Apple Doesn't Want Your Cash (Credit Only, Please)

from the cash-not-wanted-here dept

Mon, Oct 29th 2007 5:04am — Mike Masnick

With reports of huge numbers of iPhones being purchased to be unlocked and resold, it looks like Apple trying to clamp down a bit on the process by changing the rules for purchasers: requiring credit cards for purchases and limiting order to only 2 iPhones at a time. This is similar to what the original "launch day" limitations were. The credit cards let Apple track purchases more carefully (though, you have to wonder what good that really does) and the two person limit makes life harder for unlocker/resellers -- but also makes it more likely that parents will be able to pick up iPhones for their kids this holiday season. As for whether or not it's legal to turn down someone handing over the requisite amount of cash, we'll just let the US Treasury Department explain that it's perfectly fine. The whole "legal tender" bit doesn't mean anyone has to accept your cash.

A bigger question, though, is why Apple would bother? The resellers are likely to figure out ways around these limitations anyway, and it just seems more likely to cause problems for legitimate purchasers (especially younger ones who might not have a credit card yet). And, while it is true that Apple makes money from every iPhone with AT&T service, it's silly to completely shut off unlockers, who still are giving Apple plenty of money that they might not hand over if they were forced to go with AT&T service (especially those from foreign countries where iPhone service is not offered). This really seems like an unnecessary restriction that isn't likely to help Apple very much.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: cash, credit, iphone, unlocking
Companies: apple

32 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

woRi, 29 Oct 2007 @ 5:27am

Pre-paid card
If someone doesn't have a credit card, they can just go get a prepaid VISA or MC gift card. You can get them anywhere. Also, no tracking you.
[ link to this | view in thread ]
Danny, 29 Oct 2007 @ 5:37am

This really seems like an unnecessary restriction that isn't likely to help Apple very much.

The only truly unnecessary restriction in all this was signing that exlusive deal with AT&T. Apple had to have realized that making an exlusive deal with any carrier for the iPhone would have led to this.
[ link to this | view in thread ]
Mike F.M, 29 Oct 2007 @ 5:41am

Extent
Apple going to this extent to curb people selling on unlocked phones has to make you reconsider if that update that blocked all those unlocked phones was on purpose.

I, at first, had doubts. But now it really looks like they are on a mission.

Maybe due to pressure from AT&T?
[ link to this | view in thread ]
TriZz, 29 Oct 2007 @ 5:48am

iPhone
It just came out that Apple makes $18/month per 2 year plan with AT&T per iPhone. That's $432 per iPhone, without the equipment profit. So, I guess I can understand why Sir Jobsian would try anything to keep people buying iPhones with AT&T.
[ link to this | view in thread ]
Richard Ahlquist (profile), 29 Oct 2007 @ 6:02am

Screw Apple and Steve Jobs
This is a horrid precedent, first we have retail stores forcing you to use 'savings cards' so they can track your purchases. And trust me, they definitely do I know someone who worked on a major chains DB. The penalty for not using the card is astronomically higher prices. In some cases 3X higher than normal retail. Now this, must have credit card in order buy, I'm sorry but this should flat out be illegal.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 6:10am

Re: Screw Apple and Steve Jobs
Did you use your real name, Richard? I think the man is closing in on you. You had better relocate and change your name.
[ link to this | view in thread ]
ScaredOfTheMan, 29 Oct 2007 @ 6:30am

DRM for retail sales!
This is Hilarious... No no please don't buy lots of our product, we are afraid you will use it in ways not intended...so sorry!

These guys have some big b@lls.

I bet this is greed, because they know all those iPhones are going into foreign markets, where Apple has yet to muscle the local wireless provider into giving them a piece of the action. Its tough to argue the exclusivity benefit to the carrier if everyone in the country already has an unlocked one from the US.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 6:35am

Re: Screw Apple and Steve Jobs
And then this strange thing called the market reacts by creating stores that don't require a 'savings card' and people flock there. That of course is based on the assumption that people really care that much about their personal information going in to a huge database. Look at TJ Maxx, I hear they're still in business.
[ link to this | view in thread ]
IANAL, 29 Oct 2007 @ 6:43am

But
I might not even play one on tv.

I honestly think that Apple MUST do everything to maintain the contract it has, whether or not customers like it.

An exclusive deal means that every cutomer gets hooked up with AT&T. Thats th end of it. If AT&T ever got wind of Apple, even turning a blind eye to the unlocking issue, they will sue Apple, for a whole lot of money. So the fact that people complain that 'whoas-me.. Apple is so unfeeling', that somehow they might be missing out on some customers that won't buy now. '

Even if that is 1% lost sales, it is nothing compared to the hundreds of millions that they would be on the hook for.

And that is the plain and simple truth.

How would you feel if your contract with your employer said that you were the programmer for the project, and you discover that they had off-shored it all? Do you you still not think that you should be entitled to your money regardless of the reasons, because they signed it?
[ link to this | view in thread ]
T, 29 Oct 2007 @ 6:48am

T-Mobile has been doing this "can only buy 2" thing for a while with their prepaid phones. It's so short sighted and actually bit me when I dropped and broke my phone. I had to have the replacement shipped to somewhere other than my home, because two of the same phone had already been shipped to my home address.
[ link to this | view in thread ]
chris (profile), 29 Oct 2007 @ 6:59am

smurfing for fun and profit
getting people to buy restricted/rationed items for you is called smurfing.

in order to crackdown on the sales of materials to make crystal meth, many american drugstores (under pressure from the DEA) restrict how much over the counter sinus and allergy medication you can purchase at one time.

naturally, they limit how much you can buy while you are at the register, but they don't record how much you have bought previously and the records are not shared with other stores.

to get around the restriction, you have a group of people (usually meth heads) go in and buy small amounts a few times. if the staff get suspicious or say something, you just pack up the team and move them to another store.

you see this also with console and game releases where a person in limited to purchasing one or two consoles, so they get a few people to stand in line with them and buy the additional consoles for them.

any time you try to restrict what people can do, your restrictions only work on the least dedicated and least resourceful. it's that way for DRM, it's that way for modders, and it's that way for pretty much anything else.
[ link to this | view in thread ]
ibeetle, 29 Oct 2007 @ 7:01am

Why is this news?
One cannot buy a airline ticket without a credit card.
One cannot rent a car without a credit card.
Many companies require a credit card to secure a account. Almost every cell phone carrier, AOL, MSN, XBox Live (prefers and pressure user to do so) are just a few examples.
--
Then there is other retail stores policy.
GameStop to this day has a 1 Wii per customer per day policy. With payment credit card only.

---

Apple is trying to secure a number of things. One, trying to stop some bozo coming in, buy every iPhone in the place, then sell them 2.5 times over list on eBay.
The other, they believe this is the best policy to help reduce any Christmas shortage. On the Tuesday before Thanksgiving last year; as I stood in line at Toys R Us Times Square, we were told, repeatedly, one Wii per party and only credit card payment would be accepted. So, someone could not, for example pick up a Wii for themselves and 5 more for friends and/or neighbors.
Lastly, placing a credit card restriction reduces minors from buying a iPhone and signing up for a cell phone contract without parents permission.

---
Apple is a private company. You don't like the way they do business. Do not do business with them. I believe these restrictions do show a certain corporate responsibility. They are a multi-international billion dollar company. One policy is not going to bring them down. Apple is not doomed keeping some guy from buy 6 iPhones, and selling 5 of them on eBay.
[ link to this | view in thread ]
Zoolander, 29 Oct 2007 @ 7:25am

3 Reasons...
I can only see this happening for 3 reasons. 1, Apple is protecting their brand image. When an unlocked phone crashes, that looks bad on Apple because it's not their software that's loaded on there. 2, As mentioned previously, Christmas stock. 3, They're trying to secure contracts with other carriers in other countries. Can you image what that would do to their contracts with those carriers if people didn't have to buy through those carriers or if they didn't have exclusivity to it. Why would anyone go through AT&T or O2 or whoever if they could pick anyone and still get an iPhone? It's a premium that's paid for exclusivity.

They're not doing it to be evil or to track how many Joe Consumer can buy. They're doing it so that if a serial number comes back to them as defective/unlocked, they know who to go to. It's really pretty simple.
[ link to this | view in thread ]
Kevin, 29 Oct 2007 @ 8:12am

It's simple really
Apple gets a cut of the monthly bill from AT&T, plus the sale of the phone. On top of that, AT&T probably paid a pretty penny to be the exclusive carrier. So why does Apple not want you to unlock?

1. They lose out of the cut of the monthly bill. They make more money if you sign up for AT&T than they do if you unlock and go to T-Mobile.

2. There is probably a clause or ten in their contract with AT&T that stipulates that Apple should make reasonable efforts to ensure that the phones aren't used with carriers who didn't pay for the right of exclusivity.

3. When negotiating exclusive contracts with carriers in other countries, the ability to unlock the phones and use them with any carrier lessens the value of that exclusivity deal to the carrier, which means that Apple will get less money for those rights.
[ link to this | view in thread ]
TheDock22, 29 Oct 2007 @ 8:33am

No big deal...
Apple must honor their contracts and also they must make sure they have enough supply for the Christmas season, so why is this a big deal?

Beside, most of the children Mike claims are too young for credit cards who have enough money to buy an iPhone already have a credit card, probably supplied as a supplement off of their parent's account. I mean, I've had a credit card since I was 13, but my it was linked to my parent's account.

I don't think this is an extravagant way to deal with the situation. There are plenty of ways Apple could have handled this that would have been more hassle for customers than simply requiring a credit card.
[ link to this | view in thread ]
TSO, 29 Oct 2007 @ 8:33am

Hmm lesseee.... 5 debit and 9 credit cards in my wallet atm, and 4 more at home... so I can do 36 iPhones for a profit of $5400... Still not bad, Apple, although kinda less impressive than a couple months ago when profit was $350 per unit.
[ link to this | view in thread ]
toneloc, 29 Oct 2007 @ 8:35am

Re: Why is this news?
F.Y.I. Apple is not a private company! They are very public! appl on nasdaq! How many people brought friends to the Toy's r' Us party to get more than one? This is just stupid overall!
[ link to this | view in thread ]
TheDock22, 29 Oct 2007 @ 9:54am

Re: Re: Why is this news?
F.Y.I. Apple is not a private company! They are very public!

So what? Just because they are public does not mean they still are not a business. Your argument is silly.
[ link to this | view in thread ]
Overcast, 29 Oct 2007 @ 10:47am

Just yet, another reason I'm glad I don't have one, lol
[ link to this | view in thread ]
Mike (profile), 29 Oct 2007 @ 11:34am

Re: Why is this news?

Apple is trying to secure a number of things. One, trying to stop some bozo coming in, buy every iPhone in the place, then sell them 2.5 times over list on eBay.

That would make sense if you could actually sell your iPhone for 2.5x on eBay... but you can't.
[ link to this | view in thread ]
Mike (profile), 29 Oct 2007 @ 11:35am

Re: It's simple really
1. They lose out of the cut of the monthly bill. They make more money if you sign up for AT&T than they do if you unlock and go to T-Mobile.

That's only true if the people would have gone with AT&T service originally. Yet, many of the unlocked phones are being used by people who never would be on AT&T (esp. those in foreign countries). In other words, blocking those sales is clear lost revenue to Apple. That is, they're NOT losing money from the AT&T deal, because there never would have been usage on AT&T's network.
[ link to this | view in thread ]
Max Powers at http://ConsumerFight.com, 29 Oct 2007 @ 2:59pm

Limiting Purchases
I have to plead guilty in the 80's when I would get kids to stand in line for me to buy up as many concert tickets as I could in L.A. due to restrictions on ticket sales. Scalping is still big business.

Restricting sales of a product can always be circumvented by the public as chris #11 mentioned.

I agree with Danny #2 that everything is blowing up in Apple's face and AT&T is not too happy what has happened. Somehow Apple is in trouble with it's deal with AT&T and they are tying to appease AT&T anyway they can.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 5:14pm

Apple is a private company. You don't like the way they do business. Do not do business with them.

Best advice I've seen on it yet!
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 10:04pm

Re: Re: Screw Apple and Steve Jobs
And then this strange thing called the market reacts by creating stores that don't require a 'savings card'
That hasn't happened in my neighborhood. Do you think it will be this century or the next?
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 10:13pm

Re: But
An exclusive deal means that every cutomer gets hooked up with AT&T. Thats th end of it

That's not the way contract law works. Only terms that are legal may be enforced in a contract. The courts, as I understand it, have ruled that it is legal to use a purchased phone with a different carrier despite what the contract might say.

How would you feel if your contract with your employer said that you were the programmer for the project, and you discover that they had off-shored it all?

What do feelings have to do with it?

Do you you still not think that you should be entitled to your money regardless of the reasons, because they signed it?

That would depend on the contract and the law. Not what you think you should be entitled to.
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 10:25pm

Re: No big deal...
Apple must honor their contracts...
I wasn't aware they had a contract that required them to sell phones only by credit card purchase. I guess they must have been in violation of their contracts up until now then so I guess are going to get sued anyway. By way, where did you find Apple's contracts?

...they must make sure they have enough supply for the Christmas season...
They MUST? Is this another of their contract terms to which you're privy?
[ link to this | view in thread ]
Anonymous Coward, 29 Oct 2007 @ 10:33pm

Re: Re: Re: Why is this news?
So what?

So it wasn't true. I suppose you see nothing wrong with that.

Just because they are public does not mean they still are not a business.

Who said otherwise?

Your argument is silly.

Your implication that the poster said they were not a business is intellectually dishonest, not just silly.
[ link to this | view in thread ]
CYCLONE, 29 Oct 2007 @ 11:27pm

The Rule of Unintended Consequences
Apple is simply running into the brick wall of unintended consequences that springs up in the path of any institution, governmental or private sector, that attempts to institute unrealistic marketplace controls. When the Nixon Administration, through wage and price controls, decreed that a sirloin steak, for example, could not be sold for more than $x.xx per pound, the meat cutters simply changed the cut a bit and tagged on a new name, think tri-tip. When Roosevelt froze wages during WWII, employers came up with the idea of offering free health insurance as an added benefit to attract and keep the best workers. As a result, we now have the third party payer system that is a proximate cause of skyrocketing health care costs. The rules of the market no longer apply there.

Consumers will find ways to circumvent artificial marketplace restrictions, whether by keeping one step ahead of Apple's firmware developers or finding ways to acquire the Chinese I-Clone which is sure to make it's way to these shores sooner rather than later. Apple is run by leftists and no matter how many MBA'S they may count in their ranks, they just don't have a gut level grasp of what makes a free market economy tick; hint, it's the consumers, stupid.

God bless
[ link to this | view in thread ]
TheDock22, 30 Oct 2007 @ 7:41am

Re: Re: Re: Re: Why is this news?
So it wasn't true. I suppose you see nothing wrong with that.

But what does Apple being a public or private company have anything to do with them selling their product anyway they see fit? I must have missed that memo.

Your implication that the poster said they were not a business is intellectually dishonest, not just silly.

Maybe the original poster should have been more clear with their statement if they did not want to receive any backlash for saying something pretty intellectually deprived.
[ link to this | view in thread ]
BTR1701, 30 Oct 2007 @ 8:43am

Re: Re: Why is this news?
> F.Y.I. Apple is not a private company!
> They are very public! appl on nasdaq!

You're mixing the terms "public" and "private" in two different contexts. In terms of company ownership and shareholders, Apple is a publicly-traded company but it's still a private business in the sense that it's not a government entity. For example, even though Apple is a public company, it's headquarters is private property, not public (i.e., governmental) property.
[ link to this | view in thread ]
Anonymous Coward, 30 Oct 2007 @ 5:02pm

Re: Re: Re: Why is this news?
You're mixing the terms "public" and "private" in two different contexts.
I don't think he was at all. There are very real differences between a public companies and private companies. One of the main ones is that a public company has a legal responsibility to its share holders that a private company does not. This allows a private company to legally behave in ways that a public company can not. And just because a public company can own "private" property, that does not make it the same as a "private" company. Nor does the term "public company" mean "governmental". While there are such things as private companies, Apple Computer is clearly not one of them.
[ link to this | view in thread ]
Steve, 1 Nov 2007 @ 7:24pm

AT&T
You can be sure that this has to do with AT&T crying foul.
They see how many phones are sold and how many activations there are and the numbers don't add up and they are PISSED!
They were stupid to think that this wouldn't happen. No wonder America is so far behind in wireless. It's a joke.
[ link to this | view in thread ]