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iPhone Antitrust Suit Clears Class Certification Hurdle

Posted  July 14, 2010

Judge James Ware of the Northern District of California has granted a motion for certification of a class of iPhone consumers in an antitrust suit against Apple and AT&T.  An estimated 15 to 20 million U.S. iPhone purchasers are potential members of the class.

Filed in 2007, the suit alleges that Apple and AT&T secretly agreed to restrict iPhone service for five years.  Although plaintiffs purchased a two-year service agreement which could be terminated at any time by paying a $175 fee, the suit alleges that Apple and AT&T ensured that iPhone users are still locked in to AT&T, as the iPhone won’t work on any other compatible network – such as T-Mobile.

In 2008, the court held that the plaintiffs adequately alleged the existence of two “iPhone aftermarkets” – one for iPhone voice and data service and one for iPhone applications.  In ruling on class certification, the court rejected the argument that determining market power in the aftermarkets would require “individualized inquiry” into whether each class member “knowingly and voluntarily” gave the defendants this market power because they knew about AT&T exclusivity and Apple’s control over iPhone apps.  The court held that “whether consumers of iPhones ‘knowingly’ entered into de facto commitments to be monopolized can be analyzed on a class-wide basis.”

Likewise, defendants argued that plaintiffs’ damages expert failed to raise a common question because he analyzed the broader value of a customer’s ability to switch carriers rather than the impact of defendants’ specific challenged practices – the non-disclosure of the five-year exclusivity agreement.  The court concluded that the broader analysis was plausible.

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