Apple loses at US Supreme Court on iPhone app antitrust suit

Supreme Court rules Apple will face antitrust suit for its iPhone apps

An Apple iPhone 3GS at an Apple store in Palo Alto

Apple had argued that a Supreme Court ruling allowing the case to proceed could pose a threat to e-commerce, a rapidly expanding segment of the US economy worth hundreds of billions of dollars in annual sales.

The suit, filed by leading plaintiff Robert Pepper, dates back to 2011.

The theory of the lawsuit is that Apple's 30% commission charge to app developers is often passed on to consumers - creating a higher-than-competitive price - and that competitors are shut out because Apple prevents iPhone owners from buying apps anywhere other than its App Store. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store.

Apple argued that consumers couldn't sue the company because they aren't "direct purchasers" of apps. And because iOS is a closed system, iPhone and iPad users are forced to purchase apps only from Apple's official storefront. It only ruled that lawsuits may go forward.

"In the retail context, the price charged by a retailer to a consumer is often a result (at least in part) of the price charged by the manufacturer or supplier to the retailer, or of negotiations between the manufacturer or supplier and the retailer", Kavanaugh wrote. Specifically, it allows for suits from iPhone owners who believe that Apple's 30% sales commissions could be driving up app prices, especially as there is no other lawful way to get apps on iOS.

But Morgan Reed, president of ACT/The App Association, which represents 5,000 app makers and developers, said the ruling could open litigation floodgates. has reached out to Apple for comment on the court's decision. Gorsuch wrote. "Will the court also consider expert testimony analyzing how market factors might have influenced developers' capacity and willingness to pass on Apple's alleged monopoly overcharge?"

Antitrust experts also welcomed the Court's reasoning that allowing Apple to avoid the class-action suit "would provide a roadmap" for others to evade the law.

The Supreme Court's majority opinion was written by Justice Brett Kavanaugh - a conservative Trump appointee - joined by the court's four liberal-leaning judges, Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elia Kagan. At the same time, the company is raking in money from App Store purchases - and paying developers billions.

The U.S. Supreme Court disagreed, in a close 5-4 ruling.

The Supreme Court did not rule on the customers' likelihood of success - only that they have the right to sue. "But that makes little sense, and it would directly contradict the longstanding goal of effective private enforcement and consumer protection in antitrust cases".

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