In In re Apple & AT&TM Antitrust Litigation, No. 07-CV-05152-JW (N.D. Cal. Oct. 1, 2008) (attached IPhone Decision), plaintiffs alleged that the arrangement in which the Apple IPhone worked exclusively with AT&TM not only for the initial two-year contract period but also for three additional years after their contracts expired with AT&TM violated Section 2 of the Sherman Act. Plaintiffs also alleged that Apple’s restrictions on dowloadable applications for use on IPhones violated Section 2. Plaintiffs alleged Section 2 claims of monopolization and attempted monopolization of the market for IPhone applications and monopolization, attempted monopolization and a conspiracy to monopolize the market for voice and data services to IPhone owners. The Northern District of California held that there were cognizable relevant product markets limited to Apple IPhone customers in these aftermarkets. The court distinguished cases in which customers voluntarily commit to a lock-in through a contract such as when a franchisee agrees to purchase certain products from its franchisor. In this case, the Complaint alleged that the lock-in was created through deceit or unbeknownst to the customers at the time of purchase. The Complaint alleged that the IPhone customers did not know that they could not unlock their IPhones from AT&TM service after the two-year commitment or the limitation on downloadable applications. This case is consistent with the Supreme Court’s approach in determining whether aftermarkets represent separate relevant product markets. The key inquiry is whether the consumer knows or has reason to know of limitations in purchasing products or services in the afermarket before he becomes locked-in by the initial purchase.
Apr
24
Posted by : | On : April 24, 2008
Yesterday, the United States Court of Appeals for the D.C. Circuit granted Rambus’ petition for review. This decision was much awaited among antitrust counselors because it represented an attempt by the FTC to extend the antitrust laws to cover deceptive practices directed at standard-setting organizations. After administrative proceedings, the FTC held that Rambus violated Section 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act by concealing to a standard-setting organization that it held patents in a technology which it urged the organization to adopt. Rambus then allegedly used the organization’s adoption of its technology to overcharge for licenses. In rejecting the claim under Section 2, the court explained, “if JEDEC, in the world that would have existed but for Rambus’s deception, would have standardized the very same technologies, Rambus’s alleged deception cannot be said to have had an effect on competition in violation of the antitrust laws; JEDEC’s loss of an opportunity to seek favorable licensing terms is not as such an antitrust harm. Yet the Commission did not reject this as being a possible—perhaps even the more probable—effect of Rambus’s conduct. We hold, therefore, that the Commission failed to demonstrate that Rambus’s conduct was exclusionary, and thus to establish its claim that Rambus unlawfully monopolized the relevant markets.” Rambus Inc. v. FTC, No. 07-1086 at 19 (D.C. Cir. Apr. 22, 2008). With respect to Section 5 of the FTCA, the court also expressed “serious concerns about strength of the evidence relied on to support some of the Commission’s crucial findings regarding the scope of JEDEC’s patent disclosure policies and Rambus’salleged violation of those policies.” Id. Notably, the court did not address whether such conduct would violate Section 5 even if it could not support liability under the Sherman Act. The FTC has recently taken such a position in its action against Negotiated Data in the March 10, 2008 Post. A copy of the slip opinion in Rambus is attached.