Supreme Court rules against Apple in lawsuit targeting App Store

Ruben Fields
May 13, 2019

The Supreme Court ruled Monday that iPhone users can bring an antitrust lawsuit against Apple alleging the tech giant has monopolized the market for software applications.

Apple's App Store marketplace has always been a target of some consumers and developers because the company takes a commission of up to 30% on sales, the so-called "Apple Tax". Apple takes a 30% cut of revenue generated through app sales in the App Store.

The app market is a tightly-controlled system. iPhones are programmed so they can not download apps outside the Apple-administered App Store, and users who modify their devices to download apps from other sources - called jailbreaking - risk adverse consequences like voiding their warranty.

Apple argued that consumers couldn't sue the company because they aren't "direct purchasers" of apps.

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

"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", Justice Brett Kavanaugh wrote in the majority opinion.

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"In the retail context, the price charged by a retailer to a consumer is often a result (at least in part) of the price charged by the manufacturer or supplier to the retailer, or of negotiations between the manufacturer or supplier and the retailer", Kavanaugh wrote.

If a new report is anything to go by, Apple is getting ready to abandon a series of older iPhones with the release of iOS 13 the next September. Justice Neil Gorsuch filed dissenting opinion joined by Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito.

Tom's Hardware has reached out to Apple for comment, but did not receive an immediate response.

It's worth noting that the Supreme Court did not rule Apple a monopoly, but rather allowed the suit to proceed.

The Ninth Circuit, however, said that Apple is indeed the seller, through their App Store. Larger app developers, including Netflix (NASDAQ: NFLX) and Spotify (NYSE: SPOT), are already taking steps to bypass the Apple Tax, but if the litigation is successful it could mean less revenue for Apple from smaller app developers as well. They were supported by 30 state attorneys general, including from Texas, California and NY. Should Apple lose the case it might be forced not just to allow third-party app stores, but to pay up to triple in damages as a deterrent.

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