Apple defends iPhone app fees as USA court weighs suit

29 November, 2018, 07:19 | Author: Kristen Mcgee
  • Apple approaches US Supreme Court to block customers from suing it for monopoly abuse

A majority of Supreme Court justices in oral arguments on November 26 appeared to side with plaintiffs over a technical issue of law that would send the case back to a trial court. One federal judge from Oakland, California had previously ruled that consumers are not directly buying from developers and that the higher fees being paid were the fault of developers, not Apple's 30 percent fee for using the App Store.

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 their smartphones exclusively through its App Store. Although the consumers say they pay for the commissions through higher app prices, Apple says those are the type of "pass-through" damages barred under the Supreme Court's 1977 Illinois Brick v. Illinois ruling. Supreme Court will hear arguments Monday on whether the Apple App Store has a monopoly and whether consumers can sue for antitrust damages.

Apple takes a 30 percent commission on the sale of apps, but it says any complaints about its pricing structure should come from developers, not consumers, since it's the developers who pay the commission.

Apple's lawyers rely on a long-standing court doctrine that holds only "direct purchasers" may bring an antitrust claim. Apple has said that a ruling against the company could be a threat to the entire e-commerce industry and would open the doors for consumers to file dozens of suits against other businesses. Its argument: the company is merely providing a marketplace for the apps. Well, the App Store would lose all its power in the first place.

An app developer trade group called The App Association has also put out a statement that sides with Apple.

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"This is a closed loop", Justice Sonia Sotomayor told a lawyer for Apple. "From my perspective", she said, "I've engaged in a one-step transaction with Apple". Under federal law, proving such an allegation could be worth millions of dollars, because awards are tripled for antitrust violations.

The Trump administration is siding with Apple. "The App Store has fueled competition and growth in app development, leading to millions of jobs in the new app economy and facilitating more than $100 billion in payments to developers worldwide".

"Apple directed anticompetitive restraints at iPhone owners to prevent them from buying apps anywhere other than Apple's monopoly App Store", Frederick said.

A trial court initially dismissed the lawsuit, but the 9th U.S. Circuit Court of Appeals revived it. On that basis, a federal judge in San Francisco threw the lawsuit out, concluding that Apple didn't sell anything directly to iPhone consumers.

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

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