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iPhone Antitrust and Computer Fraud Claims Upheld 273

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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iPhone Antitrust and Computer Fraud Claims Upheld

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  • Wait... what? (Score:5, Interesting)

    by pushing-robot ( 1037830 ) on Friday October 03, 2008 @06:24PM (#25251661)

    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.

  • Re:Good (Score:4, Interesting)

    by houstonbofh ( 602064 ) on Friday October 03, 2008 @06:27PM (#25251691)
    People forget that when it comes to phones, "we" are not the customer. Verizon is the customer, and we are the product.
  • Re:clarification (Score:3, Interesting)

    by Anonymous Coward on Friday October 03, 2008 @06:32PM (#25251715)

    per the first paragraph, the AT&T/Apple restriction is ok, but they [might have] imposed other limitations after the 2 year contract (umm, which hasn't ended for anyone yet).

    If someone purchases an iPhone and ends their two year contract after they pay the applicable fees associated with an early ended contract, is it against "computer fraud and abuse" to not allow them to use their hardware?

    Recently Sprint was forced into allowing its customers to unlock their phones []. So, applying that logic, if I own an iphone (and am not renting it from AT&T, is it not an abuse of law to release a patch to hardware which intentionally damages my property?

    Sorry if that didn't make sense.

  • by darkmeridian ( 119044 ) <william,chuang&gmail,com> on Friday October 03, 2008 @06:34PM (#25251735) Homepage

    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)

    by MMC Monster ( 602931 ) on Friday October 03, 2008 @06:38PM (#25251753)

    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?

  • by jakethejuggalo ( 718693 ) on Friday October 03, 2008 @06:40PM (#25251777)
    Wouldn't this ruling apply to Verizon phones also? They're technologically the same as sprint phones, but if you switch from Verizon to Sprint or vice-versa, you can't use your phone on that new network. What's the difference between that situation and wanting to use the iPhone on t-mobile?
  • by peragrin ( 659227 ) on Friday October 03, 2008 @06:42PM (#25251793)

    That is what really gets me. AT&T and Apple's deal isn't abnormal in the cell phone industry. Certain phones don't show up in certain regions because of such deals.

    The big plus of this whole lawsuit is that all this will be made public and the cell phone industry will be forced to change. Like Apple broke open music downloads by forcing an industry to be more open (and closed), maybe this lawsuit will break open the cell phone industry. Of course it won't be apple leading the charge but defending the old ways but hey you must start somewhere.

  • Re:Good (Score:1, Interesting)

    by Anonymous Coward on Friday October 03, 2008 @06:43PM (#25251805)

    Only if you buy into the idiotic US business model. If we had things working the way they do in some countries, the consumer would be empowered to run any device on any network they want.

  • Point five is false. (Score:3, Interesting)

    by argent ( 18001 ) <peter.slashdot@2006@taronga@com> on Friday October 03, 2008 @06:47PM (#25251829) Homepage Journal

    The original iPhone WAS subsidized by AT&T. The fact that it was only available with AT&T service, so there was no unsubsidized price listed, doesn't mean there wasn't a subsidy.

    I imagine Apple will appeal on this basis at least.

  • My take (Score:1, Interesting)

    by Thail ( 1124331 ) on Friday October 03, 2008 @06:49PM (#25251851)

    My take on why apple should be punished isn't the exclusivity deal with AT&T being the only seller of the product, but with them disabling the product on other carriers, such that you can't use the itunes service if you did unlock the phone. Phones have been carrier locked for years, but most carriers can provide unlock codes for these phones once the contractual obligation is met, freeing the phone to be used with the other services. The iPhone however looses full functionality due to software restrictions installed by the manufacturer.

  • Re:Good (Score:5, Interesting)

    by IdahoEv ( 195056 ) on Friday October 03, 2008 @07:11PM (#25252027) Homepage

    Their extremely honest willingness to let you use your bandwidth as you see fit, [etc.]

    ...and their ability to keep up with the industry in other countries. A couple years ago I was shocked to hear that Korean, Scandinavian, and Japanese homes were regularly getting inexpensive > 100 Mb/s data lines. Last week, /. reported that Japanese telcos are rolling out Gigabit fiber for $55/mo.

    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.


  • by ArbitraryConstant ( 763964 ) on Friday October 03, 2008 @07:19PM (#25252105) Homepage

    Meh. It's still worthwhile if it creates a disincentive for Apple to do this.

  • by randomc0de ( 928231 ) on Friday October 03, 2008 @09:14PM (#25252889)

    so I don't see why artificially tying the iPhone to AT&T would be considered illegal under current legal definitions

    Seriously? Are you serious? Because there's an f'ing law against artificially tying products to services. It's illegal under current legal definitions because there's a law against it. Jesus.

  • by Space cowboy ( 13680 ) * on Friday October 03, 2008 @09:26PM (#25252981) Journal

    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 [] 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.


  • by milkmage ( 795746 ) on Friday October 03, 2008 @09:58PM (#25253155)
    "willfully bricking unlocked iPhones the way they did" - they did? funny, mine was hacked to use another SIM (just to see if it worked).. and subsequent patches worked just fine. had to hack it again to continue using a TMo SIM - but it was never bricked. show me the source for your comment.
  • by earlymon ( 1116185 ) on Friday October 03, 2008 @10:06PM (#25253195) Homepage Journal

    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.

  • by xero314 ( 722674 ) on Saturday October 04, 2008 @01:04AM (#25254005)

    Forcing people to buy one product in order to be able to buy another is a classroom example of an anticompetitive practice, which is banned in most civilized places

    As I mentioned above, this is not entirely true. Bundling products is perfectly reasonable and accepted in every country I know of. It's a matter of how that bundling is used. For example, a Ford dealer does not have to sell you a frame or body of a car separate from the engine, even though in many cases the engine that is supplied with the car is manufactured by another manufacturer (not 100% sure about for but I know that Lotus does that). My Apple computer comes bundled with an Intel processor, which is again, considered standard and acceptable practice.

    Again I am not defending Apple in this case, though I have my opinions, as I am just trying to point out that not all bundling is illegal or regulated, or even unfair.

  • Re:Precisely (Score:2, Interesting)

    by garote ( 682822 ) on Saturday October 04, 2008 @01:18AM (#25254093) Homepage

    "That's a bunch of crap. There is no such thing as irreparable damage to software."

    What, you've never overclocked an [expletive] Pentium before? You've never seen a fumbled BIOS upgrade? You've never seen a hacker stomp all over encryption hashes in NVRAM as part of an "unlock" procedure and then whine that the manufacturers should have anticipated and magically prevented his own abject clumsiness?

    "This is a clear example of monopoly tying, which is illegal."

    You think you can read the law like you can read code fragments? The law doesn't work that way. The iPhone is a subsidized phone.

"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." -- Howard Aiken