Supreme Court ruling could threaten Apple’s 30 percent app commission

Supreme Court ruling could threaten Apple’s 30 percent app commission

THE US SUPREME COURT has ruled that consumers can sue Apple for allegedly violating antitrust laws with its "monopolistic" App Store.

For a bit of background here, the 9th U.S. Circuit Court of Appeals ruled in January 2017 that Apple sells its apps directly to consumers and that they can move forward with an antitrust suit on these grounds. "It was the four liberal members of the court and its newest member, Justice Brett Kavanaugh, writing a decision that is a plaintiff's lawyer's delight". Apple contended that it's merely an intermediary since customers technically buy their apps from developers. However, Apple could be forced to hand over millions of dollars in penalties if found guilty, and could also be forced to reduce its 30 per cent commission on app sales or allow consumers to download apps from rival app stores.

Kavanaugh took issue with Apple's defense that it does not have a monopoly because it doesn't set the retail price for individual apps, pointing out that the fee the company charges developers (30 percent of sales revenue plus $99 annually) significantly affects retail pricing.

"A "who sets the price" rule", he wrote, "would draw an arbitrary and unprincipled line among retailers based on retailers' financial arrangements with their manufacturers or suppliers". Hypothetically, he wrote, "If the monopolistic retailer's conduct has not caused the consumer to pay a higher-than-competitive price, then the plaintiff "s damages will be zero".

Dissenting from the decision, conservative Justice Neil Gorsuch, said the decision is "not how antitrust law is supposed to work" because it gives a green light to the exact type of case that the court had previously prohibited.

In this background, four iPhone users had approached the courts, alleging that Apple has unlawfully monopolized the market for iPhone apps.

Today's ruling, Gorsuch said, could begin whittling away the decision in Illinois Brick and may also call other, older cases into question. So a favorable Supreme Court ruling wouldn't just keep this particular lawsuit alive. Since customers are paying Apple directly rather than the developers, they do have the right to sue.

Apple argued that the same logic applies to its App Store. Unfortunately for Apple, it's not good news for the firm.

Apple and its tech-industry allies said before the ruling that a decision allowing the lawsuit could lead to expensive antitrust claims against other companies that run online marketplaces, potentially affecting Alphabet Inc.'s Google, Inc. and Facebook Inc.

Apple's stock tumbled nearly six percent after the ruling, but it is hardly the end of its financial concerns in the matter.

"Our cases have consistently stated that direct purchasers from alleged antitrust violators may maintain a suit against the antitrust violators", Kavanaugh wrote in an official opinion.

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