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Memory Card Maker Accuses Microsoft Of 'Predatory Conduct' In Antitrust Suit

Memory Card Maker Accuses Microsoft Of 'Predatory Conduct' In Antitrust Suit

November 24, 2009 | By Kris Graft

November 24, 2009 | By Kris Graft
More: Console/PC

UK-based Datel, makers of the Max Memory cards for Xbox 360, claims in a new suit that Microsoft "deliberately harmed competition" when the gaming and software giant nixed third-party memory card support in a recent system update.

Datel said this week that it filed an antitrust lawsuit against Microsoft in San Francisco federal court for what it called a "downgrade" of the Xbox 360 that now makes it incompatible with competing memory accessories.

"Microsoft has taken steps to render inoperable the competing Datel memory card for no visible purpose other than to have that market entirely to themselves," said Marty Glick, director at Howard Rice, the senior attorney representing Datel.

He added, "They accomplished their recent update by making a system change that will not recognize or allow operation of a memory card with greater capacity than their own. We believe that with the power Microsoft enjoys in the market for Xbox accessories this conduct is unlawful."

Datel's third-party Max Memory cards arrived in May 2009 in 2GB ($40) and 4GB ($50) versions. Microsoft's first-party Xbox 360 memory units are 512MB and currently sell for $30. Datel said Microsoft's memory units sold for $60 prior to the release of Datel's competing Max Memory.

Datel's suit [PDF], filed last week, claimed that Microsoft told the company that the "disabling of third-party memory units was an unintentional effect" of an October 2009 software update.

Microsoft later told G4TV that third-party cards were disabled in order to prevent cheating. "Unauthorized MUs are not tested for compatibility or certified for safety and compliance standards and thus could damage customer's Xbox 360 consoles," G4TV's report quoted Microsoft.

Datel argued that its Max Memory cards are "100 percent compatible" and that no reports of harm to Xbox 360 consoles have emerged after 50,000 memory units sold. The plaintiff said it also believes Microsoft modified Xbox 360's authorization protocols to block the use of Datel's to-be-released Xbox 360 controller.

Datel also said that Microsoft uses its massive financial resources to achieve supracompetitive pricing in its products that is difficult for rivals to compete with. "If for any reason Microsoft is not deemed to have monopoly power in the Aftermarket for Xbox 360 Accessories and Add-ons, there exists a dangerous probability of Microsoft gaining such power," Datel's complaint said.

Datel is asking the court to enjoin Microsoft from continuing alleged anti-competitive actions, treble damages -- or triple actual financial losses -- legal fees, plus "appropriate" punitive damages.

Microsoft did not return request for comment as of press time.

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