Case against Apple over app commission likely to proceed

Gerardo Harmon
November 29, 2018

The company says the popularity of software for iPhones and its App Store shouldn't obscure the fact that consumers buys apps from developers, not Apple.

The case in question, Apple Inc. v. Pepper, won't actually address the heart of the issue, rather it is merely for the Supreme Court to decide IF the case should be allowed to make its way up through lower level courts first.

The company is battling a group of iPhone owners who claim Apple forces them to overpay for apps by forbidding rivals to the multibillion-dollar App Store.

Antitrust cases sometimes, but not always, divide the Supreme Court along ideological lines. Under Frederick's theory, he said, consumers are hurt by higher prices and app developers are hurt by having to agree to Apple's 30 per cent commissions.

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The company sought to have the antitrust claims dismissed, saying the plaintiffs lacked the required legal standing to bring the lawsuit. In other cases, the court has ruled there must be a direct relationship between the seller and a party complaining about unfair, anti-competitive pricing. Apple cited companies like ticket site StubHub, Amazon's Marketplace and eBay.

But it was not just the court's liberals who seemed skeptical of Apple's argument.

Apple was backed by Republican President Donald Trump's administration. "The plaintiffs were backed by 30 state attorneys general, including from Texas, California and NY". CNBC today described this legal action as the most important business dispute of the Supreme Court's current term and also "the most consequential litigation facing Apple outside of its billion dollar intellectual property suit against chipmaker Qualcomm".

Gorsuch agreed, noting that only one group can claim they are paying the "monopoly rent" that results from Apple's pricing policies.

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Plaintiffs argue that they "have been injured by Apple's anti-competitive conduct because they paid more for their iPhone apps than they would have paid" in a more competitive market where there were other places to buy apps, court documents state.

Developers "cannot risk the possibility of Apple removing them from the App Store if they bring suit", the American Antitrust Institute advocacy group said in a brief. A judge initially threw out the suit, ruling that the consumers were not direct purchasers because the higher fees they paid were passed on to them by the developers. At that time, Judge Yvonne Rogers ruled in favor (PDF) of Apple, reasoning that end users of the applications were indirect customers are therefore could not be the ones to sue under USA antitrust law.

But the 9th Circuit Court of Appeals allowed the antitrust suit to proceed on the theory that Apple acts as a distributor with monopoly power over certain products - in this instance, apps on the iPhone.

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