Supreme Court To Decide, Is Apple's Walled Garden App Store Anti-Competitive?

Apple approaches US Supreme Court to block customers from suing it for monopoly abuse

Tens of thousands of software developers set the prices and agree to pay Apple a 30 percent commission on whatever they sell, the lawyer representing Apple said in the courtroom. Developers earned more than $26 billion in 2017, a 30% increase over 2016, according to Apple. If the Supreme Court upholds the Ninth Circuit's decision, though, it will send the case back to a lower court, where the case will keep going; Apple will have to fight to avoid being forced to pay out hundreds of millions of dollars to consumers and perhaps even changing its App Store model. "From my perspective", she said, "I've engaged in a one-step transaction with Apple". Apple, of course, argues that the plaintiffs shouldn't be allowed to sue it over the app sales because Apple says it isn't selling the apps directly to consumers, it's just passing them along from the developers as a kind of middle man.

Lawsuits against companies like these would multiply "and lead to the quagmire this court sought to avoid", Apple told the justices in a legal brief.

If the justices permit the suit to go forward, a decision against Apple would nearly certainly be a blow to its business.

Justice Elena Kagan made similar comments. A federal judge in Oakland, California threw out the suit, saying the consumers were not direct purchasers because the higher fees they paid were passed on to them by the developers.

A trial court initially dismissed the suit.

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The plaintiffs, as well as antitrust watchdog groups, said that if the justices close courthouse doors to those who buy consumer products, monopolistic conduct could expand unchecked. Currently, the App Store is the only official way to download apps for your iPhone or iPad.

But Apple's critics say its control over the App Store makes it unlike other internet marketplaces.

The Justice Department is supporting Apple, although Solicitor General Noel Francisco acknowledged that Apple exploits its powerful position in the market by imposing the 30 percent commission.

The iPhone users, including lead plaintiff Robert Pepper of Chicago, filed the suit in a California federal court in 2011, claiming Apple's monopoly leads to inflated prices compared to if apps were available from other sources. Under federal law, proving such an allegation could be worth millions of dollars, because awards are tripled for antitrust violations.

"They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their App Store", said Frederick. Developers must submit their apps to Apple for approval, and if they meet all of the company's criteria (and are malware-free), they can be listed either as a free, freemium, or paid app.

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