iTunes Antitrust Class Action Lawsuit Heads to Trial

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The trial for the iTunes antitrust class action lawsuit kicked off on Tuesday, with the plaintiffs’ attorneys arguing that Apple Inc. should pay $351 million in damages for allegedly engaging in anticompetitive behavior that artificially inflated the prices of iPods. The trial is expected to last nine days.

According to the iTunes antitrust class action lawsuit, Apple updated its iPod software in 2006 to prevent digital songs downloaded from iTunes to be played on any device. This iTunes encryption update allegedly allowed Apple to maintain an 80 percent share of the digital music market from September 2006 through March 2009. Attorneys for the plaintiffs argue that the software upgrade was implemented after Apple executives learned that its competitors had learned how to have their digital music played on Apple’s iPod products.

Essentially, the iTunes antitrust class action lawsuit argues that Apple used the software upgrade to push out its competitors, many of which sold MP3 players at lower prices than Apple music players. Because iPod owners were only able to play songs purchased on iTunes, and because songs downloaded from iTunes could not be played on other players, iPod customers were allegedly “locked” into Apple products, which allowed the tech giant to charge more for its products.

Consumers allegedly paid $16.32 more per iPod because of Apple’s security encryption, while iPod resellers paid $4.13 per device, according to Stanford University professor emeritus Roger Noll, the plaintiffs’ economics expert.

In defense, Apple argues that the iPod upgrades were implemented to improve the product and included important security fixes. Further, the tech giant denies it exerted monopoly power and maintains there is no proof that the consumers were harmed by the upgrade. Apple argues that the upgrades were necessary to protect the quality of their product and the iPod users’ experiences.

Steve Jobs, the late co-founder of Apple, will provide testimony in the iTunes antitrust class action lawsuit trial via a taped deposition.

Although the plaintiffs estimate the damages at about $351 million, the damages could exceed $1 billion if the antitrust allegations against Apple are proven. An estimated 8 million consumers and iPod resellers may be affected by the iTunes antitrust class action lawsuit.

Apple has tried unsuccessfully to put an end to the iTunes antitrust class action lawsuit. In August, the tech giant filed a motion for summary judgment, which was denied. In September, Apple tried unsuccessfully to exclude Dr. Noll’s testimony. Last month, a California federal judge denied the tech giant’s bid to decertify a Class of iPod resellers, ruling that it would be unfair to decertify the Class so close to the trial date.

The plaintiffs are represented by Alexandra Senya Bernay, Bonny E. Sweeney, Carmen A. Medici and others at Robbins Geller Rudman & Dowd LLP.

The iTunes Antitrust Class Action Lawsuit is Apple iPod iTunes Antitrust Litigation, Case No. 4:05-cv-00037, in the U.S. District Court for the Northern District of California.

UPDATE: On Dec. 16, 2014, a jury handed down a verdict in favor of Apple in the iTunes antitrust trial, finding that the software upgrade was a genuine product improvement and was not intended to stifle competition.