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iPhone Antitrust and Computer Fraud Claims Upheld
Posted by
ScuttleMonkey
on Fri Oct 03, 2008 06:05 PM
from the everybody-hates-the-big-guy dept.
from the everybody-hates-the-big-guy dept.
LawWatcher writes "On October 1, 2008, a federal judge in California upheld a class action claiming that Apple and AT&T Mobility's five-year exclusive voice and data service provider agreement for the iPhone violates the anti-monopoly provisions of the antitrust laws. The court also ruled that Apple may have violated federal and California criminal computer fraud and abuse statutes by releasing version 1.1.1 of its iPhone operating software when Apple knew that doing so would damage or destroy some iPhones that had been 'unlocked' to enable use of a carrier other than AT&T."
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No one deserves this more than Apple (Score:5, Insightful)
Re:No one deserves this more than Apple (Score:4, Insightful)
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Re:No one deserves this more than Apple (Score:5, Insightful)
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Re:No one deserves this more than Apple (Score:5, Insightful)
They would certainly deserve it for willfully bricking unlocked iPhones the way they did, but this is the US were talking about.
The thing is that these phones were unlocked through exploits which placed the iPhones in a indeterminate state as far as updates went. It was a crapshoot whether or not an update would cause the phone to be unbootable. Everyone who unlocked their iPhone either understood this or didn't know enough about what they were doing and shouldn't have been doing it in the first place.
If you hack ANYTHING then you should have no expectations that it will continue to be stable across software updates. You've made the choice to modify your device, you live with the fact that you may have broken it irreversibly. Now in the case of the iPhones it turns out that almost all of them were NOT bricked, they just had to be coaxed back to the factory software and you were good to go. There's even NEW unlocking software that you can apply for the latest version of the operating system. Of course the same caveat still applies: hack your device and you might ruin it.
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Precisely (Score:5, Insightful)
Their statement was not 'we are going to brick other people's phones,' but 'if you have messed around in the baseband firmware, we can't promise this upgrade isn't going to break something significantly.'
They didn't set out to brick phones (and quite a few unlocked phones I know of took the firmware upgrade just fine). It was more a 'look, if you did this, you're on your own; we're not promising that this firmware won't completely break your modified phone.'
Which actually seems reasonably fair; if someone takes a car and decides to tinker in the brake system and try to come up with their own antilock braking system they feel is better, that's fine. But if they then have an accident, they can't realistically hold the car manufacturer responsible for the ABS they modified.
That said, the AT&T exclusivity contact may well verge on antitrust violations; IANAL, so I cannot really speak with any authority on that. However, restricting phones to specific carriers is pretty much par for the course. T-Mobile doesn't let you use the Sidekick on AT&T, nor the new Google Android phone that just came out. As far as I know, the Instinct is exclusive to Sprint. Etc.
So if they do rule that the AT&T exclusivity contract violates antitrust, I really do hope that decision can crack the practice of carrier exclusives overall. Forcing all phones to be sold unlocked, so that they can be taken to any other carrier with compatible cellular technology, would force carriers to actually focus on providing good service rather than relying on handset exclusives.
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Re:Precisely (Score:5, Insightful)
"Apple has discovered that many of the unauthorized iPhone unlocking programs available on the Internet cause irreparable damage to the iPhone's software, which will likely result in the modified iPhone becoming permanently inoperable when a future Apple-supplied iPhone software update is installed"
(From http://www.google.com/search?btnI=I'm%20Feeling%20Lucky&q=iphone+apple+statement+firmware+modified [google.com])
It's really not Apple's job to be writing workarounds for jailbroken phones (and exhaustively testing them -- what if the workarounds adversely affected unjailbroken iPhones?)
However, I would argue it is Apple's job to design the iPhone such that no changes (other than physically invasive ones) can ever cause the phone to be "permanently inoperable". And if they can't provide information to the user on how to reset the iPhone to factory defaults, they should bear the burden of repairing it.
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Not so precise, actually (Score:5, Interesting)
Er, it's easy to make software that irreparably damages embedded systems. We're not talking about software that runs in nice safe wrap-you-in-bubblewrap PCs any more.
Send the wrong configuration down to a CPLD or FPGA device and you can configure the voltage inputs to be (say) 1.2 volts when a 5v signal is being applied. Kiss bye-bye to that oxide layer in minutes (or seconds). If the part that's now burnt out is only used during configuration, or even just rarely (say a low-power situation), it may not be obvious that you're SOL.
Along comes a new configuration (the Apple one) and Boom!(TM) - dead hardware.
I don't know if the iphone contains configurable parts with that sort of vulnerability (like FPGA's) - I do know it contains an embedded system for the baseband receiver which needed to be configured for that update.
Embedded processor systems like these are *much* more vulnerable to the halt-and-catch-fire [babylon.com] because they're expected to be configured in a certain way, and the QA is rarely done to make them bulletproof, like traditional processors.
As far as I can see, Apple were only being reasonable: it's entirely possible for the hacked reconfiguration of the GSM baseband system to have completely screwed it up (because it probably didn't dot every 'i' and cross every 't' - it was a trial-and-error job after all), and the problem to only become apparent when a new "proper" configuration was attempted.
So, pretty *not* precisely, IMHO. For what it's worth, I've blown CPLDs up on one project and months later come back to use the same board on another project and found out it was no longer reconfigurable. It worked fine in the configuration it had, but as soon as I reconfigured, no dice.
Simon.
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Re:Precisely (Score:5, Informative)
Wrong; the judge has only denied the motion to dismiss the case. Whether there was any violation of law remains to be determined.
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Re:No one deserves this more than Apple (Score:5, Insightful)
Note that I'm not saying it SHOULDN'T be against the law. Rather, I'm asking how it can be considered illegal under the laws we have today. I'm curious about the legal standpoint on this issue.
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Re:No one deserves this more than Apple (Score:5, Insightful)
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Re:No one deserves this more than Apple (Score:5, Insightful)
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Magnuson Moss Warranty Act of 1975 (Score:5, Informative)
The Warranty Act is related to the product tieing, and bricking of unlocked phones. Essentially (and amongst other things) the MM Warranty Act says that it's illegal for a vendor to sell a product and require a tieing of services. From the FTC's web site:
"Tie-In Sales" Provisions Generally, tie-in sales provisions are not allowed. Such a provision would require a purchaser of the warranted product to buy an item or service from a particular company to use with the warranted product in order to be eligible to receive a remedy under the warranty. The following are examples of prohibited tie-in sales provisions. In order to keep your new Plenum Brand Vacuum Cleaner warranty in effect, you must use genuine Plenum Brand Filter Bags. Failure to have scheduled maintenance performed, at your expense, by the Great American Maintenance Company, Inc., voids this warranty.
They are arguing that tieing to AT&T, and then firmware releases bricking phones that have been unlocked to another carrier is an illegal/tortious act on the part of Apple. They allege Apple has told customers that downloading of unapproved software (but software that should be legal to install, under the MM act, imo) will void their warranty. Furthermore they have a vested financial interest in "approved" software from the Apple store, and obviously refuse to allow unlocking software to be included in that store. They refuse to provide customers who have lawfully canceled their AT&T contracts with unlocking codes so they may use their device with another carrier (again, covered by MM act). The list of allegations goes on. Full text of 15 USC Chapter 50 [house.gov], which is the section of the statute they have sued under (although I believe Title 16 - Commercial Practices, Chapter I - Federal Trade Commission, Subchapter G - Rules, Regulations, Statements and Interpretations under the Magnuson-Moss Warranty Act, Part 700 Section 102 also deals with warranty denials, text here [gpoaccess.gov]).
They are alleging illegality on the part of Apple in that they monopolized the market for iphone applications, and also apple+AT&T for voice and data service monopolization. And of course the alleged illegality I spoke of above (services ties, denying consumers the ability to break these ties, pushing software updates that intentionally break the phones of users who have circumvented product ties, and then denying warranty coverage for these affected users)
I hope that was somewhat helpful.
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Re:No one deserves this more than Apple (Score:5, Informative)
Because it breaks the idea of subsidies.I am not sure how these things are like in the USA, but here in the UK, when you buy a phone it is likely to be SIM Locked to the network as the cost of the phone is subsidised to the monthly contract.
I am on T-Mobile (UK) myself.
T-Mobile, Vodafone, Orange and 3, typically do that. They also typically customise the phone in such a way, to usually make it easier to use on their network. The customisations can be subtle in the case of T-Mobile (excluding the N95/VOIP fiasco), where the phone is not vastly modified, to outright butchery in Vodaphone/Orange, and 3.
Nevertheless, once a phone is out of the subsidy period, it is YOUR phone, and legally you should be able to unlock it to all networks. In the case of T-Mobile (and I suspect the others) they will on request (and possibly for a small admin fee) provide you with the sim unlock code, to unlock the phone. I have heard that in many cases, they even gave the code, even before the subsidy term was over.
T-Mobile promised the same deal for the upcoming G1 Android phone, in that it CAN be unlocked once the sub period is over.
I personally buy my upgrades via Carphone Warehouse, as they source it idependantly, so phones are unlocked, and unbranded to T-Mobile, so I get the best of both worlds, a subsidised UNLOCKED phone.
O2, intrestingly do NOT usually simlock their phones, unless its a specific O2 made phone. O2 is the UK's Exclusive network for the iPhone, and the iPhone is the first GENERAL phone O2 provides which IS simlocked.
The point being is that, after the 2 year contract period with AT&T (or O2 in the UK) you STILL will not be able to unlock the iPhone, and use it with other networks, so in effect you still ARE locked into AT&T/O2. It is YOUR GSM phone, that has no TECHINCAL reason why it should not work on any other network, other than plain nastyness by Apple/AT&T/O2.
This may not be totally legal in the UK (and same in the USA), especially as it is sold as a GSM phone. If Apple/O2/AT&T allows to unlock after 2 years, then they are ok, but something tells me that will not be the case.
Note: this may be also why the Pay As You Go version was pulled from O2, as technically you own the phone straight away.
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Re:No one deserves this more than Apple (Score:5, Informative)
They seriously need to be taken down a notch legally so they don't lawyer up at every opportunity.
Everybody has a right to an attorney. Even a corporation.
(And even an unlawful enemy combatant, but that's another topic for another time.)
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More Accurate Summary (Score:5, Informative)
Nothing has been "Upheld", all that has happened is that the court denied Apple's 12b6 motions for dismissal. (Failing to state a claim upon which relief can be granted.)
This case is still pre-trial. Discovery has not happened yet. Apple can still file for summary Judgment.
If the complaint survives Apple's inevitable motion for summary judgment, then the case will go to trial. Then there will be appeals.
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Good (Score:5, Insightful)
Re:Good (Score:5, Interesting)
And yet this week one of my clients is still struggling to get a reliable 1 Mb/s connection to their office, right here in the middle of Los Angeles. They are currently paying $150/mo for a DSL line that ain't working. Even if it worked, that's almost a factor of 3000 increase in the cost per Mb/s relative to the new stuff in Japan.
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explains everything (Score:5, Funny)
So that's what gave Jobs the heart attack...
Who gets to be in the Class? (Score:4, Insightful)
People on other carriers that want to use the iPhone?
People who were "compelled" to get an ATT account to use the iPhone?
People who didn't get an iPhone because of the exclusivity?
Who *wasn't* damaged?
Just for the record, I have an iPhone, I was already with ATT, and Apple should have figured out that this might have been illegal beforehand.
Re:Who gets to be in the Class? (Score:5, Informative)
D. None of the above.
People who bought the iPhone and are allegedly stuck with AT&T for five years as a result, despite having agreed to a two-year contract.
The exclusivity agreement, according to the complaint, prevents any iPhone customer from going anywhere else once their contract is up. The problem is that (a) no one's contract has expired, so there is no evidence for or against Apple and AT&T as to what happens at that time, (b) there are already tools to unlock the iPhone and use the device on other networks, which, after the AT&T contract and the product warranty expires, Apple could not care less about for end users, and (c) the "legal action" discussed does not extend to people unlocking their handsets for the purpose of lawfully connecting them to another provider's network.
This, furthermore, is not a finding of fact or law. It is not an opinion. It is simply a rejection of a dismissal motion. It by no means suggests the final outcome, nor does it endorse any of the allegations made by the plaintiffs. It is entirely possible that this suit will be dismissed further along in the discovery process, dismissed during trial, or that Apple/AT&T will win at trial. It will likely provide nothing of value to consumers either way, with the possible exception of an announcement of an "official" unlocking tool for customers whose initial contracts have expired.
It is important to note that such a tool being offered upon completion of your term commitment would entirely moot this case.
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Wait... what? (Score:5, Interesting)
I have a hard time seeing how the iPhone could be considered monopolistic when it has such a small market share; you can't have a monopoly by law unless there are no good alternatives to your product.
On the other hand, I'd love to see an end to the AT&T exclusivity agreement and unlocked iPhones for sale in the USA. I hope this case leads to more than just punitive damages.
This is just a preliminary finding. (Score:5, Interesting)
The title of the article discussed a motion to dismiss. The article itself was slashdotted, but a motion to dismiss only means that the lawsuit is allowed to continue. The holding only means that the complaint states a legally-cognizable cause of action, and does not address the substantive merits of the plaintiffs' (as it was a class action) case aside from that.
I would like to know if this was filed under the federal antitrust statutes or the California antitrust laws. If it is the former, than the decision would have national implications and Apple may lose significant amounts of money if it is found liable of anti-competitive conduct.
Moreover, if the contract between Apple and AT&T Mobile is ruled in violation of law, does AT&T owe Apple money anyway, or are they just going to sue each other? This will be fun to see.
Antimonopoly? (Score:5, Interesting)
Apply iPhones are a small fraction of all smart phones, let alone all phones.
AT&T/Cingulair has at least a couple viable large competitors in most markets in the U.S.
How the heck is this a monopoly?
On the other hand.... (Score:5, Interesting)
It's common /. knowledge that Apple + AT&T lock-in is pure evil - I agree with this knowledge, fwiw.
And it was evil of Apple to break hacking iPhones restricting user freedom.
On the other hand, maybe....
1. Apple saddles up AT&T to break into the phone market.
2. AT&T goes for it. Apple Board of Directors is appeased; if iPhone fails somehow, how were stockholders not protected by the new venture, given Apple's attempt to partner with the phone giant?
3. Many people are offended and alienated by this, however, the fact remains:
4. iPhone sales are a tech phenomenon.
5. Apple keeps AT&T happy by breaking hacked iPhones. See point 4 for how this affects Apple's bottom line. Note that AT&T never publicly complained.
6. Apple waits for it to be the court's fault that they have to open things up for other carriers.
7. Apple expands its iPhone market without violating the AT&T agreements for hegemony.
If you've spent much time at all in Silicon Valley, this kind of thinking and planning isn't so outlandish.
And truth is most often stranger than fiction in the tech industries.
Re:Yay! (Score:5, Informative)
What gives is that they're talking about Apple's contract with AT&T, not your contract with AT&T. The reason you can't buy an iPhone and use it with T-Mobile in the US (unless you hack it) is because of Apple's exclusive contract, which currently runs for five years.
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