US court allows lawsuit on Apple's App Store monopoly

The class-action lawsuit from 2011 maintains that Apple, which takes a 30 percent commission on app sales, abuses its monopoly position, resulting in higher prices.
The class-action lawsuit from 2011 maintains that Apple, which takes a 30 percent commission on app sales, abuses its monopoly position, resulting in higher prices.PHOTO: REUTERS

WASHINGTON (AFP) - The US Supreme Court ruled Monday (May 13) that a consumer lawsuit accusing Apple of illegally monopolising the company's App Store may proceed, opening a new avenue of antitrust litigation against the iPhone maker.

In a 5-4 ruling, the justices rejected Apple's argument that consumers lacked standing to proceed with their lawsuit because the tech giant was merely an intermediary with app developers.

The class-action lawsuit from 2011 maintains that Apple, which takes a 30 percent commission on app sales, abuses its monopoly position, resulting in higher prices.

The opinion written by the newest court member, Justice Brett Kavanaugh, said consumers had a right to pursue their case because they have a direct relationship with Apple.

"If a retailer has engaged in unlawful monopolistic conduct that has caused consumers to pay higher-than-competitive prices, it does not matter how the retailer structured its relationship with an upstream manufacturer or supplier," the opinion said.

Kavanaugh was joined by liberal justices Ruth Ginsburg, Elena Kagan, Stephen Breyer and Sonia Sotomayor and the case must now go back to a lower court for trial.

"We're not a monopoly'

A dissenting opinion written by Justice Neil Gorsuch and joined by other conservatives on the court agreed with Apple's argument that developers, not the company, sell to consumers and that the lawsuit is based on "pass-on" liability.

 

"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," Gorsuch wrote.

Apple said it believed it would be successful in the lower court hearing the merits of the case.

"We're confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric," the company said in an emailed statement.

"We're proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world. Developers set the price they want to charge for their app and Apple has no role in that."

Dealing with 'techlash'

The ruling comes amid a growing backlash against major tech companies that dominate key segments of the online economy. Democratic presidential candidate Elizabeth Warren has argued that big firms such as Facebook, Google and Apple should be broken up through antitrust enforcement.

And Apple faces charges in Europe of abusing its platform by discriminating against rival apps, including one complaint from streaming music service Spotify.

John Lopatka, a professor of antitrust law at Penn State University, said the latest ruling does not address the merits of the lawsuit but adds to the pressure on companies like Apple.

"If you're a platform monopolist, you're a sitting duck. You're a target for antitrust challenges," Lopatka said.

Apple could sidestep the controversy, according to Lopatka, by allowing apps to be purchased through certified outside parties.

"Once you allow iPhone users to get apps elsewhere, the case disappears," he said.

Some activists meanwhile hailed the decision as a victory in the battle against tech monopolies.

"This is an important win in the public's fight against monopoly in the tech sector and elsewhere," said Sandeep Vaheesan of the Open Markets Institute, a think tank focused on antitrust issues.

But Morgan Reed, president of ACT/The App Association, which represents 5,000 app makers and developers, said the ruling could open litigation floodgates.

"We are extremely disappointed in the decision from the US Supreme Court to reward trial lawyers rather than developers," Reed said.

"Platforms of all kinds have provided three key benefits for developers - trust, reduction of overhead and global access to consumers."

Ed Black of the Computer & Communications Industry Association, a trade group, said the ruling opens up digital platforms to liability for their role as "matchmaker companies" that connect consumers with services.

"The decision may unintentionally expose businesses offering digital platform services to unintended liability," Black said in a statement.