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Supreme Court says customers can sue Apple over price fixing in the App Store

By Cal Jeffrey · 12 replies
May 13, 2019
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  1. The Supreme Court of the United States has ruled 5-4 against the iPhone maker in a case involving antitrust practices with its App Store. Justices heard arguments last November and arrived at a decision on Monday. The ruling will allow customers to go forward with price-fixing lawsuits against the company.

    Plaintiffs in the case claim that Apple has monopolized iPhone app distribution and in doing so has gouged customers indirectly with its 30-percent commissions on app sales.

    The tech giant says that it acts as merely the storefront and that since developers name their own prices, it cannot be held responsible for price fixing. It further adds that since developers are the ones who pay the commission and not customers, developers should be the only ones that can have a claim citing a 1977 case between Illinois Brick Co. v. Illinois.

    However, the SCOTUS disagreed saying that the Illinois Brick ruling found that direct purchasers of products are allowed to file anti-trust lawsuits. Since customers are paying Apple directly rather than the developers, they do have the right to sue.

    "Apple's line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits."

    Furthermore, justices feel that if customers had other options for purchasing apps, it would create competitive pressure on Apple to lower its commission. As it is now, customers and developers are locked into an ecosystem that is exclusively owned and operated by Apple so it can charge developers whatever it wants, and of course, those costs are passed on to the consumer.

    Justice Brett Kavanaugh wrote in the Court’s opinion, “Apple's line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits. In particular, we fail to see why the form of the upstream arrangement between the manufacturer or supplier and the retailer should determine whether a monopolistic retailer can be sued by a downstream consumer who has purchased a good or service directly from the retailer and has paid a higher-than-competitive price because of the retailer’s unlawful monopolistic conduct.”

    The SCOTUS ruling does not consider the merit of the plaintiffs’ claims or any other defenses Apple may have. It only ruled that the company’s argument to dismiss under Illinois Brick was invalid.

    Apple’s stock tumbled almost six percent after the ruling, but it is hardly the end of its financial concerns in the matter. The company could be facing hundreds of millions in anti-trust claim settlements. It may also be looking at a forced reduction in the App Store’s 30-percent cut or removing restrictions against downloading from an alternative marketplace.

    This case is not the first price-fixing lawsuit Apple has faced. In 2014, the company settled an anti-trust lawsuit involving ebooks for $450 million. More recently in 2017, Russian regulators found Apple guilty of fixing prices for iPhones with several retailers in Russia.

    Permalink to story.

  2. brucek

    brucek TS Maniac Posts: 132   +166

    I like the court's big picture thinking on this, but going by that same big picture, I'm not sure how Apple ends up considered as a monopoly when they have Google/Android for a competitor.

    Yes, Apple's app store is the only app store selling iOS apps. But it is not the only way consumers can get apps for a smart phone, tablet, or other similar device. I think Android may actually have far greater numbers of devices although the total sales volume in app sales may be closer?
  3. brucek

    brucek TS Maniac Posts: 132   +166

    Ahh, to answer my own question, from the supreme court decision:

    "At this early pleadings stage of the litigation, we do not assess the merits of the plaintiffs’
    antitrust claims against Apple, nor do we consider any other defenses Apple might have"...

    So basically this decision was simply on the technical issue of did the plantiffs even have standing to file a suit in the first place. They did, so they can proceed, and now the courts will get to the substance of the matter (years and years from now probably....)
  4. Cycloid Torus

    Cycloid Torus Stone age computing - click on the rock below.. Posts: 3,929   +1,161

    Lots of happy lawyers.
    TheBigT42, Fearghast and VitalyT like this.
  5. Evernessince

    Evernessince TS Evangelist Posts: 3,815   +3,203

    Monopolies are not always on a wide scope. Monopolies can occur of any size. The biggest consideration for a monopoly is the harm to consumers.
  6. epicblunder

    epicblunder TS Rookie

    How else can you expect them to be the first tech company to reach trillion?
  7. lipe123

    lipe123 TS Evangelist Posts: 778   +308

    By making a good product that's cost effective, does not have planned obsolescence of 2 years and allowing its users to mess with the software if they choose and repair it at any good repair shop?

    Oh wait.. thats android devices- my bad
  8. mbrowne5061

    mbrowne5061 TS Evangelist Posts: 1,161   +628

    Lets be fair about the Apple stock plunge:

    Nearly every tech stock fell on Monday because of the trade war. Apple's stock falling was not the sole result of this SCOTUS ruling.
  9. Uncle Al

    Uncle Al TS Evangelist Posts: 5,150   +3,574

    We have seen enough of this sort of junk that our Congress & Senate SHOULD be putting together legislation that makes ANY form of price fixing, manipulation or changes that cheat the consumer a 1st Class Felony with minimum fines of 2x the corporate worth and mandatory sentences for all senior executives, directors, and other corporate officers.
    White collar crime is NOT a victimless crime, especially when the money taken would have gone for food, medical and housing costs, all of which can cost the victim everything they own and significantly shorten their life span.
  10. Danny101

    Danny101 TS Guru Posts: 714   +270

    IPhone vs. the iMac. Can't consumers buy from 3rd party developers on the iMac, or do they still have to purchase through an Apple store? Looking for a precedent.
  11. Lew Zealand

    Lew Zealand TS Guru Posts: 523   +400

    On any Mac you can install apps from a 3rd party without using the Mac App Store. The difference is that on iOS devices the 3rd party app has to get approval from Apple first and then they take that 30% cut.
  12. Lew Zealand

    Lew Zealand TS Guru Posts: 523   +400

    Apple's stock went down about 2x the rest of the market but their stock tends to be an exaggerated version of the broader market, going up and down faster than the averages. Add in a negative Supreme Court opinion and down it goes even further.
  13. Danny101

    Danny101 TS Guru Posts: 714   +270

    That's what I thought. So by that measure, it may work against them in the lawsuit. I get why Apple would want to control the store so as to police any nefarious apps, although they have failed on occasion. 30% does appear to be an awful lot to ask.

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