Supreme Court Deals Antitrust Blow to Apple

The court says iPhone users are eligible to sue Apple for overcharging them for apps sold in the App Store.
Matthew HellerMay 13, 2019
Supreme Court Deals Antitrust Blow to Apple

iPhone users have cleared an initial hurdle in an antitrust lawsuit against Apple as the U.S. Supreme Court ruled they can sue the company for charging too much for apps sold in the App Store.

Apple had sought to dismiss the class action, arguing it acted only as an intermediary between app developers and purchasers. Since iPhone users do not purchase apps directly from Apple, the company said, they did not have standing to sue for antitrust violations under a 1977 Supreme Court precedent.

But in a 5-4 decision, the high court said on Monday that iPhone owners were not indirect purchasers “two or more steps removed from the antitrust violator in a distribution chain” as was the plaintiff in the 1977 case but purchasers who pay the alleged overcharge on apps directly to Apple even if the app developer sets the actual price.

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“iPhone owners are direct purchasers from Apple and are proper plaintiffs to maintain this antitrust suit,” Justice Brett Kavanaugh wrote for the majority.

The ruling did not address whether Apple overcharges for apps, leaving that issue for the trial court to decide. But if the plaintiffs ultimately succeed, Ars Technica said, “it could not only force Apple to refund money the company collected from users over the last few years — it could also put pressure on Apple to open up the iOS platform, allowing users to install third-party software without paying Apple for the privilege.”

The Apple Store generated payments to developers of more than $26 billion in 2017. The New York Times noted that Apple, which charges developers a 30% commission, has been trying to “shift its business to rely more on revenue from sales of apps and other services instead of iPhones.”

In trading Monday, Apple shares fell 5.2% to $186.86.

Four iPhone users brought the antitrust suit in 2011, alleging Apple exercises monopoly power in the retail market for the sale of apps and has unlawfully used that power to force iPhone owners to pay Apple higher-than-competitive prices for apps.

The trial court granted Apple’s motion to dismiss but the 9th U.S. Circuit Court of Appeals reversed that decision.

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