US court allows lawsuit on Apple's App Store monopoly

14 May, 2019, 02:45 | Author: Frank Williams
  • Apple logo inside of an Apple store at Grand Central Station in New York

The Cupertino, California-based technology company, backed by President Donald Trump's administration in the case, argued that it was only acting as an agent for app developers, who set their own prices and pay Apple's commission.

For a bit of background here, the 9th U.S. Circuit Court of Appeals ruled in January 2017 that Apple sells its apps directly to consumers and that they can move forward with an antitrust suit on these grounds.

He said, "Leaving consumers at the mercy of monopolistic retailers simply because upstream suppliers could also sue the retailers would directly contradict the longstanding goal of effective private enforcement in antitrust cases".

"The iPhone owners are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain", Kavanaugh wrote. But if the plaintiffs win at trial, Mark Rifkin, a lawyer representing them, said that "the overcharges paid by consumers since Apple's monopoly began will be measured in the billions of dollars". But in both cases - PC games and Android apps - there are alternatives for getting the products on the platform, so it's unclear how this could affect other companies with online stores.

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"We disagree. The plaintiffs purchased apps directly from Apple and therefore are direct purchasers", Justice Kavanaugh wrote. The suit charges Apple with gouging consumers through what it describes as a monopoly on apps in the App Store. But the court's opinion - led by conservative Justice Brett Kavanaugh, who joined its liberal justices in the majority - did not rule on the merits of the lawsuit itself. This story will be updated if or when Apple responds.

"We are extremely disappointed in the decision from the US Supreme Court to reward trial lawyers rather than developers", Reed said.

Apple v Pepper, as the case is called, dealt with the issue of whether Apple's 30 percent revenue cut is a charge that trickles down to consumers. However, the slim majority argued that the fact that consumers buy apps directly from Apple means the situation is different and so the Illinois Brick case does not hold and the underlying lawsuit can continue. If consumers were harmed by high app prices, this occurred only because app developers were able to "pass on" Apple's 30 percent commission. Apple had warned that this could pose a threat to e-commerce, a rapidly expanding segment of the USA economy worth hundreds of billions of dollars in annual sales.

It is worth noting that neither side really dug into the realities of app stores and digital marketplaces, relying instead on precedents about bricks and shoes (Hanover Shoe v United Shoe Machinery, 1968) to make their case.

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