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IPhone antitrust lawsuit goes class action

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- A lawsuit accusing Apple and AT&T of monopolizing the iPhone can proceed as a class action, a federal judge ruled late last week.

Anyone in the United States who entered a two-year contract with AT&T for an iPhone since June 29, 2007, can join in on the suit, Judge James Ware of the U.S. District Court for the Northern District of California said Thursday. Apple has sold in excess of 50 million iPhones, though the company has not stated how many were sold to U.S. customers.

Nine separate lawsuits have been unified into one action focusing on the tight grip AT&T and Apple have on the iPhone's services and applications. The consolidated complaint alleges that Apple and AT&T violated antitrust law by forcing iPhone users to sign a two-year contract for voice and data services, while they "secretly agreed to technologically restrict ... voice and data services for five years, i.e., after plaintiffs' initial two year service period expired."

In other words, if consumers wanted to continue as iPhone customers after their two-year agreement, they were obligated to sign another contract with AT&T, with no option to jump to another carrier. Court documents show that Apple entered an unusually long, five-year exclusivity deal with AT&T.

The lawsuit also claims that Apple holds an anticompetitive monopoly over iPhone applications, because the company only allows third-party applications in its App Store that it has approved. Apple has been known to ban certain applications that it finds offensive, buggy or fraudulent. CEO Steve Jobs defended the company's approval process in early June, saying 95% of the submitted apps are approved just a week after submission.

AT&T (T, Fortune 500) and Apple (AAPL, Fortune 500) declined to comment.

Judge Ware's ruling wasn't a complete win for the plaintiffs. Ware dismissed several other claims, including one that accused Apple of intentionally "bricking," or disabling, iPhones that had been "jail broken" by customers who hacked their phones to make them work on competing wireless networks.

When Apple released an iPhone OS update in September 2007, customers discovered that downloading the update disabled unlocked iPhones. But the judge ruled that the plaintiffs could not prove intentional harm by Apple, and noted that the customer had to choose to download the new software version -- Apple did not force people to install it.

Judge Ware also denied a claim by the plaintiffs that they suffered harm after Apple erased third-party applications from their iPhones, an action many customers complained about on tech blogs. But Ware dismissed the claim on a technicality, and said he wanted to "put Apple on notice that destruction of third party applications" could be grounds for later injury claims.  To top of page

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