iTunes sues Apple over monopoly practices and iPod rigging

With all the images of "freedom" found in iPod ads, it's sobering to realize that Apple actually wants customers to be chained to the monopoly music distribution channel it controls.

• An unhappy iTunes online music store customer is suing Apple Computer Inc. (AAPL.O: Quote, Profile, Research), alleging the company broke antitrust laws by only allowing iTunes to work with its own music player, the iPod, freezing out competitors, court filings showed.
• Apple, which opened its online music store in April 2003 after introducing the iPod in October 2001, uses technology to ensure each digital song bought from its store only plays on the iPod.
• The suit was filed on Monday in the U.S. District Court in San Jose.
• The key to such a lawsuit would be convincing a court that a single product brand like iTunes is a market in itself separate from the rest of the online music market, according to Ernest Gellhorn, an antitrust law professor at George Mason University.
• Since rolling out the iPod, which has sold nearly 6 million units and was a top Christmas gift this past holiday season, Apple has garnered 87 percent of the market for portable digital music players, market research firm NPD Group has reported.
• "Apple has unlawfully bundled, tied, and/or leveraged its monopoly in the market for the sale of legal online digital music recordings to thwart competition in the separate market for portable hard drive digital music players, and vice-versa," the suit charged.
• Apple's online music store uses a different format for songs than Napster, Musicmatch, RealPlayer and others.
• The rivals use the MP3 format or Microsoft Corp.'s (MSFT.O: Quote, Profile, Research) WMA format while Apple uses AAC, which it says helps thwart piracy.
• While songs saved in the AAC format can be saved in the MP3 format and played on virtually any digital music player, songs bought from the iTunes music store have an added software tag, which Apple calls FairPlay DRM, or digital rights management, added to the file that contains the song.