SUPREME COURT COULD AL­LOW SUIT OVER AP­PLE iPHONE APPS’ SALES

Apple Magazine - - Summary -

The Supreme Court seemed ready to al­low an an­titrust law­suit to go for­ward that claims Ap­ple has un­fairly mo­nop­o­lized the mar­ket for the sale of iPhone apps.

Ap­ple faced skep­ti­cal ques­tions from jus­tices who seemed con­cerned about the con­trol the Cu­per­tino, Cal­i­for­nia-based com­pany ex­erts over iPhone users who must pur­chase soft­ware for their smart­phones ex­clu­sively through its App Store.

The ar­gu­ments dealt with the fruits of tech­nol­ogy that, over the past 10 years, have made more than 2 mil­lion apps avail­able to iPhone users, but in the court­room there were also ref­er­ences to older an­titrust cases in­volv­ing con­crete, alu­minum, nat­u­ral gas and shoes.

The suit by iPhone users could force Ap­ple to cut the 30 per­cent com­mis­sion it charges soft­ware de­vel­op­ers whose apps are sold through the App Store. A judge could triple the com­pen­sa­tion to con­sumers un­der an­titrust law if Ap­ple ul­ti­mately loses the suit.

But the is­sue be­fore the high court at this early stage of the suit is whether the case can pro­ceed at all. Jus­tice Stephen Breyer, who used to teach an­titrust law at Har­vard Law School, said the con­sumers’ case seemed straight­for­ward and in line with a cen­tury of an­titrust law.

Ap­ple ar­gues it’s merely a pipe­line be­tween app de­vel­op­ers and con­sumers, and that iPhone users have no claims against Ap­ple un­der fed­eral laws that pro­hibit un­fair con­trol of a mar­ket.

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. If any­one should be able to sue Ap­ple, it’s a de­vel­oper, Daniel Wall said. “There have been plenty of dis­putes, but none has ever gone to lit­i­ga­tion,” he said.

Chief Jus­tice John Roberts was alone among the nine jus­tices who seemed pre­pared to agree with Ap­ple.

Among the jus­tices who ap­peared to be on the other side, Jus­tice Elena Ka­gan said con­sumers ap­pear to have a di­rect re­la­tion­ship with Ap­ple. “I pick up my iPhone. I go to Ap­ple’s App Store. I pay Ap­ple di­rectly with credit card in­for­ma­tion that I’ve sup­plied to Ap­ple. From my per­spec­tive, I’ve just en­gaged in a one-step trans­ac­tion with Ap­ple,” Ka­gan said.

Jus­tice Brett Ka­vanaugh said if con­sumers are pay­ing more than they should, then per­haps they should be able to sue. The rel­e­vant fed­eral an­titrust law says “any per­son in­jured” can sue, Ka­vanaugh said.

His com­ments could align him with jus­tices who would al­low the suit to pro­ceed. In other cases, the

court has ruled there must be a di­rect re­la­tion­ship be­tween the seller and a party com­plain­ing about un­fair, anti-com­pet­i­tive pric­ing.

Con­sumers can choose from among more than 2 mil­lion apps, com­pared with the 500 apps that were avail­able when Ap­ple cre­ated the App Store in 2008. “The phrase ‘there’s an app for that’ is now part of the pop­u­lar lex­i­con,” Roberts noted in a 2014 de­ci­sion lim­it­ing war­rant­less searches of cell­phones by po­lice. Ap­ple has trade­marked the phrase.

But the com­pany says the pop­u­lar­ity of soft­ware for iPhones and its App Store shouldn’t ob­scure that con­sumers buys apps from de­vel­op­ers, not Ap­ple. De­vel­op­ers set the prices, though Ap­ple re­quires prices to end in .99, Wall said. The Trump ad­min­is­tra­tion is back­ing Ap­ple at the high court.

Rep­re­sent­ing con­sumers, lawyer David Fred­er­ick said the monopoly Ap­ple has over iPhone apps is unique in the dig­i­tal age. “Ap­ple can’t point to an­other e-com­merce dis­trib­u­tor that does what it does,” Fred­er­ick said. Even Ap­ple al­lows third par­ties to sell com­puter soft­ware di­rectly to pur­chasers of its lap­top and desk­top com­put­ers, he said.

A trial court ini­tially dis­missed the suit. The 9th U.S. Cir­cuit Court of Ap­peals re­vived it.

A vic­tory for Ap­ple could se­verely re­strict con­sumers’ abil­ity to sue over an­titrust vi­o­la­tions even though Congress en­vi­sioned such suits “would form a cen­tral com­po­nent of en­force­ment of the an­titrust laws,” warned 18 schol­ars of an­titrust law in a Supreme Court fil­ing.

A de­ci­sion in Ap­ple Inc. v Pep­per, 17-204, is ex­pected by late spring.

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