Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Former prisoners sue over alleged post-release MP3 players tying arrangement, (Feb 4, 2016)

By Linda O’Brien, J.D., LL.M.

A technology company and a manufacturer of music and video players engaged in anticompetitive conduct by conditioning the ability of former prison inmates to retain their purchased music collections after their release on their additional purchase of the manufacturer’s post-release version of MP3 players, according to a complaint filed in the federal district court in Tampa, Florida. The lawsuit was brought by a group of former inmates of the federal corrections system (Shain v. Advanced Technologies Group, LLC, February 2, 2016).

The Federal Bureau of Prisons (BOP) allows inmates to purchase MP3 players. For security reasons, the devices are sold with certain features disabled. These MP3 players are not connected to the Internet. Instead, they can be used to download approved songs through the BOP’s secure computer interface, Trust Fund Limited Inmate Computer System (TRULINCS). TRULINCS allows inmates to purchase and download copyrighted music, the licenses for which do not expire and remain on the inmate’s interface.

The complaint states that, in 2012, the BOP entered into a $5.15 million contract with information technology company Advanced Technologies Group (ATG), which gave ATG the exclusive right to supply prison-restricted MP3 players and music and MP3 audio files to inmates in BOP facilities. Subsequently, ATG entered into an agreement with SanDisk, a manufacturer of flash memory storage devices, to be the exclusive supplier of prison-restricted MP3 players to ATG.

According to the complaint, inmates pay a substantially higher price for SanDisk’s MP3 players than the retail price outside of prison. There are many different MP3 players for sale on the open market and released inmates should have the same options engendered by competition as other consumers in purchasing MP3 players after their release. Unlike members of the general public, released inmates have a distinct disadvantage. They will not have access to the music collection they purchased during their incarceration unless they purchase post-release MP3 players from ATG.

ATG allegedly has utilized its exclusivity agreement with SanDisk to impose an unforeseeable restriction on the ability of all purchasers of SanDisk prison-restricted MP3 players and its MP3 music and audio files to keep their purchased music collection unless they also purchase SanDisk post-release MP3 players from ATG. This restriction constitutes an unlawful tying arrangement and has anticompetitive effects on the market for the sales of post-release MP3 players. The plaintiffs have been injured by ATG’s unlawful monopolization by being deprived of the choice of purchasing lower cost and better quality alternatives to SanDisk’s post-release MP3 players, the complaint also alleges.

The plaintiffs assert claims for breach of the implied covenant of good faith and fair dealing; unjust enrichment; conversion; civil conspiracy; and unlawful tying, monopolization, and attempted monopolization in violation of Sections 1 and 2 of the Sherman Act and the Michigan, Kentucky, Indiana, Ohio, and New York consumer protection acts. The action seeks declaratory and injunctive relief, restitution, disgorgement, treble, exemplary, and punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 4:16-cv-10367-LVP-APP.

Attorneys: E. Powell Miller (The Miller Law Firm, P.C.), Brian S. Cohen (Cohen Law Group, P.C.), and Andrew L. Lee (All Counsel, P.C.) for W. Curtis Shain.

Companies: Advanced Technologies Group, LLC; SanDisk Corporation

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