Baffling Apple Monopoly Suit Filed

Luxpro, which has suffered from competition with Apple in the market for portable music players, has filed suit against Apple. Luxpro's principal claim is that Apple has injured it through illegally creating and maintaining a monopoly, and has used dominance in the music sales business to force customers to buy its music players to the detriment of smaller competitors.

This is so bogus. Anyone claiming Apple has forced people to use its players hasn't been paying attention. The fact that the Luxpro's Original Complaint specifically discusses an Apple effort to dominate the MP3 player market draws attention to the very problem with the claim: anyone's players can play MP3s, and all Apple's players support DRM-free formats like MP3.

• MP3 files have no DRM, and can't be locked to Apple players as Luxpro suggests;

• Apple's music player synching software has always been designed to make playable files of any music customers already own, including at present the non-DRM AAC (aka MP4) and MP3 file formats that can be played without restriction on competitors' players as easily as Apple's own players;
  

• Apple's music store sells non-DRM music for whatever tracks it's been able to obtain on DRM-free terms from music vendors, and thus itself undermines lock-in by offering as broadly as it is able file formats that are supported by competing players;

• Non-Apple stores sell non-DRM music cheaper than Apple sells DRM music for tracks for which Apple offers no non-DRM alternative (say, Dig on Incubus' album Light Grenades, which when I tried to buy it for L was available only for more money and with DRM from Apple, so I bought it from Amazon and have been happy as a clam -- playing the song just fine the whole time on the iPod and on the Mac), meaning that Apple has been unable through its maket position to exercise pricing controls to prevent competition on price -- if Apple is succeeding at selling digital music downloads, it's not because others can't sell songs cheaper or with a non-proprietary interface.
  

The "Apple locks you in" meme isn't new. It's just strange that anyone who's been to school long enough to learn to read can look at the marketplace and its varied offerings and conclude that Apple (a) forces music listeners to use iPods or (b) forces iPod buyers to use Apple's music store. Apple offers a store that has cost-competitive competition and is compatible with the non-DRM offerings of every other vendor. (OK, if you bought something encoded in Ogg Vorbis, you might need to use an MP3 converter; but if you bought Ogg Vorbis, you know that and aren't bothered about it.)

The real story in Apple's music store is that it was a defensive measure to avoid being barred by proprietary file formats from selling music players and content editors without being forced to pay competitors a licensing fee. The fact that Apple's defensive move put it at the top of the digital download heap hasn't exactly caused it to roll in profit, either. The store's margins are slim -- and intentionally so -- to prevent competitors from having much room in which to undercut Apple while establishing a moat with Apple-incompatible DRM.

Unable to prove Apple had an evil motive (it was just trying to protect its backside from Microsoft), or that it wields pricing power in the music business (competitors are able to sell the same thing for less, with less restrictions by suppliers), and unable to prove would-be music buyers get locked into Apple hardware (the numbers on the amount of music Apple sells per iPod make this pretty plainly a bunch of bunk), Luxpro seems up the creek without a paddle proving antitrust wrongdoing. All Apple's done to acquire and maintain a monopoly is to build attractive music players and make them as easy as possible to enjoy with customers' music collections. The fact Luxpro got crushed when the industry faced serious design competition from a solvent competitor able to buy parts in bulk isn't Apple's problem. Maybe Luxpro could have improved its margins by shucking compatibility with Microsoft's DRM scheme ....

The Jaded Consumer gives this suit an 'F' and predicts a slow death in federal court, where there will be no way to prove Luxpro's claims of illegal conduct, or to prove Apple's conduct caused antitrust damages to Luxpro.