Apple iPhone Antitrust Suit Allowed to Proceed

By  |  Tuesday, October 7, 2008 at 10:17 am

AT&T’s stranglehold on the iPhone here in the US may be coming to an end, as a California federal court has allowed an antitrust suit against the carrier and Apple to proceed. In an order handed down October 1, the US District Court for the Northern District of California ruled that there was sufficient material to continue the case.

Nine iPhone owners (who, by the way, are AT&T customers) from California, Washington, and New York make are the plaintiffs, and accused Apple and AT&T of ten separate breaches of federal law.

The ruling seems to be pretty much a clear win for the plaintiffs. Judge James Ware denied AT&T’s motions to compel arbitration, stay discovery, and dismiss, while also essentially denying Apple’s similar motion to dismiss. Apple and AT&T will have until October 15 to file any amended complaint.

Still on the table in the case are a litany of charges against the two companies, including several Sherman Antitrust Act claims, Magnuson-Moss Warranty Act claims, and computer fraud and computer tresspass claims. One bright spot: Apple has gotten the courts to throw out the unfair and deceptive trade practices claims.

At issue here really is the unusually long exclusivity agreement between the two companies, which is through 2012. The plaintiffs argue that this locks consumers into AT&T even after their contract with the provider is complete, as the phone cannot legally be unlocked for use elsewhere. The court seems to agree.

The App Store is also at issue, with plaintiffs pointing out that Apple has locked users into only “approved” applications. The hub-bub around how it approves what makes it and what doesn’t has made news lately, so Apple may have unintentionally gave the plaintiffs here some additional evidence to work with.

Plaintiffs are also hitting hard against the 1.1.1 firmware update, which Apple did admit included code within to permanently “brick” unlocked iPhones, as well as agreeing with AT&T to not produce a CDMA version of the device, which would lock out users of carriers such as Verizon or Sprint regardless of whether an unlock was available.

Reading through the ruling, I get the impression that the courts are most taken aback by the exclusivity agreement rift. The fact that Apple does not plan to work with any other carrier until at least 2012 is at no time disclosed to the customer. Essentially, when you are buying an iPhone, be ready to use it on AT&T until at least that date.

I am no lawyer, but if any part of this case is successful, something tells me this part right here has the highest chance of being ruled in the plaintiff’s favor.

The case now moves onto discovery, where we will probably for the first time learn a lot more about the agreement between Apple and AT&T. While this case is by no means anywhere close to being over, and could take years to come to a conclusion, it could be very good news for those of us who want the iPhone, but have no intention of signing an contract with AT&T.

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  1. tekkie Says:

    Not only this, as it has turned out, is the issue for Apple. Indirectly the recent hassle has been introduced with apps, predictably, though.

    Those who are on top of things might agree that recent developments like Skype app on iPhone may cause some true trouble for exclusive operators of iPhone, so one may ask if another EC antitrust case on the way for European iPhone operators?