You don't have different markets if the goods can be substituted for each other. Dishwashers and washing machines are different markets: If I need a dishwasher I can't buy a washing machine and use it as a dishwasher. Downloads and CDs are the same market: If I download a record, I'm not going to buy the CD anymore, and if I have the CD, I'm not going to buy a download. Therefore, no separate markets.
The argument that digital downloads aren't a definable market is a long shot. I'd have to look at Apple's response to the complaint again, but I'm pretty sure they aren't even trying to go in that direction. I believe they've accepted the definition of the relevant market.
By default, you have _no rights at all_ to make copies of music that you bought. So if Apple didn't negotiate for you to get you the right to play the music on a non-Apple device, they didn't do anything to hurt their competitors. They just didn't spend time and money on helping their competitors.
That again is questionable. In previous digital media copyright cases, the basic principle of fair use was preserved for buyers of copyrighted materials. They can make copies so long as the copies are for their use only.