Apple Facing Trial Over Whether Its Use Of DRM Violated Antitrust Laws
from the this-could-matter... dept
When Apple first launched the iTunes store for music, it had DRM deeply embedded in it. According to reports around the time, this DRM was a key part of allowing Apple to get into the business of selling music. The labels demanded strong DRM. It didn't take long for most people to recognize how the labels' own demands for DRM actually gave Apple tremendous leverage over the record labels by basically handing the market over to Apple while making it that much more difficult for a competitor to jump into the space. While, years later, Apple and the labels finally ditched the DRM on music, one of Apple's competitors, Real Networks had tried to hack its way around Apple's DRM, which was called FairPlay, with its own DRM, called Harmony, that more or less reverse engineered Apple's DRM. Apple responded by changing things so that Real's music wouldn't work on iPods (yes, this was back in the day of iPods). Real adjusted... and Apple broke it again.While all that went on a decade ago, a lawsuit over whether or not Apple's use of FairPlay to keep out Real's music violated antitrust laws appears to finally be heading to trial:
In this lawsuit, plaintiffs are claiming the anti-Harmony measures in iTunes 7.0 broke antitrust laws, because it had the effect of illegally raising the price of iPods. Users were continually forced to either stop playing any songs they had bought from the Real store, or convert them to a non-DRM format, for example by burning the music to CD and then ripping the CD to their computer.Apple sought to have the lawsuit tossed out, but the judge is letting it go forward. While the specifics of this case now seem like ancient history, the eventual results, should it get very far, could be interesting for other makers and users of DRM (Amazon might want to pay particular attention). From the judge:
That produced "lock-in" to the iTunes environment and increased consumers' "switching costs," the plaintiffs argue.
That theory is intricate, but ultimately it amounts to a charge that Apple's release of 7.0 unlawfully maintained Apple's monopoly in the market for portable digital media players by making demand for iPods less elastic. Specifically, plaintiffs claim that 7.0 resulted in an increased "lock-in" effect for iPod owners who purchased songs online. Lock-in, according to plaintiffs' principal economics expert, "is a form of foreclosure that arises from actions that increase the cost to consumers of switching to a product that has better quality and/or a lower price."....While other DRM situations may not be quite as involved, the idea of using DRM as a form of lock-in, increasing switching costs is clearly a legitimate concern. Having DRM present a potential antitrust concern could make for some interesting situations for companies today who rely on DRM.
Plaintiffs offer expert opinion that Apple, by counteracting Harmony, "raised the cost of switching from iPods to competing portable digital media players by eliminating the ability of consumers to collect a library of downloads that could be played on all players." (Id.) That is, 7.0 made iPod owners unable to play songs purchased from iTS competitor Real and thus pushed them to make their online song purchases only on the iTS. As a result, it discouraged iPod owners from buying a competing, non-iPod digital portable music player when it came time to replace their iPods due to loss, breakage, or a desire to upgrade. (Id.) Such owners would have to either forego use of the songs they had purchased through Real (as well as any other online music store besides iTunes, though that is not part of the damages alleged in this case), repurchase such songs through other, iPod-compatible means (for instance, iTS or physical CDs), or convert music bought from Real into a non-DRM format, for example, by "burning" that music to a CD and then "ripping" the CD onto their computers in a file format with no DRM, from whence the songs could then be loaded on their iPods. These increased "switching costs," plaintiffs argue, locked iPod owners into continuing to purchase iPods, notwithstanding the allegedly similar or better quality of and lower prices of competing products. They also locked out owners of non-iPod portable digital media players who had downloaded songs from the Real store. The effect of both lock-in and lock-out, plaintiffs say, was to reduce competition in the market for digital portable music players and to reduce the price elasticity of iPods, which permitted Apple to charge a supracompetitive price therefor.
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Filed Under: antitrust, drm, fairplay, harmony
Companies: apple, realnetworks
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Real still exists?!
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Re: Real still exists?!
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Why does this have to be so complicated?
As such, the use and distribution of DRM should be illegal. Period. Then we wouldn't have to worry about arcane details of antitrust law. Does Apple put DRM on its products? Yes. Then it's in violation of the law.
See how simple that is?
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Re: Why does this have to be so complicated?
If, however, you bought the file with DRM already on it (and it was advertised as such), then it's not malware. You've just bought something that doesn't meet your requirements.
The bit that makes this case interesting is that it was DRM vs DRM, not DRM vs open, and that Apple changed there code in order to prevent previously valid files from playing. That is arguably adding an element of malware to the iTunes software itself.
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Re: Why does this have to be so complicated?
I also think that copyright content should be forced to offer the same licenses and pricing for everybody and it should be fair and scaled with size of said services. And it should be compulsory. Or, you know, copyright should be scrapped and abandoned.
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Re: Re: Why does this have to be so complicated?
And it's not necessary. Just remove the DMCA's penalties for circumventing DRM, and the problem will go away. With no legal hammer, publishers wouldn't be able to stop anyone from removing DRM, and eventually* even the thickest of them would realize it's pointless.
* possibly for very large values of "eventually" but I think the bulk of them would move fairly quickly to ditch DRM
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What this shows
The execs at the record labels really are idiots. In their desperate desire to prevent piracy, they handed the market over to one monopoly vendor, to their own detriment.
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Re: What this shows
And then the book publishers did the exact same thing.
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Think Different!
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Amazon's DRM?
Can someone explain this to me? I've used Amazon's music service and all the MP3s I've gotten seem to be DRM-free. Unless I'm missing something?
Or is this referring to other kinds of media, not music files?
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Re: Amazon's DRM?
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Re: Re: Amazon's DRM?
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No comment on the merits of these claims? Of course not. Just some FUD about how those that use DRM "might way to pay particular attention" and a vague suggestion of "a particular antitrust concern" that "could make for some interesting situations." Journalism! That's some awesome analysis, Mike.
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Take initiative and write a piece, have your say, back it up with some good sources and see what happens.
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Then I installed the FileMon program from SysInternals, so I could see where the program was storing the temporarily-unencrypted file before encryption and the temp file was deleted. As soon as iTunes told me it was ready to watch, I ran an undeleter on the temp file and had it free of DRM.
So does my explanation of it (even though they might have changed there process since) mean I just broke the law?
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Yours doesn't, but theirs will
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Wow, what a super effective lock they had there.
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Re: Re:
DRM is endorsed and paid for by those consumers who are too lazy to fight back.
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Lazy? That presumes that everyone feels as strongly about DRM as you. I think that's obviously not true. I think DRM is idiotic and reduces the value of whatever it touches, but I don't think it's some sort of moral disaster that requires a full battle.
I buy DRM'd eBooks not because I'm too lazy to fight back, but because my personal cost/benefit analysis comes out in on the side of "ignore and work around" it. If the DRM wasn't removable, that would dramatically change my analysis and I'd stop purchasing such eBooks.
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