Class Action Filed against Apple for locking iPhones to AT&T Network
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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Where do I sign up. We purchased two 3GS's on ebay and AT&T refused to unlock them since we did not purchase them directly from AT&T. They refused to unlock one other 3GS when we could not provide the name of the original purchaser, that one was also purchased on ebay. On all occasions they said the phones were past the original contract period but since "we" did not purchase them from AT&T they would not unlock them.
Apple won't unlock them until AT&T approves it.
Again, where do I sign up.
Posted by: Bill S. | October 22, 2012 at 08:41 AM
Well, this certainly sounds like a huge lawsuit considering the "right" of users to switch carriers of their choice but why has it taken over 5 years to realize this? Yet another moral flaw in our system where we are just okay with whatever the big brands do.
Posted by: Jignesh | October 22, 2012 at 03:36 AM
It seems to me that this isn't just an Apple problem. Every cell phone company locks the phones they sell. My HTC was locked by T-Mobile.
Posted by: Mark | October 21, 2012 at 07:55 PM
What a Crock of a lawsuit.
Posted by: James Katt | October 21, 2012 at 05:27 PM
But ATT will unlock any iPhone, no matter when it was purchased, as long as the contract after two years. They will unlock iPhones purchased from eBay or Craig's List for example, even if your do not have a contract with them, as long as they are not in currently in a contract [the owner sold it before the 2 yr contract expired]. They check the IMEI number to see if it's and ATT phone and eligible, then unlock it. I have two friends in other countries that have called the ATT international number and had the phone unlocked. So it doesn't matter when the phone was purchased, it matters that it's been two years after the purchase. HOWEVER, people upgrade their iPhones BEFORE two years and enter a new contract, which should void the old contract, or replace it, but ATT will NOT unlock the iPhone unless it was purchased over 2 yrs ago. That's wrong of ATT, because the replaced phone is no longer in a contract.
Posted by: BIll | October 21, 2012 at 09:04 AM
I don't like Apple's practices, but I dislike opportunists more. First of all, the 5year exclusive contract has been common knowledge since launch. Second, which cave have they been in for all this while? If this was a genuine lawsuit, it should have been filed in 2007. And last of all, if you don't like the policy, there is a simple solution - decide whether you want the iphone more or whether you want to leave at&t more, and act accordingly. Boycott what you don't like.
You can't have everything. I'm sick of people whining about everything they don't get. Screw the iphone, i choose not to have one either. What you are really proving by the lawsuit is how desperate you are to own one, not how dissatisfied you are with Apple.
Besides, you can buy an iphone on several carriers now, so they really should be stating in their lawsuit exactly which carrier they are being deprived of. Or they should have sued in 2007.
Posted by: JaneQ | October 21, 2012 at 07:47 AM
It looks like it's about those who got locked into the original iPhone and iPhone's prior to Apple changing their policy on locking.
Posted by: Drew | October 20, 2012 at 04:23 PM
I just got my iPhone 4 unlocked by at&T after the end of my contract. What is the brouhaha all about? You just have to apply for it and once deemed legitimate, the company will send you the product number that you need to unlock it via iTune. If the company fails to send you the number, just go back to one of the AT&T office and in my case, I was send to a neighboring shop to have it unlocked at AT&T expense. Every subsidized iPhone is not unlocked and is subject to a two years contract. To have an unlocked iPhone 5, you will need to pay full prize for it, or have it unlocked after you fulfill the terms of the contract. This lawsuit looks like a loss of time on our court system, I presume.
Posted by: Jocca | October 20, 2012 at 01:14 PM
Finally- A lawsuit for the consumers. It is interesting
that I have to contact AT&T to unlock my iPhone
and that unlock comes in the form of a iTunes
update. Furthermore, how can AT&T dictate how many
out of contract iPhones I can unlock(5). If I have
100 off contract iPhones, I should be able to unlock
I have read that the iphone5 comes unlocked,
with a contract. This is unconfirmed as I am one
of millions waiting in line for the "privelege" of owning
one. However, if this is true I would expect a judge
to discover that locking the phones was a monopoly
between apple and AT&T due to the unargreable
fact that this practice (locking) is no longer in use
for obvious reasons.
I look forward to the trial.
Posted by: Paul Seiden | October 20, 2012 at 10:32 AM
Contrary to their expectations?? Hilarious
Posted by: Ron | October 20, 2012 at 09:15 AM