The recent speech by Thomas Barnett, Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, shows once again who the people in Washington are working for. There are plenty of places that show how the whole business of government has been prostituted to serve a handful of business groups that finance the election campaigns of both parties, but that a member of the U.S. Department of Justice, which has as stated purpose "[t]o enforce the law and defend the interests of the United States according to the law;... and to ensure fair and impartial administration of justice for all Americans", uses a public forum to defend the not easily defensible position of a company that he should be investigating might become the poster-child of promiscuos relations between corporations and government.
In that talk, given at the George Mason University School of Law Symposium Managing Antitrust Issues in a Global Marketplace, Mr Barnett used different arguments to attack certain legal developments outside the US that seek to curtail Apple's abuse of its dominant position in the mobile music and video market. It first laid out the economic theoretical background by using Schumpeter's characterisation of static and dynamic efficiency (efficiency based on doing the same thing but better and efficiency based on doing something new that takes the place of the old thing) and mixing it with competition and innovation to say that protecting innovation is protecting competion, to then conclude that stronger IP protection helps competition (have you heard that before. Is like encouraging sexual relations to promote virginity!). Then, the talk used examples of industries where IP and innovation helped to create excellence in the US: telephone, phonograph, light bulbs, lasers, computers, television, and pharmaceutical; it is interesting but some of these industries are between the most regulated in the world and US has not been consistent in respecting other countries' IP on them. But the substance of the speech was to defend Apple (or attack any pretension of regulating it).
It is not the first time that happens, but it is interesting to hear (actually read) again, from the mouth of a member of the US Government, the fallacious argument that the music industry lost billions due to "piracy". There is no evidence that every download displaced a legitimate purchase and the facts speak by themselvesf: in September of 2003 the RIAA filled 261 lawsuits against egregious file swappers, and one of them was Brianna LaHara, a a 12-year-old honors student who lives in a New York City Housing Authority apartment. Can anyone in its right mind think that that girl could afford to buy legally the more than 1,000 songs that she downloaded? Well, those thounsands of songs are counted as part of the music industry losses and the American government is repeating it! But the real issue was not about the music industry (but it served to show how serious and unbiased the US government analysis was): it was about the wrong-guided that the attacks on Apple were.
Apple seems to need protection from the “assault in a number of jurisdictions on the ground that iTunes is too dominant and does not “interoperate” with devices other than iPods”. The assault, Mr Barnett goes on, are based on four theories, which are rebutted by the government representative.
Theory one: consumers are locked into buying songs only from the iTunes service and they would have to pay too high a price for iTunes songs.
Mr Barnett’s rebuttal: “consumers can upload other formats to (CD-Roms and MP3 files)” to iPods (is he suggesting that is OK to infringe copyright by downloading into iPods your CD’s music?) and “while it is true that Apple’s DRM software ensures that the first recording of a song downloaded from iTunes can only play on an Apple device, consumers can re-record an iTunes song in an MP3 format and play it on other devices”. (What about the anti circumvention provisions of the DMCA?) Finally, Apple has fended off music industry’s attempt to raise prices, so that’s good for consumers…is it? The current price of 79p in UK, 99c in Ireland and 99c in the US does not reflect either the cost of delivering nor the taxation schemes of different countries. They just represent a profiteering scheme where Apple gets an alleged more than 50% of what consumers pay (so after deducting what the music industry gets you can imagine how much the actual artist receives, but that is for the third theory)
Theory two: “Apple is selling songs on the cheap but devices on the dear and consumers […] are locked into buying the same expensive devices in the future”. DOJ’s man rebuttal: “Apple’s model is the opposite: consumers buy the expensive iPod device first, then have the option- not the obligation- to use the free iTunes software and buy cheap iTunes songs”. The problem with that line of reasoning is that if you want to follow the law, buying from iTunes is not an option (the famous interoperability we were talking about before), and the songs are not cheap.
Theory three: “information wants to be free”. Mr Barnett’s rebuttal: “creators want to be paid”. But again, if artists usually get 4.5p per song, which are sold at 79p, clearly the overused line about the poor creator that needs to be paid has become more an insult to intelligence and good taste than an argument for defending stringent IP laws. It seems that the law doesn’t need to protect the creators AND Apple+music industry; it needs to protect creators FROM Apple+music industry.
Theory four: “Apple may not be hurting consumers, but it is hurting competitors”. Mr Barnett’s rebuttal: “Antitrust law protects competition, not competitors”. The first problem with this rebuttal is that Apple might well be hurting consumers, and it is more than suspicious that a member of the Antitrust Division of the US Department of Justice has chosen to “misinterpret” and misuse Brooke Group Ltd. v Brown & Williamson Tobacco Corp., where the US Supreme Court was dealing with a “conscious parallelism among oligopolists” and not with a company like Apple that has more than 80% of market share.
And then, to put the cherry on the top of the cake (was that the expression?) Mr Barnett said “if government is too willing to step in as a regulator, rivals will devote their resources to legal challenges rather than business innovation”. Was he joking? The whole IP system has been modified to benefit IP owners so they don’t care anymore about innovation and instead use a lot of resources to use their IP rights strategically in courts of law; and Apple represents some of the most egregious examples (do you remember the lawsuits of Apple against creative Labs?)
In that talk, given at the George Mason University School of Law Symposium Managing Antitrust Issues in a Global Marketplace, Mr Barnett used different arguments to attack certain legal developments outside the US that seek to curtail Apple's abuse of its dominant position in the mobile music and video market. It first laid out the economic theoretical background by using Schumpeter's characterisation of static and dynamic efficiency (efficiency based on doing the same thing but better and efficiency based on doing something new that takes the place of the old thing) and mixing it with competition and innovation to say that protecting innovation is protecting competion, to then conclude that stronger IP protection helps competition (have you heard that before. Is like encouraging sexual relations to promote virginity!). Then, the talk used examples of industries where IP and innovation helped to create excellence in the US: telephone, phonograph, light bulbs, lasers, computers, television, and pharmaceutical; it is interesting but some of these industries are between the most regulated in the world and US has not been consistent in respecting other countries' IP on them. But the substance of the speech was to defend Apple (or attack any pretension of regulating it).
It is not the first time that happens, but it is interesting to hear (actually read) again, from the mouth of a member of the US Government, the fallacious argument that the music industry lost billions due to "piracy". There is no evidence that every download displaced a legitimate purchase and the facts speak by themselvesf: in September of 2003 the RIAA filled 261 lawsuits against egregious file swappers, and one of them was Brianna LaHara, a a 12-year-old honors student who lives in a New York City Housing Authority apartment. Can anyone in its right mind think that that girl could afford to buy legally the more than 1,000 songs that she downloaded? Well, those thounsands of songs are counted as part of the music industry losses and the American government is repeating it! But the real issue was not about the music industry (but it served to show how serious and unbiased the US government analysis was): it was about the wrong-guided that the attacks on Apple were.
Apple seems to need protection from the “assault in a number of jurisdictions on the ground that iTunes is too dominant and does not “interoperate” with devices other than iPods”. The assault, Mr Barnett goes on, are based on four theories, which are rebutted by the government representative.
Theory one: consumers are locked into buying songs only from the iTunes service and they would have to pay too high a price for iTunes songs.
Mr Barnett’s rebuttal: “consumers can upload other formats to (CD-Roms and MP3 files)” to iPods (is he suggesting that is OK to infringe copyright by downloading into iPods your CD’s music?) and “while it is true that Apple’s DRM software ensures that the first recording of a song downloaded from iTunes can only play on an Apple device, consumers can re-record an iTunes song in an MP3 format and play it on other devices”. (What about the anti circumvention provisions of the DMCA?) Finally, Apple has fended off music industry’s attempt to raise prices, so that’s good for consumers…is it? The current price of 79p in UK, 99c in Ireland and 99c in the US does not reflect either the cost of delivering nor the taxation schemes of different countries. They just represent a profiteering scheme where Apple gets an alleged more than 50% of what consumers pay (so after deducting what the music industry gets you can imagine how much the actual artist receives, but that is for the third theory)
Theory two: “Apple is selling songs on the cheap but devices on the dear and consumers […] are locked into buying the same expensive devices in the future”. DOJ’s man rebuttal: “Apple’s model is the opposite: consumers buy the expensive iPod device first, then have the option- not the obligation- to use the free iTunes software and buy cheap iTunes songs”. The problem with that line of reasoning is that if you want to follow the law, buying from iTunes is not an option (the famous interoperability we were talking about before), and the songs are not cheap.
Theory three: “information wants to be free”. Mr Barnett’s rebuttal: “creators want to be paid”. But again, if artists usually get 4.5p per song, which are sold at 79p, clearly the overused line about the poor creator that needs to be paid has become more an insult to intelligence and good taste than an argument for defending stringent IP laws. It seems that the law doesn’t need to protect the creators AND Apple+music industry; it needs to protect creators FROM Apple+music industry.
Theory four: “Apple may not be hurting consumers, but it is hurting competitors”. Mr Barnett’s rebuttal: “Antitrust law protects competition, not competitors”. The first problem with this rebuttal is that Apple might well be hurting consumers, and it is more than suspicious that a member of the Antitrust Division of the US Department of Justice has chosen to “misinterpret” and misuse Brooke Group Ltd. v Brown & Williamson Tobacco Corp., where the US Supreme Court was dealing with a “conscious parallelism among oligopolists” and not with a company like Apple that has more than 80% of market share.
And then, to put the cherry on the top of the cake (was that the expression?) Mr Barnett said “if government is too willing to step in as a regulator, rivals will devote their resources to legal challenges rather than business innovation”. Was he joking? The whole IP system has been modified to benefit IP owners so they don’t care anymore about innovation and instead use a lot of resources to use their IP rights strategically in courts of law; and Apple represents some of the most egregious examples (do you remember the lawsuits of Apple against creative Labs?)
The funny side is that if an official of the equivalent of the Department of Justice of any developing country says something that goes half the way that Mr Barnett has gone, the US Deparment of State would be calling for an end of corruption, stopping the intervention in judicial matters and respect for the rule of law...
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