May 13, 2019
The U.S. Supreme Court, in a narrow 5-4 decision written by Justice Brett Kavanaugh, ruled that a consumer lawsuit challenging Apple Inc.'s dominance of mobile app sales for iPhone, can proceed.
The case, Apple Inc. vs Pepper, involved allegations that Apple had artificially mobilized pricing for mobile app sales for the iPhone, because the iOS app store is the only way to download apps for the device.
Apple moved to dismiss the suit, originally filed by four iPhone users, who argued that because Apple collected 30% commissions on all iPhone app downloads that it had illegally monopolized the market, according to court documents. Apple, in its court filing, argued that iPhone users could not directly sue the company based on an earlier case, Illinois Brick Co. vs. Illinois, arguing that consumers were not direct purchasers from Apple.
That case argued that the party that sets the retail price was the party that could be sued and that Apple was an intermediary. Under the current structure for iOS apps, Apple charges independent developers a $99 fee and allows them to set prices for mobile apps used on the iPhone.
"If accepted, Apple's theory would provide a roadmap for monopolistic retailers to structure transactions with manufacturers or suppliers so as to evade antitrust claims by consumers and thereby thwart effective antitrust enforcement," Kavanaugh wrote in the opinion.
The four iPhone users originally filed suit in 2011, arguing they would have been able to pay less for the apps in a competitive market than under the existing structure. Apple started selling the iPhone in 2007, and launched the App Store in 2008. The store sells about 2 million downloadable apps for iPhone users.
Kavanaugh joined the four liberal members of the court, Ruth Bader Ginsberg, Sonya Sotomayor, Stephen Breyer and Elena Kagan. Justice Neil Gorsuch wrote the dissenting opinion, joined by Samuel Alito, Clarence Thomas and Chief Justice John Roberts.
While the court did not weigh in on the merits of the specific case, legal experts say a victory from the original plaintiffs could lead to new competition for mobile app sales, and eventually impact consumer prices.
"The Apple v Pepper case means that consumers have standing to bring cases," John Bergmayer, senior counsel at Public Knowledge a Washington D.C.-based nonprofit that focuses on digital rights and open competition issues. "It’s too early to predict the effects on a particular app category, but the case could lead to more competition if the plaintiffs are successful in their underlying claim."
ACT The App Association, which represents 5,000 mobile app developers, said in a statement that it was disappointed in the ruling, which it said rewarded trial lawyers rather than developers,
"This decision and its categorization of developers as 'suppliers' or 'manufacturers' to platforms sets a troubling precedent," said Morgan Reed, president of the association. "Ten years ago getting software was quite a different and onerous process — our members count on platforms that enable customers to purchase software safely, easily and with confidence. Under this decision, only trial lawyers will benefit from the simplification of platforms as a retailer and vendor model."
A spokesperson for Apple was not immediately available for comment.
Topics: Mobile Apps, Regulatory Issues
Sponsored Links: