Antitrust Lawsuit Could Drastically Change the Apple App Store

Antitrust Lawsuit Could Drastically Change the Apple App Store

In a major blow to Apple, the US Supreme Court has ruled that consumers can pursue their anti-trust lawsuit and sue the company for forcing them to buy apps exclusively from it through its App Store. Additionally, the Apple Supreme Court case would likely carry over to other online marketplaces and possibly change the way traditional app stores work.

But the Supreme Court disagreed on the statement, saying Apple reserves contracts with third-party developers, who are forced to hike their original prices in order to pay Apple's 30 percent commission on every sale of an app.

In those cases, Apple charges a commission of 30%, a practice that the lawsuit contends unfairly drives up the price for the apps. "We're confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric". Perhaps, Apple could go the Google way and enable app sideloading as Google does on Android.

Justice Neil Gorsuch who, like Kavanaugh, was appointed to the Court by President Donald J. Trump, argued in a dissenting opinion that the majority's view could open a nasty can of worms.

The effort has been largely successful, helping to transform the Apple services division that includes the app store into the fastest growing part of the company. "Developers set the price they want to charge for their app and Apple has no role in that".

Shares of Apple stock were down some 5.85% in mid-day trading following the decision.

Apple had argued that app buyers are not entitled to sue under a 1977 Supreme Court decision, Illinois Brick Co. v. Illinois.

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But Kavanaugh stressed in his opinion that Apple's commissions also may affect consumers, as well as app developers.

Apple has said the consumers were indirect purchasers, at best, because any overcharge would be passed on to them by developers.

The plaintiffs, including lead plaintiff Robert Pepper of Chicago, filed the suit in a California federal court in 2011, claiming Apple's monopoly leads to inflated prices compared to if apps were available from other sources.

"Plaintiffs can be injured only if the developers are able and choose to pass on the overcharge to them in the form of higher app prices that the developers alone control", he wrote.

The Illinois Brick decision "means that indirect purchasers who are two or more steps removed from the antitrust violator in a distribution chain may not sue", Kavanaugh said.

Apple's App Store rules are about to come under a lot more scrutiny and that could be bad news for the company. "And it raises questions about how the company has wielded that power, amid a wave of anti-tech sentiment that has also prompted concerns about the dominance of other tech behemoths such as Facebook and Amazon", The New York Times reported on Monday. If Apple loses the suit, the company will have to pay hundreds of millions in penalties.