Published: Tue, May 14, 2019
Money | By Ethel Goodwin

Supreme Court rules consumers can sue Apple for App Store monopoly

Supreme Court rules consumers can sue Apple for App Store monopoly

The Supreme Court on Monday ruled that iPhone users can sue Apple over prices in the company's App Store, dealing a blow to the technology giant in a high-profile antitrust lawsuit. A practical problem with Apple's theory, wrote Kavanaugh, is that it could give "monopolistic retailers" a way to avoid being sued under antitrust law: They could simply arrange their transactions to be commissioned sales on behalf of manufacturers rather than direct sales of items they bought at wholesale, he argued.

When I initially wrote up the case, I described Apple's argument as "confusing and counterintuitive". This commission structure results in higher prices for consumers, the plaintiffs argued.

"The plaintiffs purchased apps directly from Apple and therefore are direct purchasers under Illinois Brick", Kavanaugh wrote in the majority opinion, citing the doctrine that prohibits indirect purchasers from suing companies for damages under antitrust law.

The majority opinion held that the case was "a classic antitrust claim" where Apple has "used its monopoly to overcharge consumers".

There has been exponential growth in the availability of apps since Apple created the App Store in 2008 with 500 choices.

Recently appointed conservative justice Brett Kavanaugh sided with the court's four liberal justices in the 5-4 ruling which upheld a lower court's decision.

Apple had tried to argue that it acted exclusively as an agent for developers.

Apple said in its statement, "Developers set the price they want to charge for their app and Apple has no role in that".

Apple took a trip to the Supreme Court and left with a loss.

In the case Apple v. Pepper, four iPhone owners brought a class-action lawsuit against Apple for what they deemed as the company's unlawful monopolization of the aftermarket for iPhone apps. Apple also claimed that because they don't set the retail price of the apps on the store, iPhone users can not sue them.

Apple argued that the iPhone owners do not have the right to sue because Apple is an intermediary. Other companies who operate walled app stores could face similar cases in the future warns former Justice Department antitrust official Gene Kimmelman, president of consumer advocacy group Public Knowledge. The Motley Fool owns shares of and recommends Apple and Netflix.

By a 5-4 margin, the high court chose to uphold a lower court's decision to permit a lawsuit by consumers to go forward. "But if Apple does lose, one possible outcome is that Apple might be forced to allow consumers to install apps from outside the App Store".

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