Lawsuit against Apple (NASDAQ:AAPL)

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By Chris Hillman on December 10, 2014 Intl News

Apple (NASDAQ:AAPL) used to restrict its itunes facility for those customers who were going to switch from ipod to any other digital music device. Those customers had to burn songs on a CD and then reload them. Apple used this strategy to monopolize its music services so that they could only be used using Apple devices. According to a professor from Stanford University the customers can sue Apple in a jury. For an amount of more than $1billion for this illegal monopolizing strategy.

Analysts see this as a way to reduce competition. This University professor further described it by adding that it is the same case with rival digital music players like Zune of Microsoft. Microsoft’s customers would also have to go through the same procedure. The point here is that all the substitutes have costs. Therefore Apple (NASDAQ:AAPL)’s customers are locked and are unable to switch to any other music player. In short there is a very high customer switching cost.

This made Apple consumers less sensitive about price regarding the ipod devices and thus they were exposed to Apple (NASDAQ:AAPL)’s pricing campaign. However a lawsuit was eventually filed back in 2005 which continues to this day. The jurors are expected to hear the testimonies this weeks end and are expected to give a decision. The attorneys are representing their respective consumers and retailers. The consumers are as many as 8million, sellers and retailers almost 500.

These are the people which bought ipods from the 2006 to 2009 time period and were a victim of Apple (NASDAQ:AAPL)’s pricing strategy. The music simply couldn’t play when they tried to play it through another digital music player made by a competitor RealNetworks (NASDAQ:AAPL) or (RNWK). According to the Roger Noll, the university professor, itunes 7.0 were designed to block downloads by other music players, for example RealNetworks.

So that the customers were stuck with ipods and had to bear the price increase of 7.45% or $16.32 costing the customers about $195million in total. Noll calculated this data by keeping the ipod sales record and market determining factors as base. According to the Economists reports the reseller were overcharged by a huge number of $149million that is about 2.38%. If the jury convicts Apple then it would might have almost a triple of this amount under the Federal antitrust law for compensating the damages.

Apple (NASDAQ:AAPL) on the other hand denied the charges made by Noll and declared the RealNetworks as a minor party which doesn’t exactly have much to do with the case. Apple (NASDAQ:AAPL) further said that Noll’s statement is unlikely there is no available evidence or proof that Apple (NASDAQ:AAPL) overcharged its customers in any possible way or they were stuck or locked up with ipods. Apple (NASDAQ:AAPL) further clarified by claiming the technological changes as a product enhancement.

According to Apple (NASDAQ:AAPL) it’s a routine to make changes to their products to further develop and modify them and keep them up with the latest market trends.