Justices to listen to antitrust case over sale of iPhone apps

Florence Fletcher
November 29, 2018

The court must decide whether there is a case if there is no direct link between Apple and the app buyers.

When iPhone users want to edit blemishes out of their selfies, identify stars and constellations or simply join the latest video game craze, they turn to Apple Inc's App Store, where any software application they buy also includes a 30% cut for Apple.

When a user buys an app, Apple collects the money, keeps the 30%commission and gives the rest to the developer. Justice Elena Kagan explained that from her perspective, downloading an app is a one-step transaction with Apple.

Apple is officially off to the Supreme Court today to fight an antitrust case that claims the App Store operates as a monopoly. Chief Justice John Roberts, a George W. Bush appointee, nevertheless suggested he sides with Apple and seemed concern that Apple could end up being held liable by both consumers and app developers.

"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. In its friend of court brief, the Justice Department said it would be particularly hard to figure out whether the App Store overcharges, since the prices are set by tens of thousands of app developers. Even though the average price of an app is just over one dollar, the App Store generated an estimated $11 billion in revenue for the company in 2017.

"This is a closed loop", Justice Sonia Sotomayor told a lawyer for Apple. Under this long-standing legal doctrine, customers who bring in their laundry can not sue.

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It will be several months before the justices hand down a ruling in the case.

Although the case began in 2011, the Supremes are considering a ruling made four years ago by the Northern California US District Court. But the San Francisco-based 9th US Circuit Court of Appeals revived the case previous year, finding that Apple was a distributor that sold iPhone apps directly to consumers.

Apple was backed by Republican President Donald Trump's administration. The states are led by Texas Attorney General Ken Paxton, a Republican, and Iowa Attorney General Tom Miller, a Democrat.

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

The iPhone users, including lead plaintiff Robert Pepper of Chicago, have argued that Apple's monopoly leads to inflated prices compared to if apps were available from other sources.

A trial court initially dismissed the lawsuit, but the 9th U.S. Circuit Court of Appeals revived it. What remains unclear is how many purchasers would qualify as plaintiffs, and how the law's triple damages for antitrust violations would be apportioned if Apple loses.

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