Microsoft Accused of Xbox 360 Accessory Monopoly in Datel Lawsuit

Accessory maker Datel taken Microsoft to court, accusing the console manufacturer of unfair competition and monopolizing the market for Xbox 360 peripherals.

"With the specific intent to acquire or the intent to maintain monopoly power in

and over the Aftermarket for Xbox 360 Accessories and Add-ons, Microsoft has committed

exclusionary, predatory, or anticompetitive acts," asserts Datel.

The lawsuit follows a recent Xbox 360 system update that causes the platform to no longer recognize Datel's unauthorized MAX Memory Cards. Said update must be applied for users to connect to Xbox Live, play online and download new content.

As the cheapest of Datel's two MAX Memory Cards, the $39.99 2GB model, offered four times the storage space of Microsoft's only current official Xbox 360 Memory Card (512MB) at the same price, Datel accuses Microsoft of attempting to "exclude competition from the Xbox 360 aftermarket for memory cards."

Following the system update, Microsoft told G4tv that the decision to block unauthorized memory cards stemmed from consumer protection concerns.

"Unauthorized [memory units] are not tested for compatibility or certified for safety and compliance standards and thus could damage customer's Xbox 360 consoles," it explained. "Microsoft goes to great lengths to protect the Xbox 360 and Xbox LIVE service from cheating...the primary purpose and use of these unauthorized [memory units]."

Datel labels the explanation as "nothing more than a pretext for forcing consumers to purchase [Microsoft's] own overpriced memory cards," claiming that Microsoft has "never explained how or in what sense a larger memory card promotes cheating" and has not "ever identified a single circumstance in which the DMMC caused 'compatibility' or 'safety' or damages,'" and adding that Microsoft initially told the company that "the disabling of third party memory units was an unintentional effect of the software update."

[Update] However, as Shacker mo13, points out, Datel's MAX Memory Cards sport a slot that allows data to be transferred to and from a microSD card, which means that users could easily "cheat" by using a PC to modify their saved games. [/Update]

Datel further alleges Microsoft of modifying the Xbox 360's "authorization protocols" to prevent compatibility with other Datel products, such as its upcoming Joypad controller. "These technological barriers do not constitute improvements," claims Datel, "but

rather are arbitrary contrivances intended to perpetuate Microsoft's market power."

The company also claims that it was "the only source of memory cards compatible with the Xbox 360 other than Microsoft itself" and that the release of Datel's cards was the impetus for Microsoft to lower the $59.99 MSRP of its own cards after two years.

Such memory devices aren't the only way to store data on the Xbox 360, with Microsoft bundling some versions of the hardware with 512MB of internal memory and others with hard drives. Hard drives are also available separately, though Microsoft is the only official manufacturer of such accessories and charges $149.99 for a 120GB model.

The entire situation is somewhat reminiscent of Nintendo and Tengen's twenty-year-old court feud, in which Nintendo stopped the Atari subsidiary from selling unauthorized Nintendo Entertainment System games and cartridges. At the time, Nintendo was accused of monopolizing the platform and industry, though it maintained that such practices were necessary due to quality concerns. Atari eventually lost the case, after it was discovered that the workaround the company used to circumvent Nintendo's security was based off illegally obtained documents detailing said security measures.