Antitrust idiocy rises again — now it’s Apple’s turn!

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Engadget reports that a class-action lawsuit has been filed against Apple claiming that its iPods are illegally tied to its iTunes software.

In essence, the plaintiff claims the Apple iPod/iTunes ‘ecosystem’ locks out competitors. Non-Apple music players cannot play music purchased from the Apple iTunes store. iTunes only works with Apple’s iPod players.

Boo-hoo, cry me a river. Does the Apple music ecosystem lock out competitors? It sure does! Is it illegal? No. Is it worth spending taxpayer money for our government to meddle with Apple’s ecosystem? No.

Competitors will create a more open ecosystem. Amazon has already done so to much fanfare. Eventually, an open ecosystem will be developed that matches Apple’s sleek and sexy interface and hardware design.

If we all hated Apple’s music ecosystem, we wouldn’t use it.

Remember the last time we started meddling with what was perceived as a monopolistic technology giant? After much ballyhoo, Microsoft’s Internet Explorer browser war domination was toppled due to its own monopolistic laziness which bred the decay of IE. The best option for consumers was to download a higher quality competitor.

Our European friends feared Microsoft’s Windows Media Player would rule the world and forced MS to create a WMP-free Windows XP distribution (dubbed Windows XP N). Of course, nobody ever used this government mandated software.

Look what happened to Windows Media Player: Web video has moved to Flash based in-browser applets. iTunes dominates PCs and Macs for audio. WMP serves only as a base (crappy) media player for folks that don’t give a hoot which media player they use.

Don’t legislate competitiveness, Uncle Sam. Apple will f*** up soon enough, and someone will be ready to swoop in for the kill.

PS. Check out this EconTalk podcast to hear much smarter people talk much more cogently about why most antitrust regulation sucks.

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9 Responses to Antitrust idiocy rises again — now it’s Apple’s turn!

  1. Jay says:

    I agree, but for different reasons. If Apple had its druthers they would only sell non-DRM’ed music. Apple isn’t able to do that because the labels don’t understand how to change their business model.

  2. kfarr says:

    True, Apple would like to sell non-DRM music.

    But, this is somewhat separate from Apple making their iTunes software only compatible with iPods, and not competing digital music players (using their software dominance to push their high margin hardware).

  3. kfarr says:

    PS. Sorry the above article was badly written and I didn’t make that simple point more clear.

  4. crasshopper says:

    I disagree: I think so-called “tying” is sometimes a good reason for government interference. There is a large literature on the subject with which I’m not familiar, however the basic idea rings true: competition only helps the consumer when it takes place in a restricted environment.

    Clearly, anarchic laissez-faire would not benefit consumers because CEO’s could hire assassins to kill each other. So there are some times when regulation works better than a “pure market” solution outside of a legal framework. Is tying also bad for markets?

    My intuition says yes. I have not put this into a mathematical model, but: if Apple artificially inflate the opportunity cost of owning a competitor’s product, then they are decreasing someone’s utility of owning a Zune (for example) without increasing anyone’s utility of owning an iPod. Therefore societal utility has to be lower under a tying regime.

    I will listen to the EconTalk podcast and then post some more thoughts.

  5. kfarr says:

    I can buy your argument that it’s better for societal utility to have non-artificially-tied products.

    So perhaps it boils down to this question: are “tying” practices worthy of governmental intervention?

    This “tying” practice by Apple is not ideal. It is just a step toward the best market solution. People have a choice for non-tied products and eventually they will choose a non-tied option (Zune).

    As shown by the EU’s involvement with MS’s tying WMP to XP, government involvement is perhaps so slow and ineffective in combating tying that by the time the government sanction takes place, the market has already evolved a solution (Flash Video) to the originally tied offering (XP + WMP).

    Furthermore, I think it’s a dangerously arbitrary sliding slope of what tying actions would be considered worthy of government involvement. Tying occurs in all sorts of ways: Nintendo 64 game cartridges only play in Nintendo 64 hardware. Apple laptops require Apple brand chargers. Should the government force Nintendo to release their hardware specifications such that anyone can manufacture an ‘open source’ Nintendo 64?

  6. Metzer says:

    This isn’t tying, at least not in the way the antitrust laws are currently interpreted (cf Jefferson Parish). You have to show market power in the first product- the tying product, in this case the I-Tunes, which Apple doesn’t have really, I don’t know what their market share is, but there are enough substitutes out there, and as you point out barriers to entry enough are low enough to counteract them if they move the market. After a couple of years of discoverty, assuming the litigation is still going on and apple hasn’t settled, they’ll move for summary judgment, and they’ll win. They only way to get around the couple of years discovery is heightened pleading requirements, and that’s lame for a lot of reasons.

    I mean I don’t know why the dudes are complaining any way. Antitrust is moving more and more towards being universally judged by the rule of reason on everything but pretty blanantly anticompetive things like horizontal price collusion and horizontal territorial restirctions and its really hard to win a rule of reason case- and really costly to the plaintiffs to prove all they need to prove to win.

  7. kfarr says:

    Thanks for the voice of legal reason, Metzer. It’s comforting to know that this case doesn’t have much to stand on.

  8. kfarr says:

    Here’s some good Wikipedia reading on this topic. It even uses the iTunes/iPod example:

  9. Pingback: GOOG whines about MSFT eating YHOO for dinner. « kfarr

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