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 Politics: Laissez Faire Capitalism
Apple, AT&T and Antitrust
TheStreet, United States Thursday, July 15, 2010

A federal judge in california ruled that an antirtrust class action suit is fre to proceed against Apple and AT&T for making an agreement to sell only locked phones. There is nothing that should be illegal in the deal. It doesn't hurt competition or drive up prices. On the contrary, this is competition, writes Thomas Bowden in TheStreet.

In California, a federal judge has ruled that an antitrust class action suit can proceed against Apple(AAPL) and AT&T(T). What have those companies done to warrant being hauled into court? Basically, they agreed to sell only "locked" iPhones. A locked phone is one that works only on a specific mobile network -- in this case, AT&T's network.


Apple and AT&T decide to make money by working together. Although details of their deal aren't public, it's clear that AT&T saw an opportunity to increase its subscriber base by becoming the only retailer of iPhones. Apple, for its part, looked forward to receiving payments from AT&T based on a percentage of every iPhone subscriber's monthly bill. Was this collaboration a good idea? You be the judge: consumers have bought 50 million iPhones in three years.

Let's pause at this point to remind ourselves that the Apple-AT&T agreement does not interfere with anyone else's smartphones or networks.


So far, does this sound like conduct that should be illegal?

"Hurt competition?" This is competition. Apple and AT&T are competing with other makers of smartphones and with other mobile networks -- and those other makers and networks are competing right back. In a free market, everyone else in the universe is at liberty to enter the market and offer a product that is better, cheaper, or both. No competitor can forcibly prevent another's efforts.

"Drove up prices for consumers?" There was no price for an iPhone before Apple created and sold it. There was  no price for an AT&T iPhone subscription until AT&T offered it. Those prices were not "driven up" from some arbitrary level that the plaintiffs would have wished to see. The prices were set by the owners of the goods and services being sold. Consumers were free to buy or to wait for some competitor to offer an equally attractive, unlocked phone.

This article was published in the TheStreet on Thursday, July 15, 2010. Please read the original article here.
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