Lawsuit claims Apple violates law with iTunes

An unhappy iTunes customer alleges Apple broke antitrust laws by allowing iTunes to work only with its own music player.

An unhappy iTunes online music store customer is suing Apple Computer, alleging the company broke antitrust laws by allowing iTunes to work only with its own music player, the iPod, freezing out competitors, court filings showed.

Apple, which opened its online music store in April 2003 after introducing the iPod in October 2001, uses technology to ensure each digital song bought from its store only plays on the iPod.

The suit was filed on Monday in the U.S. District Court in San Jose, Calif. One antitrust expert called it a long shot, but Californian Thomas Slattery is hoping for unspecified damages for being "forced" to buy an iPod, one of the most successful electronics products in years.

The key to such a lawsuit would be convincing a court that a single product brand like iTunes is a market in itself separate from the rest of the online music market, according to Ernest Gellhorn, an antitrust law professor at George Mason University.

There is legal precedent for such claims, but courts usually conclude competing products as viable alternatives, Gellhorn said.

"As a practical matter, the lower courts have been highly skeptical of such claims," Gellhorn said.

Since rolling out the iPod, which has sold nearly 6 million units and was a top Christmas gift this past holiday season, Apple has garnered 87 percent of the market for portable digital music players, market research firm NPD Group has reported.

"Apple has unlawfully bundled, tied, and/or leveraged its monopoly in the market for the sale of legal online digital music recordings to thwart competition in the separate market for portable hard drive digital music players, and vice-versa," the suit charged.

Slattery called himself an iTunes customer who "was also forced to purchase an Apple iPod" if he wanted to take his music with him to listen to.

A spokesman for Apple declined to comment on the suit. Its iTunes charges 99 cents per song on its online music store and has sold more than 200 million tracks.

Although Apple is the dominant disk-drive-based digital music player, many others, using the MP3 compression decompression standard and others, are sold by Creative Technology, Dell, Gateway and others.

Apple's online music store uses a different format for songs than Napster, Musicmatch, RealPlayer and others. The rivals use the MP3 format or Microsoft's WMA format while Apple uses AAC, which it says helps thwart piracy.

While songs saved in the AAC format can be saved in the MP3 format and played on virtually any digital music player, songs bought from the iTunes music store have an added software tag, which Apple calls FairPlay DRM, or digital rights management, added to the file that contains the song.

"Apple has turned an open and interactive standard into an artifice that prevents consumers from using the portable hard drive digital music player of their choice, even where players exist that would otherwise be able to play these music files absent Apple's actions," the suit alleges.

In the past Apple has aggressively pursued those who had provided a work-around to Apple's FairPlay DRM to let songs purchased from other online music stores play on the iPod. Last year it also blocked technology from music rival RealNetworks that made downloads from its online music store compatible with any other portable media player, including Apple's.

Story Copyright © 2005 Reuters Limited. All rights reserved.

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