Apple Faces Supreme Court in App Store Monopoly Battle

Judy Cobb
November 28, 2018

Apple spokeswoman Rachel Wolf Tulley said in a statement after the arguments that the App Store has fueled competition and promoted innovation in software development, leading to millions of jobs in the sector.

Apple, supported by the Trump administration, argues that the plaintiffs in the case don't have the right to sue under current antitrust laws in the US.

Plaintiffs acting on behalf of iPhone customers argued that because Apple chooses what apps can be sold, gives developers a limited pricing structure and forces iPhone owners to use the App Store, it is operating anti-competitively.

Instead, Apple is set to appear before the U.S. Supreme Court over antitrust allegations stemming from its popular App Store.

A hot potato: The App Store might be considered a monopoly and could be forced to make changes depending on the ruling of Apple v. Pepper by the Supreme Court. At issue now is only whether the antitrust suit against Apple can proceed to further hearings and a trial on whether Apple wields monopoly power. The App Store generated more than $11 billion in revenue for the company in 2017.

Justice Brett Kavanaugh said consumers experience harm through higher prices, but also noted that plaintiffs' basis to sue is murky, because Apple doesn't purchase apps from developers and then resell them to consumers. The suit, originally filled back in 2011, alleges that the Apple App Store is a monopoly since Apple's iOS devices can only install apps from that location.

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If the customers succeed in their lawsuit it could be a big payday: Antitrust law allows seeking triple damages.

The entire case could hinge on a ruling from 1977.

A victory for Apple could severely restrict consumers' ability to sue over antitrust violations even though Congress envisioned such lawsuits "would form a central component of enforcement of the antitrust laws", warned 18 scholars of antitrust law in a Supreme Court filing. The company's lead Supreme Court lawyer, Dan Wall, declined to discuss the case in advance of the argument. On the other hand, Chief Justice John Roberts, a conservative, seemed to agree with Apple's position.

In its defense, Apple said the company plays no role in setting an app's price; that decision is up to the app's developer.

Sandeep Vaheesan, legal director for the Open Markets Institute, said that a lot of tech platforms would start making the argument that consumers don't have the standing to bring antitrust suits against them. But a three-judge panel of the 9th Circuit Court of Appeals reinstated the complaint a year ago. Users of the iPhone have to buy apps through Apple, she said, and that at least looks like a monopoly arrangement. "Apple took 30% from the customer, not from the developer".

A decision in Apple Inc. v Pepper, 17-204, is expected by late spring.

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