do that stupid registration crap, which is just a method of grabbing all your details so they can email you junk forever. No thanks, even if I could be bothered to do it to point out the errors of people who don’t know their stuff. (Thurrott just doesn’t have comments nor trackbacks on his blog, which lends it a certain pre-Reformation feel.)

9 Comments

  1. “If Microsoft[ís antitrust trial experience] can serve as a lesson, and they should” – the trial did serve as a lesson. Even if Apple were illegally leveraging a monopoly what would the point be in going after them? How much was spent going after Microsoft and what effect did it have?

  2. You apparently didn’t read the entire story or any of my other posts on the issue. By refusing to license its DRM technology and tying customers of the iTunes Music Store to Apple-only playback technologies, Apple is creating a world where the content you acquire won’t work on your existing hi/fi stereo and entertainment gear. And, guess what? Suprise!!! Apple is making gear that replaces your existing entertainment gear. The existing manufacturers would have no beef if only Apple would license its technology to them. But it won’t. In summary (and again, if you read the entire post as well as my comments in the discussion area), I never said it’s illegal to have a monopoly. It is however illegal to maintain one, use it to deliberately make others, and use it to foreclose on competitors in those markets. By refusing to open up or license its DRM technology, Apple is engaged in all of these activities, in my opinion.

    db

  3. Yes but not licensing your technology to them, does not prevent them from creating their own technologies and competing does it? Why can’t they wrest the market away from Apple. Apple’s not doing anything to prevent that, nor does it appear there are significant barriers to entry into this market. Plenty of music stores around, plenty of alternative players and all manner of home entertainment gadgets, like Sonos and so on.

    So your arguement regarding other manufacturers really has little merit.

  4. I’m waiting for David to explain then why it is legal for Microsoft to refuse to license Win32 APIs and tying customers to Windows. I bet I wait a long time.

    It isn’t illegal to have proprietary systems. In fact, it is the norm in capitalist markets. I bet you could find a dozen companies that would love to license the Win32 API and port it to Linux and OS X and probably other platforms. But somehow, no one thinks it is illegal for Microsoft to withhold the Win32 API from competitors.

    Why is Apple always seen as a special case? I think it shows a recurring bias that Apple is somehow “different” from other companies. That Apple isn’t really a business. I’ve never understood it because these same people will be the first in line to declare Apple doomed if it makes a bad business decision.

  5. I forsee that Australia, not USA may become the interesting test ground for this particular issue to be sorted out. Revisions to the Copyright Act in Australia may or may not make it necessary for DRM companies to co-operate in order to format shift, time shift or otherwise co-operate in order to keep their DRM intact (or face customers making DRM irrelevant, such as use of cracks to make existing DRM systems inoperable).

    In the case of allowing Format Shifting, for example, if I purchase a song from iTunes and then want to play it on my Zune player (for whatever reason), if the Australian Copyright Act enables fair use for format shifting (ie, CD -> MP3, Apple DRM -> Microsoft DRM, etc) companies will be forced to co-operate in order to enable me to do so, especially if a precendent lawsuit rams the concept home. It would be better for companies to co-operate, at least at a level to prove that a person can re-obtain a DRM’ed media item in a different DRM format from which it was originally obtained, if available.

    I’d imagine such a lawsuit would involve accusations of companies “double dipping” media licensing fees (probably not media/download costs, however) which is probably not justifiable. Discerning customers will turn to DRM free alternatives (ie, rip from DVD, audio CD, or your friendly illegal distribution outfit) to avoid such tactics. I’d imagine Apple will be forced to play ball at some point, like it or not. The more companies that get into it, the more likely this will happen, otherwise people will just turn to where-ever they can get their media from DRM free.

  6. David Berlind states: “Apple is creating a world where the content you acquire wonít work on your existing hi/fi stereo and entertainment gear”. So how come I can burn a CD from my iTunes Music Store purchases then?

  7. David Berlind: Refused to license their DRM? But did not Motorola have a phone that could play songs bought from iTMS? Yes they did. The hone never became a hit, but saying that Apple refuses to licence their DRM is bullshit. Abviosly no-one has been willing to pay to cach in. Or Apple are selective on who to let in, in order to not taint their image. They are selling an experience, and quite understandably they do not want anyone else to taint that experience.

  8. @David Berlind: true, you did not say having a monopoly is illegal. In your comment you do say: “I never said itís illegal to have a monopoly. It is however illegal to maintain one, use it to deliberately make others, and use it to foreclose on competitors in those markets.”

    It is illegal to maintain a monopoly if you coerce buyers. The two last points are right, though.

    But the whole theme of your article is just *wrong*. Record labels wanted Apple to vary pricing. Apple didn’t want to. Record labels have a choice: don’t sign with Apple; or vary their wholesale pricing for tracks. They cannot force Apple to change the prices tracks are sold at – that’s illegal in the US and Europe.

    Huge tracts of your article ignore the fact that Apple is not a content producer, and that content producers have perfectly adequate alternative outlets. If all the record labels decided tomorrow that they were going to tear up their contracts with Apple, that “monopoly” in downloaded music would disappear very rapidly. It’s not tenable, and I think that your attempts to wriggle around it by claiming, weirdly, that Apple is trying to monopolise entertainment systems – when in fact car manufacturers etc are simply reacting to a perceived customer demand – is weird indeed.

    It may be that we’ll end up with a monopoly where the iPod dominates just as Windows dominates, and you could argue that neither is optimal. Well, monopolies rarely are. But there’s been no coercion, and that’s where your arguments completely collapse.

    *plus, what’s with the ZDNet system? I’ve pasted the correct trackback URL, which is different from the post URL, pinged all the right servers, and it still says “No trackbacks yet”.

  9. I am a student in law school, and just to chime in I agree rather strongly with the gist of this post. Even with a rather vigorous individual study of the law (in any area), a layperson has nowhere near the expertise on the area of law that a legally-trained person does. Until you’ve been in law school you have absolutely no idea how the law works or what the law really is. Even if you find the relevant statute or case-law on a subject, it takes so much more knowledge to be able to correctly interpret these words. I have absolutely no knowledge on antitrust law, but I would wager that the assertions made by Mr. Berlind are not completely consistent with current (and good) U.S. Antitrust law. That’s just my two cents, the law really is one of those things where the phrase “you think you know, but you have no idea” very aptly applies.

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