Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 1 of 13
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`Case No. 12-cv-05404-YGR
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`ORDER GRANTING IN PART DENYING IN
`PART DEFENDANT’S MOTION FOR
`SUMMARY JUDGMENT
`Re: Dkt. Nos. 78, 126
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`ZACK WARD, ET AL.,
`Plaintiffs,
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`v.
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`APPLE INC.,
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`Defendant.
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`Plaintiffs Ward and Buchar bring this putative class action against defendant Apple Inc.
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`alleging violations of Section 2 of the Sherman Act for a conspiracy to monopolize trade in the
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`market for iPhone voice and data services. (Dkt. No. 1, “Comp.”)
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`On December 15, 2015, the Court denied Apple’s motion to dismiss, but indicated that it
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`would entertain a motion for summary judgment solely on the issue of the existence of a relevant
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`market for antitrust purposes. (Dkt. No. 72.) Apple filed such motion on February 2, 2016. (Dkt.
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`No. 78.) The Court heard oral arguments on the motion on March 29, 2016, and ordered the
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`parties to conduct additional discovery, deferring ruling thereon. (Dkt. Nos. 97, 100.) With the
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`benefit of additional discovery, the parties filed supplemental briefs in September and October of
`2016. (Dkt. Nos. 112, 118.)1
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`1 On November 21, 2016, plaintiffs filed an administrative motion to supplement the
`summary judgment record and file a sur-reply. (Dkt. No. 126.) Having considered such motion,
`and for good cause appearing, the Court GRANTS plaintiffs’ administrative motion.
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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 2 of 13
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`Having considered the pleadings, the papers and exhibits submitted on the motion, and oral
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`arguments held on January 31, 2017, and for the reasons set forth more fully below, the Court
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`finds that plaintiffs have raised sufficient facts to show the existence of an antitrust market, albeit
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`more narrow than plaintiffs contemplate. Accordingly, the Court GRANTS IN PART and DENIES IN
`PART Apple’s motion for summary judgment.2
`I.
`BACKGROUND
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`Plaintiffs seek to represent a class of persons who purchased iPhones and paid for voice
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`and data service from AT&T between October 19, 2008 and February 3, 2011 (the “Class
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`Period”). Plaintiffs bring a single claim against Apple under Section 2 of the Sherman Act,
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`alleging that Apple conspired with AT&T to monopolize an aftermarket for iPhone voice and data
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`services. For purposes of the instant motion, Apple contends that no such illegal antitrust
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`aftermarket exists under applicable laws and economic theories. The following undisputed facts
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`are relevant to such argument and plaintiffs’ claims to the contrary:
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`Apple launched its original cellular telephone, the iPhone 2G, on June 29, 2007. (Dkt. No.
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`83-8, Fenger Decl. ¶ 8.) Prior to such launch, Apple and AT&T entered into an agreement by
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`which AT&T would be the exclusive provider of cellular voice and data service for the iPhone in
`the United States (the “Agreement”). (Id. at ¶ 9.)3 By the terms of the Agreement, the exclusivity
`period was to end five years after the effective date of the Agreement, i.e. August 10, 2011. (Dkt.
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`No. 83-9 at 2, 5.) The Agreement also allowed either party to terminate the Agreement for
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`convenience and upon notice, prior to the second anniversary of the iPhone’s commercial launch.
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`(Id. at 19.) Thus, given that the iPhone’s commercial launch was June 29, 2007 (Fenger Decl. ¶
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`8), AT&T was only guaranteed to be the exclusive provider for the iPhone until June 29, 2009.
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`2 In connection with the parties’ filings on this motion, they submitted administrative
`motions to file parts of their briefs and certain exhibits under seal. (Dkt. Nos. 83, 90, 111, 117,
`and 125.) The Court addresses each of those motions by separate order.
`3 During the periods relevant to the instant action, similar exclusivity provisions between
`cellular phone manufacturers and service and data providers were common in the industry, at least
`for limited periods of time. (See Fenger Decl. ¶¶ 2–3; Dkt. No. 111-8, Wilkie Decl. ¶ 27.)
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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 3 of 13
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`In June 2008, around the time the second generation of iPhones was being released (the
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`iPhone 3G), Apple and AT&T modified the Agreement to include a different and specific
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`termination date, namely December 31, 2010. The amendment to the Agreement also provided for
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`a significant change to the manner in which Apple earned revenues from the sales of the iPhone.
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`Under the original Agreement, Apple shared in the revenues earned by AT&T from its sales of
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`voice and data service for iPhones. (Dkt. No. 83-9 at 6–7.) The amendment eliminated revenue
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`sharing and replaced it with a subsidy model, through which AT&T agreed to subsidize the cost of
`the iPhone if the buyer agreed to enter into a two-year service contract. (Dkt. No. 83-10 at 3–5.)4
`Prior to, and during the Class Period, Apple and AT&T advertised both that AT&T would
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`be the exclusive provider of voice and data service for the iPhone (at least in the United States)
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`and that consumers were required to purchase a two-year contract with AT&T to activate the
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`iPhone. (Dkt. No. 80-1 at 2.) Such information also appeared in the following: (i) the box in
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`which the iPhone was sold (Dkt. No. 80-2 at 2); (ii) certain websites related to Apple and AT&T
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`(Dkt. No. 120-4); and (iii) a pop-up screen during the iPhone activation process (Dkt. No. 79-1 at
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`3). In light of these disclosures and the subsidy model in place during the Class Period, the iPhone
`was essentially sold bundled together with a two-year service plan through AT&T.5 Relevant
`here, the two-year service plan contracts entered into between consumers and AT&T allowed
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`consumers to terminate their plans with AT&T upon payment of a $175 termination fee. (Dkt.
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`No. 82-3 at 11.) Additionally, in such a case, the contract allowed AT&T to recover “any
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`handsets and accessories purchased with” the service plan. (Id.)
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`4 During the Class Period, the parties agree that such a subsidy model was the industry
`standard by which “virtually all cellular phones” have been sold in the United States. (Dkt. No.
`111-6 at 7, Issue 1, Fact 17.)
`5 Plaintiffs submitted evidence suggesting that, at least in some circumstances, gaps
`existed between when consumers purchased an iPhone and when they activated or purchased
`AT&T service for the same. (See, e.g., Dkt. No. 111-2 at 2 (indicating that the average delay
`between purchase and activation for iPhones from June through September 2007 was two days).)
`However, for the reasons stated herein, the Court finds such gaps irrelevant for the purposes of
`determining whether a relevant antitrust market exists for iPhone voice and data services.
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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 4 of 13
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`Notwithstanding the foregoing, plaintiffs have also produced evidence suggesting that the
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`unlock codes for the iPhones, necessary to enable the iPhone’s use with other carriers, were not
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`released by AT&T until April 2012. (Dkt. No. 113-9 at 2.) Notably, until the exclusivity
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`agreement formally ended in December 2010, iPhones were produced to function only on the
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`Global System for Mobile communication network (“GSM”). (Fenger Decl. ¶ 7.) At the time,
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`two major United States networks existed for cellular service, namely the GSM network and the
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`Code Division Multiple Access network (“CDMA”). (See Dkt. No. 111-8, Wilkie Decl. at ¶¶ 10–
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`11.) During the Class Period, generally, phones built to operate on the GSM network were limited
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`to AT&T or T-Mobile as providers while those built to operate on the CDMA network were
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`limited to using either Sprint or Verizon. (Id.) Thus, some evidence suggests that consumers who
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`purchased a GSM-compatible iPhone prior to December 31, 2010 still had to remain on the AT&T
`network until April 2012, or else purchase a new phone.6 Additionally, an open factual question
`remains as to whether iPhone purchasers were aware that AT&T and Apple would refuse to
`unlock their phones for purposes of international travel.7
`II.
`LEGAL FRAMEWORK FOR SUMMARY JUDGMENT
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`Summary judgment is appropriate when no genuine dispute as to any material fact exists
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`and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A party
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`seeking summary judgment bears the initial burden of informing the court of the basis for its
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`motion, and of identifying those portions of the pleadings, depositions, discovery responses, and
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`6 A dispute of fact exists as to whether the GSM-compatible iPhones could fully operate
`on the T-Mobile network during the Class Period. However, such dispute is not material to the
`Court’s ruling on Apple’s motion, and thus, the Court need not address the same at this time. (See
`Dkt. No. 111-6 at 3, Issue 1, Fact 6.)
`7 In this regard, Dr. Wilkie opined thus: “Cellular carriers, including ATTM, customarily
`unlock a GSM phone when a customer travels overseas. This allows customers to replace the SIM
`card with a card from a local cellular carrier and thus avoid international roaming fees. However,
`ATTM has refused to unlock iPhones. Consumers who paid anticompetitive foreign roaming
`charges to ATTM suffered a common impact. I understand that ATTM has developed a
`methodology that it has used to compensate some iPhone customers who have paid such foreign
`roaming charges. I anticipate that, following further discovery, I will be able to evaluate ATTM’s
`methodology and determine how many iPhone customers have been partially or fully compensated
`by ATTM so that I can calculate the economic damages resulting from ATTM’s anticompetitive
`roaming charges.” (Dkt. No. 111-8, Wilkie Decl. ¶ 70.)
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`affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v.
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`Catrett, 477 U.S. 317, 323 (1986). Material facts are those that might affect the outcome of the
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`case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The “mere existence of some
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`alleged factual dispute between the parties will not defeat an otherwise properly supported motion
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`for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. at
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`247–48 (dispute as to a material fact is “genuine” if sufficient evidence exists for a reasonable jury
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`to return a verdict for the non-moving party) (emphases in original).
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`Where the moving party will have the burden of proof at trial, it must affirmatively
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`demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun
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`v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the opposing party
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`will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the
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`district court that the opposing party lacks evidence to support its case. Id. If the moving party
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`meets its initial burden, the opposing party must then set out “specific facts” showing a genuine
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`issue for trial in order to defeat the motion. Id. (quoting Anderson, 477 U.S. at 250). The
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`opposing party’s evidence must be more than “merely colorable” and must be “significantly
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`probative.” Anderson, 477 U.S. at 249–50. Further, that party may not rest upon mere allegations
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`or denials of the adverse party’s evidence, but instead must produce admissible evidence that
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`shows a genuine issue of material fact exists for trial. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz
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`Cos., Inc., 210 F.3d 1099, 1102–03 (9th Cir. 2000); Nelson v. Pima Cmty. College Dist., 83 F.3d
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`1075, 1081–82 (9th Cir. 1996) (“mere allegation and speculation do not create a factual dispute”);
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`Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 922 (9th Cir. 2001) (“conclusory
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`allegations unsupported by factual data are insufficient to defeat [defendants’] summary judgment
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`motion”).
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`When deciding a summary judgment motion, a court must view the evidence in the light
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`most favorable to the non-moving party and draw all justifiable inferences in its favor. Anderson,
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`477 U.S. at 255; Hunt v. City of Los Angeles, 638 F.3d 703, 709 (9th Cir. 2011). However, in
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`determining whether to grant or deny summary judgment, a court need not “scour the record in
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`search of a genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996)
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`(internal quotations omitted). Rather, a court is entitled to “rely on the nonmoving party to
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`identify with reasonable particularity the evidence that precludes summary judgment.” See id.;
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`Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001) (“The district
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`court need not examine the entire file for evidence establishing a genuine issue of fact, where the
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`evidence is not set forth in the opposing papers with adequate references so that it could
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`conveniently be found.”). Ultimately, “[w]here the record taken as a whole could not lead a
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`rational trier of fact to find for the nonmoving-party, there is no genuine issue for trial.”
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`Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation
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`omitted).
`III.
`ANTITRUST AFTERMARKETS UNDER KODAK AND NEWCAL
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`To prove a conspiracy to monopolize in violation of Section 2, plaintiffs must prove four
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`elements: “(1) the existence of a combination or conspiracy to monopolize; (2) an overt act in
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`furtherance of the conspiracy; (3) the specific intent to monopolize; and (4) causal antitrust
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`injury.” Paladin Assocs., Inc. v. Montana Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003).
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`Additionally, plaintiffs must prove both that a “relevant market exists and that the defendant has
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`power within that market.” Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044 (9th Cir.
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`2008). Here, plaintiffs assert that the “relevant market” is the aftermarket for iPhone voice and
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`data services, arguing that Apple’s undisclosed exclusivity arrangement with AT&T illegally
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`created a monopoly in the same. (Dkt. No. 90-4 at 7.)
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`Plaintiffs’ claims emanate from the Supreme Court’s watershed decision in Eastman
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`Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992), which created a new avenue
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`for plaintiffs to allege a relevant antitrust market. In Kodak, the Supreme Court addressed the
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`juxtaposition of a defendant’s market power in the primary equipment market, or lack thereof,
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`with the possibility of market power in derivative aftermarkets. Id. at 455. The Supreme Court
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`held that competition in the primary equipment market does not necessarily preclude antitrust
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`liability in certain circumstances for derivative aftermarkets. Id. at 471.
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`The markets addressed in Kodak involved the following: (i) a primary market for
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`photocopiers and micrographic equipment and (ii) a derivative aftermarket for service and
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`replacement parts for such equipment. Id. With respect to the latter, beginning in the early 1980s,
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`independent service organizations (“ISOs”) unrelated to the Eastman Kodak Company began
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`repairing and servicing Kodak equipment. Id. at 457. However, in the late 1980s, Kodak
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`implemented a new policy in which it would only sell replacement parts for its machines to
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`“buyers of Kodak equipment who use Kodak service or repair their own machines,” effectively
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`eliminating ISO competition in the service aftermarket. Id. at 458. The ISOs filed suit against
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`Kodak claiming that it had “unlawfully monopolized and attempted to monopolize the sale of
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`service for Kodak machines.” Id.
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`The district court granted summary judgment in favor of Kodak and the Ninth Circuit
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`reversed holding that Kodak had “sufficient economic power in the tying product market [parts] to
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`restrain competition appreciably in the tied product market [service].” Id. at 460. The Ninth
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`Circuit further held that it was enough that the ISOs had “presented evidence of actual events from
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`which a reasonable trier of fact could conclude that . . . competition in the [equipment] market
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`does not, in reality, curb Kodak’s power in the parts market.” Id. On appeal, the Supreme Court
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`acknowledged that the tying arrangement alleged in the complaint could be a violation of the
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`antitrust laws if the “seller has ‘appreciable economic power’ in the tying product market and if
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`the arrangement affects a substantial volume of commerce in the tied market.” Id. at 462. Kodak
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`did not dispute that its arrangement affected a substantial volume of interstate commerce but
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`argued that (i) its activities were not a tying arrangement and (ii) in any event, it did not exercise
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`appreciable economic power in the tying market. Id.
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`The second of these arguments is most relevant to the instant motion. Kodak contended
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`that it could not exercise the necessary market power for a Sherman Act violation because
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`competition existed in the equipment market. Id. at 465. Specifically, Kodak argued that any
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`exercise of market power in the market for parts and service “at least would be offset by a
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`corresponding loss in profits from lower equipment sales as consumers began purchasing
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`equipment with more attractive service costs.” Id. at 466. The Supreme Court held that, as a
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`matter of law, the “fact that the equipment market imposes a restraint on prices in the aftermarket
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`by no means disproves the existence of power in those markets.” Id. at 471 (holding that there “is
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`no immutable physical law—no ‘basic economic reality’—insisting that competition in the
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`equipment market cannot coexist with market power in the aftermarkets”).
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`The Supreme Court thus proceeded to the narrower question of whether, under the
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`circumstances in Kodak, the assertion of power in the aftermarket was unreasonable. Id. Kodak’s
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`central theory was that higher service prices would lead to a drop in equipment sales. Id. at 472.
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`However, the evidence in the record revealed otherwise. The Supreme Court found persuasive the
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`ISOs’ explanation that the existence of “significant information and switching costs” could “create
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`a less responsive connection between service and parts prices and equipment sales,” thus allowing
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`Kodak to exercise market power in the former even where competition existed in the latter. Id. at
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`473 (explaining that for the “service-market price to affect equipment demand, consumers must
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`inform themselves of the total cost of the ‘package’—equipment, service, and parts—at the time of
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`purchase; that is, consumers must engage in accurate lifecycle pricing”).
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`With regard to information costs, the Supreme Court explained: “Given the potentially
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`high cost of information and the possibility that a seller may be able to price discriminate between
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`knowledgeable and unsophisticated consumers, it makes little sense to assume, in the absence of
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`any evidentiary support, that equipment-purchasing decisions are based on an accurate assessment
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`of the total cost of equipment, service, and parts over the lifetime of the machine.” Id. at 475–76.
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`With regard to switching costs, the Supreme Court stated that a “seller profitably could maintain
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`supracompetitive prices in the aftermarket if the switching costs were high relative to the increase
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`in service prices, and the number of locked-in customers were high relative to the number of new
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`purchasers.” Id. at 476. On such bases, the Supreme Court held that there was a question of fact
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`“whether information costs and switching costs foil the simple assumption that the equipment and
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`service markets act as pure complements to one another.” Id. at 477.
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`The Supreme Court’s decision in Kodak thus created the framework within which courts
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`have addressed antitrust liability in the context of derivative aftermarkets. The Ninth Circuit
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`grappled with the same in analyzing the existence of a relevant antitrust aftermarket in Newcal.
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`There, parties leased name-brand copier equipment to commercial customers and also provided
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`service “contracts for the maintenance of that equipment during the term of the lease.” Id. at 1043.
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`The plaintiff in Newcal alleged that the defendant exercised illegal market power over the
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`aftermarket for lease-end service contracts by amending “customers’ lease agreements and service
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`contracts without disclosing that the amendments would lengthen the term of the original
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`contract.” Id.
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`The district court dismissed the action, finding that the plaintiff had failed to allege a
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`relevant antitrust market, and the Ninth Circuit reversed. Id. at 1044. In so reversing, the Ninth
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`Circuit acknowledged three antitrust principles: First, “the law permits an antitrust claimant to
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`restrict the relevant market to a single brand of the product at issue.” Id. at 1048. Second,
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`antitrust claims cannot rest on “market power that arises solely from contractual rights that
`consumers knowingly and voluntarily gave to the defendant.” Id. (emphasis in original).8 Third,
`given the law allows an “inquiry into whether a consumer’s selection of a particular brand in the
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`competitive market is the functional equivalent of a contractual commitment,” the analysis should
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`center on whether such consumers entered into certain transactions “knowing that they were
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`agreeing to such a commitment.” Id.at 1049.
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`Against this legal framework, both parties cite approvingly to an article published not long
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`after the Supreme Court’s decision in Kodak, which lays out four different economic
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`circumstances in which an antitrust market could manifest. See Carl Shapiro, Aftermarkets and
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`Consumer Welfare: Making Sense of Kodak, 63 Antitrust L.J. 483 (Winter 1995). Of particular
`relevance to the situation at bar is Shapiro’s “surprise” theory of antitrust aftermarkets.9 “The
`surprise theory starts from the assumption that buyers in the aftermarket are vulnerable, and asks
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`whether the equipment manufacturer will find it profitable to unexpectedly change its policies so
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`as to exploit them.” Id. at 488. Shapiro explains that under this theory, injury would occur if
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`8 The Ninth Circuit in Newcal acknowledges that where “alleged market power flows from
`contractual exclusivity,” an antitrust aftermarket is not created. Id. at 1050 (citing Queen City
`Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997) and Forsyth v. Humana, Inc., 114
`F.3d 1467 (9th Cir. 1997)). Apple, however, concedes that it does not fall under Newcal’s safe
`harbor for contractually created rights. Thus, the Court does not address such issues further.
`9 The parties have not focused on the other three theories: (i) costly information; (ii)
`limited manufacturer commitment; and (iii) price discrimination.
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`9
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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 10 of 13
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`“buyers had anticipated or relied on competitive aftermarkets, but some change in the
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`manufacturer’s policies blocked that competition.” Id.
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`Thus, with this background in mind, the Court turns to an analysis of whether the particular
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`circumstances surrounding sales of the iPhone and purchasing service from AT&T during the
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`proposed Class Period gave rise to an antitrust aftermarket, and if so, to what extent.
`IV.
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`DISCUSSION
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`To assert a relevant antitrust market in the secondary market, plaintiffs first argue the
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`existence of a separate and distinct secondary market. Said differently, plaintiffs claim that the
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`primary purchase of the iPhone created a locked-in base of consumers who were then forced to
`purchase iPhone voice and data services from AT&T, i.e. the secondary market.10 To support this
`argument, plaintiffs claim, as they must, that the purchase of the iPhone and the service contracts
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`were temporally distinct transactions.
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`The Court disagrees. To the extent any temporal disconnect existed between the purchase
`of the iPhone and the activation of AT&T services, the Court finds the period insignificant.11
`Although some buyers may not have activated their iPhone and AT&T service for several days
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`after purchasing the iPhone, the purchase of the initial two-year contract was essentially linked to
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`the purchase of the iPhone. Apple produced several pieces of evidence indicating that a minimum
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`“new two-year wireless service plan with AT&T” was “required to activate all iPhone features,
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`including iPod features.” (Dkt. No. 80-2 at 2; see also Dkt. No. 79-1 at 3.) Plaintiffs themselves
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`were aware when they purchased their iPhones that they also had to enter into a service agreement
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`with AT&T. (Dkt. No. 126-2, Ward Dep. Tr. 68:19–69:11; Dkt. No. 126-3, Buchar Dep. Tr.
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`10 Plaintiffs further argue that an aftermarket was also created by Apple and AT&T’s
`refusal to unlock the iPhone during the two-year contract after users paid a termination fee.
`However, given the evidence of disclosures and information available to the consumers
`surrounding the sale of the iPhone, and the subsidy model in effect during the Class Period, the
`Court is not persuaded. Consumers explicitly locked themselves into a two-year agreement with
`AT&T, knowing that the same would be required to utilize the cellular capabilities of the iPhone.
`Additionally, the two-year service contract with AT&T included a provision that consumers may
`have to return their handsets should they terminate the plan prematurely.
`11 Plaintiffs note that discovery documents revealed that the average delay between
`purchase of the iPhone and activation of AT&T services was 1.5 days.
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`10
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`Northern District of California
`United States District Court
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`

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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 11 of 13
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`16:15–17:12.) Thus, at least with respect to the initial two-year agreement with AT&T, no
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`evidence has been proffered that a “surprise” existed leading to a market hostage to defendant.
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`Information regarding the need to purchase a two-year AT&T service plan was widely known, and
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`plaintiffs have put forward no evidence to the contrary. See, e.g., Newcal, 513 F.3d at 1049
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`(finding that the primary product market included the equipment lease and initial service contract
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`and that the secondary product market consisted of the replacement equipment and lease-end
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`service contracts).
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`Plaintiffs next argue that where, as in Newcal, the sales are tied, a market existed because
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`of the “surprise” caused by the existence of a secret, five-year exclusivity agreement between
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`Apple and AT&T. Plaintiffs’ first expert, Dr. Simon Wilke, opined as part of the initial opposition
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`to Apple’s motion for summary judgment that this surprise effectively locked-in “iPhone
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`customers for a substantial period beyond the term specified in their agreements with [AT&T].”
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`(Dkt. No. 111-10 at 4, ¶¶ 2, 8 (finding that “iPhone customers did not agree at the time they signed
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`the service contract with [AT&T] to make [AT&T] their exclusive iPhone carrier for a period of
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`time extending beyond the two-year term of that contract”); see also Dkt. No. 111-8 at 21, ¶ 33
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`(describing that the market power could be exercised by “withholding information regarding the
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`five-year term of the Apple/[AT&T] agreement, thereby causing iPhone customers who entered
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`into two-year agreements to either (1) stop using their iPhones for telecommunications purposes,
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`or (2) continue to use [AT&T] after their two-year agreement expired, effectively locking in
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`iPhone customers for a substantially longer period”).) Discovery has undermined plaintiffs’
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`theory. The evidence now shows that the “five-year exclusivity deal” between Apple and AT&T
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`never materialized. Summary judgment on this theory is therefore appropriate.
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`Given the lack of evidence, plaintiffs’ replacement expert, Dr. Frederick Warren-Boulton,
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`adds nothing to plaintiffs’ arguments based on the five-year exclusivity theory. However, he does
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`offer an additional theory that a market existed after the expiration of the two-year contract. (See
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`Northern District of California
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`Case 4:12-cv-05404-YGR Document 146 Filed 03/22/17 Page 12 of 13
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`Dkt. No. 114-1 at 12, ¶ 11.)12 With respect to this claim, plaintiffs have submitted evidence
`showing that defendant may have manipulated a market for service plans where defendant failed
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`or refused to unlock the phones after the expiration of the two-year commitment for either
`domestic or international use. (See Dkt. No. 113-9 at 2.)13
`The Court agrees as to this more narrow theory. Even though Apple was no longer bound
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`to create iPhones that could only function on the GSM network after 2010, those who purchased
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`iPhones prior to the end of exclusivity still had to remain on the GSM network. These consumers
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`could have expected to switch to another GSM provider, like T-Mobile, at the end of the two-year
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`contract with AT&T. However, as plaintiffs’ evidence suggests, AT&T did not begin providing
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`unlock codes for such phones until April 2012. Consequently, these consumers would have been
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`locked into renewing AT&T service, or else lose the cellular capabilities of their iPhones. In this
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`context, the Court DENIES summary judgment with regard to any such claims.
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`Finally, the Court addresses Apple’s argument that summary judgment should be granted
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`generally and as a matter of law based solely on the failure to include all economic substitutes in
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`the market definition. The Court disagrees. Newcal held the law “permits an antitrust claimant to
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`restrict the relevant market to a single brand of the product at issue.” Newcal, 513 F.3d at 1048.
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`In evaluating the market at issue, courts look to various factors. No one factor is dispositive. See
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`Red Lion Medical Safety, Inc. v. Ohmeda, I