The new Apple has built itself on its iconic MP3 player, which grew to a commanding market share and now holds roughly 90 percent of the hard drive-based MP3 player market and 70 percent of the total MP3 player market. This dominant position has led many; including readers at DailyTech to suggest that it has a monopoly on the market and may be abusing its position. Now a Taiwanese competitor, Luxpro has accused Apple of holding an abusive monopoly, formerly filing charges in Arkansas court.
Luxpro has had a lengthy and heated legal war against Apple over the last few years. The company was originally founded in December of 2002. In January of 2004 it released its first product -- the EZ Share MP3 player. Following its minor success, Luxpro proceeded to introduce new players. In March, 2005, at the CeBit trade show in Hanover, Germany it unveiled its new model, the Super Shuffle MP3 player.
Apple was not happy. Not only did the new player sound suspiciously like its iPod Shuffle in name, but it also resembled the first generation iPod Shuffle design in form factor. Apple sought an injunction against Luxpro to prevent its sale. After a German court granted the injunction, Luxpro responded by renaming its player the "Super Tangent".
Unable to force the upstart company out of the market by legal means, Luxpro claims Apple resorted to thuggish tactics to put it out of business. It "engaged a third-party to purchase a Super Tangent from LuxPro" and also obtained copies of two proprietary Luxpro price lists. Luxpro claims that Apple then began to send it threatening letters, demanding that it remove its players from the market.
Apple has already lost once to Luxpro. Apple sought another injunction in July 2005 in Shihlin District Court in Taipei. The battle was hard fought and the injunction was eventually granted. However, it was relatively quickly overturned on a spirited appeal by Luxpro. A frustrated Apple took its efforts to stomp out the competitor to the Taiwanese Supreme Court, only to lose.
Emboldened by its victory announced January, 2007, it decided it would take the fight to Apple. It announced that it would be $100M USD in damages. That complaint has at last been filed in U.S. court. It is not seeking a specific amount of damages with the current filing but now is requesting damages "determined by a jury trial, plus attorneys' fees".
Luxpro calls Apple "abusive" and says that it used its dominant position to "stomp out competition". It not only accuses Apple of aggressive tactics towards Luxpro, but also towards its suppliers and partners.
According to the complaint, "While Apple's over-reaching injunctions were on appeal, Apple sent warning letters to other companies doing business with Luxpro demanding that they cease doing business with Luxpro. For example, Apple placed significant pressure on InterTAN, a subsidiary of U.S.-based consumer electronics giant Circuit City, to drop Luxpro's MP3 players from its retail shelves."
Indeed, it is reported that in September, 2005 InterTAN destroyed 4,500 Luxpro players. It also stopped placing orders with the company, says Luxpro. Luxpro adds that after the InterTAN rejection Radio Shack and Best Buy also stopped doing business with it.
According to the complaint, Apple also unsuccessfully issued similar demands to Singapore's Orchard Company, Japan's Kaga Electronics, and Germany's Web Worker. It also claimed that suppliers ASUSTek Computer and Synnex Technology International were urged by Apple to pressure Luxpro's distributors, including Carrefour, ET Mall, EUPA, and 3C.
If Luxpro wins, it could open the floodgate for a plethora of other suits, as Apple has reportedly forced many smaller competitors out of the market, through various tactics.
Apple has refused to comment on the case.
Aside from its corporate and class action suits pending, Apple also is subjecting to an ongoing antitrust investigation by the European Union. The EU, which takes a tougher stance on antitrust issues, has indicated that Apple and its iTunes software may have an abusive monopoly on the MP3 player or online music market.