Individuals Zach Ward and Thomas Buchar have along with their legal counsel filed a Class Action lawsuit against Apple for locking consumers into the AT&T Network without first obtaining the consumers' contractual consent to have their iPhones locked. They're seeking, amongst other claims, to have Apple immediately provide consumers with unlock codes for their iPhones and for Apple to do so as a matter of practice in the future.
Conspiracy to Monopolize the iPhone Voice and Data Services Aftermarket
A new Class Action was filed against Apple late yesterday with the United States District Court for the Northern District of California, San Francisco Division. The complaint's single count against Apple is for "Conspiracy to monopolize the iPhone voice and data services aftermarket in violation of Section 2 of the Sherman Act."
Summary of Material Facts
Apple launched its iPhone on or about June 29, 2007. Prior to launch, Apple entered into a secret five-year contract with AT&T Mobility (ATTM) that established ATTM as the exclusive provider of cell phone voice and data services for iPhone customers through some time in 2012 ("Exclusive Agreement"). As part of the contract, Apple shared in ATTM's revenues and profits with respect to the first generation of iPhones launched, known as the iPhone 2G, which was a unique arrangement in the industry. The Plaintiffs and other class members who purchased iPhones didn't agree to use ATTM for five years. Apple's undisclosed five-year Exclusivity Agreement with ATTM, however, effectively locked iPhone users into using ATTM for five years, contrary to the users' knowledge, wishes and expectations.
To enforce ATTM's exclusivity, Apple among other things, programmed and installed software locks on each iPhone it sold that prevented the purchaser from switching to another carrier that competed with ATTM in the cell phone voice and data aftermath industry. Under an exemption to the Digital Millennium Copyright Act, cell phone consumers have an absolute legal right to modify their phones to use the network of their carrier of choice. Apple prevented iPhone customers from exercising that legal right by locking the iPhones and refusing to give customers the software codes needed to unlock them.
Under its Exclusive Agreement with ATTM, Apple retained exclusive control over the design, features and operating software for the iPhone, including the code that "locks" iPhones to the ATTM network.
Through these actions, Apple has unlawfully stifled competition, reduced output and consumer choice, and artificially increased prices in the aftermarkets for iPhone voice and data services.
Summary of Claims
In pursuit and furtherance of its unlawful anticompetitive activities, Apple: (a) failed to obtain iPhone consumers' contractual consent to the five-year Exclusivity Agreement between Apple and ATTM, the effect of which was to lock consumers into using ATTM as their voice and data service provider, even if they wished to discontinue their use of ATTM service; (b) failed to obtain iPhone consumers' contractual consent to having iPhones "locked" to only accept ATTM Subscriber Identity Modules ("SIM cards"), thereby preventing iPhone purchasers from using any cell phone and data service provider other than ATTM; (c) and failed to obtain iPhone consumers' contractual consent to make unavailable to them the "unlock code" that would enable the consumers to use a service other than ATTM, even though ATTM routinely provides such unlock codes for other types of cell phones.
Apple violated section 2 of the Sherman Act by conspiring with ATTM to monopolize the aftermarket for voice and data services for iPhones in a manner that harmed competition and injured consumers by reducing output and increasing prices in that aftermarket.
What the Plaintiffs Seek
Plaintiffs seek declaratory and injunctive relief, treble and exemplary damages, costs and attorneys' fees. As for equitable relief, Plaintiffs seek an order: (a) restraining Apple from selling iPhones that are Programmed in any way to prevent or hinder consumers from unlocking their SIM cards; (b) requiring Apple to provide the iPhone SIM unlock codes to members of the class and other iPhone consumers immediately upon request: and (c) restraining Apple from selling or disturbing locked iPhone without adequately disclosing the fact that they are locked to work only with ATTM SIM cards and without obtaining the consumers' contractual consent to have their iPhones locked.
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Sites Covering our Original Report
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