iPhone users can sue Apple for allegedly operating a monopoly through its App Store, the Supreme Court ruled Monday.
A majority of justices disagreed with Apple’s argument that app buyers aren’t direct customers of Apple. Instead, the court ruled in a 5-4 decision in Apple v. Pepper that the “iPhone owners were direct purchasers who may sue Apple for alleged monopolization.” The plaintiffs in the original case have accused Apple of overcharging for apps through its tight control over the App Store.
“The iPhone owners here are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain,” Justice Brett Kavanaugh wrote in the court’s majority opinion. He called the Supreme Court’s conclusion “straightforward.”
The court’s decision doesn’t mean that Apple is a monopoly or that it has to change how the App Store operates. Instead, it means the plaintiffs can sue Apple. The case now will go to a lower court to determine if Apple’s business practices are legal and will take at least a year to make its way through the court process.
Apple said in a statement that it’s “confident” it’ll win the case and noted “the App Store is not a monopoly by any metric.”
The case stems from complaints that Apple’s App Store — the only way to purchase apps for iPhones, iPads and Apple Watches — is effectively a monopoly that overcharges people for software. Under Apple’s model, Apple charges developers a $99 annual membership fee, lets them set the retail price of their apps and then takes a 30% cut for each sale. For subscriptions, Apple charges a 15% commission after the first year.
Apple prohibits developers from selling iPhone apps outside the App Store, and Apple device users can’t download software to their phones unless it comes from the App Store. Google’s Android phones, by contrast, make apps available in a variety of places. Along with Google’s official Play Store, people can download apps from stores operated by Samsung and Amazon. Some developers have also offered apps directly to consumers.
A handful of consumers, including Robert Pepper, originally filed an antitrust class action complaint against Apple in 2011. They argued that Apple’s practices meant apps cost more than they should. In their litigation against Apple, they asked for damages on behalf of people who’ve bought software in the App Store. Apple has long said that closely controlling the apps in its store ensures that they’re safe, and it’s touted the number of jobs and industries created because of the existence of the App Store.
In Apple v. Pepper, Apple said iPhone owners didn’t have the right to sue Apple because Apple didn’t directly set app prices. Those are determined by developers. Apple also said it only acts as a conduit between consumers and the actual sellers — the app developers. The Supreme Court disagreed.
“We’re gratified the Supreme Court today recognized the right of consumers to sue Apple for the damages they sustain from Apple’s monopoly control over the distribution of applications on iPhones,” said David Frederick, a partner at the Kellogg, Hanse, Todd, Figel & Frederick law firm. He represented iPhone users in the case against Apple.
“The decision is important for upholding consumer protections against the dangers of monopoly retailers like Apple,” Frederick said in a statement. “Apple’s monopoly control has distorted the prices for apps and it’s time for…….Read More>>