A federal district court judge sitting in the Northern District of California has denied the motions by Apple, Inc. and AT&T Mobility LLC to dismiss an antitrust lawsuit over the companies’ agreement to make AT&T the exclusive service provider for the popular iPhone device. Plaintiffs had alleged that Apple and AT&T violated Section 2 of the Sherman Act by monopolizing the markets for voice and data services for the iPhone, and that Apple further monopolized the market for aftermarket iPhone applications.
According to the complaint by Apple iPhone users, Apple and AT&T agreed that AT&T would be the exclusive service provider for the iPhone through 2012, and in return Apple would receive a percentage of the service fees. Consumers were not aware of this agreement at the time of purchase when they were only required to enroll in a two-year service plan with AT&T. In the decision denying the companies’ motion to dismiss, Judge James Ware wrote that the claims are “ripe for adjudication because plaintiffs are alleging that at the point of purchase and initiation of service, defendants involuntarily impose on consumers a contract exclusivity restriction which restricts their freedom from that point forward for at least the next five years and conceivably for the life of the iPhone.”
Judge Ware also declined to dismiss the plaintiffs’ claims against Apple for monopolizing the market for aftermarket applications for the iPhone. The plaintiffs alleged that Apple attempted to prevent users from removing “software locks,” which are installed on every new iPhone to prevent potentially harmful third-party applications from being downloaded to the device. Apple allegedly enforced this policy by issuing warnings that installing third-party applications would void the iPhone’s warranty and by publishing update software that damaged “unlocked” iPhones running third-party applications.