A lawsuit against Apple regarding the relationship between its iPod digital music player and its iTunes Music Store (iTMS) was pared back on May 15, when the U.S. District Court for the Northern District of California dismissed one form of antitrust tying claim from the case. The plaintiffs are purchasers of iPods from Apple and of audio or video files from Apple’s iTMS. In a consolidated complaint filed in 2007, they alleged that Apple engaged in unlawful tying in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, as well as other federal antitrust and state law claims. Specifically, they complained that Apple employed Digital Rights Management (DRM) restrictions that rendered content purchased from the iTMS technologically incompatible with digital players other than Apple’s own iPod. This practice allegedly locked iTMS customers into purchasing only Apple iPods going forward and at prices higher than if competing iTMS-compatible digital music players had been available.
Tying refers to the practice of selling one product (the “tying” product) only on the condition that the customer also purchases a second product (the “tied” product). In some circumstances tying is treated as a per se antitrust violation, while in other cases it requires a full blown analysis of the effects of tie under the “rule of reason.” Here, the court ruled that the incompatibility created by Apple’s DRM technology would not be sufficient for a per se claim. The court will address the rule of reason theory after further briefing from the parties. (Apple iPod iTunes Antitrust Litig., No. 05-00037, slip op. (N.D. Cal. May 15, 2009))