Are Apple apps too expensive? Supreme Court considers antitrust argument

Isaac Cain
November 28, 2018

The Trump administration is siding with Apple.

The iPhone users, 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.

But Kagan said consumers' argument is about higher prices, while developers' argument would be about lost profits from reduced sales. That decision was designed in part to ensure companies don't have to pay twice for the same misconduct.

"The plaintiffs, as well as antitrust watchdog groups, said closing courthouse doors to those who buy end products would undermine antitrust enforcement and allow monopolistic behavior to expand unchecked".

Whether or not Apple has a monopoly over the App Store it invented is not the subject of the dispute.

So as Apple sees it, even if the App Store amounted to an illegal monopoly - and the company insists it isn't - only the app developers could sue, because they're the actual buyers of Apple's distribution service.

Instead, Apple is set to appear before the U.S. Supreme Court over antitrust allegations stemming from its popular App Store.

The company says the popularity of software for iPhones and its App Store shouldn't obscure the fact that consumers buys apps from developers, not Apple. The company told the high court it passed $26.5 billion on to developers a year ago. Lawyers pressing the case have said they will seek hundreds of millions of dollars in damages.

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Apple has denied it engaged in anti-competitive behaviour, saying the prices for apps were set by app developers.

But, he said, "the only reason consumers are harmed here in the form of paying higher prices is because the app-makers decide to increase their prices in order to recoup that commission".

If the Supreme Court rules against Apple, consumers then would have standing to sue the company directly in a case potentially affecting millions of iPhone app purchasers. Apple cited companies like ticket site StubHub, Amazon's Marketplace and eBay.

Apple's supporters include ACT/The App Association, a developer trade group whose sponsors include Apple, Microsoft and eBay.

"The Ninth Circuit is home to a disproportionate share of the nation's e-commerce companies, and its erroneous decision creates uncertainty and a lack of uniformity about the proper application of Section 4 (awarding treble damages based on the antitrust law) to this increasingly common business model", its brief read.

That distinction "sounds small" but is 'at the core of a multitrillion-dollar global industry, ' Reed said.

"Why should we build on Illinois Brick?" 'This case is a prime example'.

But consumers, he said, "are suing only for the damages that we incur". The states are led by Texas Attorney General Ken Paxton, a Republican, and Iowa Attorney General Tom Miller, a Democrat. Hovenkamp says that this case is different than typical antitrust cases. In its most recent term, the court voted 5-4 to throw out a lawsuit that accused American Express Co. of thwarting competition by prohibiting merchants from steering customers to cards with lower fees.

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