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Psystar calls Apple a 'monopoly' in antitrust charges

Mac clone maker says Apple's hold on Mac OS X lets it gouge consumers

August 29, 2008 12:00 PM ET

Computerworld - The Mac clone maker that has countered an Apple Inc. lawsuit with one of its own said that forcing the computer maker to undo an illegal tie between the Mac OS X operating system and its hardware would force it to drop prices, according to court documents filed Thursday.

Psystar Corp., a Doral, Fla.-based seller of Intel-based computers, also charged that Apple enjoys "monopoly power" from the licensing link it's forged between its hardware and the Mac OS.

In its response to an Apple lawsuit filed July 3 that accused Psystar of copyright and trademark infringement for pre-installing Leopard on systems, Psystar alleged that Apple violated several antitrust laws by trying to block users and others from installing Mac OS X on non-Apple computers.

In the long complaint, Psystar claimed that Apple "possesses monopoly power in the Mac OS market" that it has abused. "There is no technical reason that a third-party could not accumulate and assemble the hardware components in an Apple-Labeled Computer Hardware System such that said system would be capable of running the Mac OS," said Psystar's countersuit.

According to Psystar, Apple had embedded code in the Mac operating system that, when it recognizes non-Apple hardware, sends the system into a "kernel panic," a state usually associated with an internal fatal error. "The kernel panic is self-induced by Apple's embedding of code to prevent operability on computer hardware systems that are not Apple-Labeled Computer Hardware Systems," charged Psystar.

Much of the Psystar complaint was devoted to spelling out its antitrust legal strategy, which it distilled by accusing Apple of being "a monopolist in the Mac OS market."

Unlike companies that have much larger shares of their market, Apple has a very small slice of the overall PC market. According to Web metrics vendor Net Applications, for example, Apple's operating system accounted for just 7.8% of those it detected online in July.

The most recent data from Framingham, Mass.-based research firm IDC put Apple's U.S. sales share at the same 7.8% during the second quarter of 2008. By comparison, Dell Inc. accounted for 32% and Hewlett-Packard Co. owned 25.1% of the U.S. market share during the quarter.

Psystar's lawyers, however, made the case in their counterclaim that Apple has a 100% monopoly in the Mac OS space, which is so different from other operating systems, including Microsoft Corp.'s Windows, that other operating systems can't be considered substitutes.

"The Mac OS market is distinct and unique as compared to other operating systems ... including but not limited to the Windows operating system," said Psystar. "As such, Psystar alleges that the Windows operating system is not and cannot be considered an effective substitute for the Mac OS; the same holds true for any other operating system."

Psystar traced Apple's own marketing to bolster its contention that Mac OS X is distinct from other operating systems, and thus so unique that there is no alternative to Apple and its hardware. The clone maker, for instance, referred to the "Think Different" campaign that Apple ran in the 1990s and the current "Get a Mac" campaign that features actors playing the parts of Mac and PC.

The bottom line, Psystar said, is that consumers have had to pay more for a computer running Mac OS X than they would have if Apple had not tied the operating system to its own hardware. "Apple is free to control and charge customers supra-competitive prices," said Psystar.

Using configurations of Apple's MacBook and MacBook Pro laptops, and similarly equipped Intel-based laptops from Dell running other operating systems, Psystar put the revenue difference to Apple at nearly $500.

"Apple has engaged in a series of anticompetitive activities," the suit said. "Apple has, at the least, substantially lessened competition in the Mac OS Capable Computer Hardware Systems marketplace if not eliminated it in its entirety [and] as a result, maintains its monopoly position with respect to the Mac OS and the artificially created Apple-Labeled Computer Hardware System."

Apple has not responded to requests for comment on the Psystar countersuit.

Read more about Macintosh in Computerworld's Macintosh Topic Center.



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