FTC Looking Into Impact of Apple’s Sales Agreement With Amazon on Independent Resellers

Last year, Apple began selling many of its products on Amazon, including the latest iPhone, iPad, Mac, and Apple Watch models. As part of Apple's agreement with Amazon, unauthorized resellers who offered new or refurbished Apple products on Amazon had their listings removed after January 4, 2019.


Since then, independent sellers have been required to apply for Apple Authorized Reseller status and the Amazon Renewed program to continue to offer used or refurbished Apple products on Amazon, but this is not always feasible due to hefty requirements outlined by The Verge earlier this year:
The first is to purchase at least $2.5 million worth of refurbished inventory every 90 days from Apple itself or through a retailer with more than $5 billion in annual sales, like a wireless carrier or big-box retailers like Target or Walmart. The second is to reach out directly to Apple to become an authorized reseller. Apple has yet to make its reseller requirements known to the public, but to become an Apple-authorized provider of repairs requires a physical retail space for customers to enter.
Now, The Verge reports that the FTC has looked into the Apple-Amazon deal, although it has yet to formally raise any antitrust concerns.

Specifically, the report claims that FTC lawyers recently reached out to John Bumstead, a Minnesota man who sold refurbished MacBooks on Amazon until his listings were removed from the platform due to the new policy:
"They wanted to know how Amazon works, how eBay works. I went into describing how a listing works on Amazon. Amazon is interesting in that you don't necessarily create a listing. You just sort of tag on to an existing listing," Bumstead tells The Verge. "If that listing gets deleted, chances are you're not allowed to sell that product. That's how Amazon did this. They created a bunch of renewed listings from the people who were certified, and they let those people sell on those listings, and they abandoned everyone else."
Bumstead has been vocal since being squeezed out of Amazon, arguing that a significant number of lower-cost refurbished or used Apple products are no longer available through Amazon, reducing choice for consumers. Apple would likely argue that it is cutting down on the availability of counterfeit products to protect consumers, although it has not officially commented on the deal since it went into effect.

The Verge claims that "experts say the Apple-Amazon deal could easily be grounds for an antitrust complaint," citing Sally Hubbard, the director of enforcement strategy at the OpenMarkets Institute:
"You put a gate around the brand and say all the third-party sellers of whatever that brand is get a notice saying you can no longer sell this product on our platform unless you get authorization from the brand," Hubbard tells The Verge. "But of course the brand is not going to let you sell if you're under the [minimum advertised price]. Problem is that it's illegal under antitrust law."
Whether the FTC shares that view and/or takes action remains to be seen.

Tags: Amazon, FTC

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FTC Wins Antitrust Lawsuit Against Qualcomm, Appeal to Follow

The FTC today won its antitrust lawsuit against Qualcomm over the chipmaker's anticompetitive business practices.


As first reported by legal expert Florian Mueller on his blog FOSS Patents, U.S. District Judge Lucy Koh has ruled that Qualcomm's so-called "no license, no chips" model, under which the chipmaker has refused to provide chips to companies without a patent license, violates federal antitrust laws.

The ruling has significant implications for Apple, as Koh ordered that Qualcomm must negotiate or renegotiate license terms with its customers in good faith without threatening to cut off access to its cellular modem chips or related software and technical support, according to Mueller.

Qualcomm also must make patent licenses available to rival cellular modem suppliers on fair, reasonable, and non-discriminatory or "FRAND" terms, and may not enter exclusive agreements for the supply of modem chips.

Apple sued Qualcomm in early 2017 over these anticompetitive business practices, and unpaid royalty rebates, but the two companies announced an agreement to end all ongoing litigation worldwide last month. The settlement includes a six-year licensing agreement and a multiyear chipset supply agreement.

It's unclear if Apple had any hint that the FTC was likely to win its antitrust case and if that had any implications on its settlement with Qualcomm.

While it appears that Intel will remain the sole supplier of LTE modems in 2019 iPhones, Qualcomm is expected to supply Apple with its industry-leading 5G modems for 2020 iPhones now that the companies have settled, so Koh's ruling could lead to a fairer agreement between Apple and Qualcomm moving forward.

Farther down the road, multiple reports have indicated that Apple is designing its own cellular modems that would allow it to drop Qualcomm for good, although they might not appear in iPhones until as late as 2025.

Qualcomm will likely appeal the ruling, but Mueller believes the chipmaker faces an uphill battle given "such a rich and powerful body of evidence" regarding its anticompetitive business practices. Mueller has excellent, in-depth coverage of Koh's ruling on his blog FOSS Patents that is well worth a read.


Update: Qualcomm has announced that it will immediately seek a stay of the ruling and an expedited appeal to the U.S. Court of Appeals for the 9th Circuit.

"We strongly disagree with the judge's conclusions, her interpretation of the facts and her application of the law," said Don Rosenberg, general counsel of Qualcomm, in a statement shared by the Washington Post's Hamza Shaban.

Koh's complete ruling is embedded ahead. Continue reading "FTC Wins Antitrust Lawsuit Against Qualcomm, Appeal to Follow"

Qualcomm Facing Off With FTC in Antitrust Trial That Kicks Off Today

With the intense ongoing legal battle between Qualcomm and Apple, it's easy to forget that Qualcomm is also facing an FTC antitrust lawsuit for using anticompetitive tactics to remain the main supplier for baseband processors for smartphones.

The FTC hasn't forgotten, though, and FTC lawyers are in a Northern California courtroom before well-known judge Lucy Koh, who also presided over the Apple-Samsung legal fight.


Lawyers for Qualcomm, the FTC, Apple, and other manufacturers have gathered as the trial commences, with the FTC set to argue that Qualcomm refused to provide chips to OEMs without a patent license, refused to license its technology to rivals, and set exclusive deals with Apple.

Manufacturers like Huawei and Lenovo will testify that Qualcomm threatened to disrupt their chip supply during licensing negotiations, forcing them into signing deals.

The FTC first filed a complaint against Qualcomm in January 2017, which was actually the catalyst for Apple's own lawsuit against the company just a few weeks later.

In that complaint, the FTC said that Qualcomm uses its position and its portfolio of patents to impose anticompetitive supply and licensing terms on cell phone manufacturers, impacting its competitors.

Part of the complaint addressed a deal with Apple in which Qualcomm required Apple to exclusively use its modems from 2011 to 2016 in exchange for lower patent royalties. Qualcomm is also accused of refusing to license its standard-essential (FRAND) patents to competing suppliers and implementing a no license, no chips policy to drive up royalty payments beyond what's fair.

Qualcomm attempted to get the FTC's lawsuit against it dismissed, but in June, Judge Koh ruled that the lawsuit would proceed on the basis that the FTC adequately demonstrated that anticompetitive tactics were being used by Qualcomm.

In its defense, Qualcomm has claimed the FTC is using a "flawed legal theory" and has misconceptions about the mobile technology industry. "We look forward to defending our business in federal court, where we are confident we will prevail on the merits," Qualcomm said in a statement in January 2017.

As the FTC trial begins, Apple and Qualcomm's legal battle has also been escalating. As of today, Apple has pulled the iPhone 7 and the iPhone 8 in Germany after Qualcomm won a preliminary injunction in the country.

Qualcomm also won an import ban on older iPhone models in China, which Apple sidestepped through a software update that addressed functionality said to infringe on Qualcomm patents.


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