Supreme Court Considers App Store Monopoly Suit

The Supreme Court is considering whether a class-action lawsuit against Apple over its App Store’s commission policies has enough grounding to proceed. If allowed, the case could make waves in the tech industry, according to commentators.

On Nov. 26, the nation’s highest court heard oral arguments in Apple Inc. v Pepper. The plaintiffs allege that Apple’s policy of requiring all iPhone applications to be sold in the company’s App Store, while also charging a 30 percent commission on all sales, violates federal antitrust law.

The Supreme Court must decide whether the case — which has already been thrown out of one court, only to be later resurrected in another — has standing to proceed. Its decision will likely hinge on who the court determines is the “first buyer” in app transactions. According to The Washington Post, “precedent says charges of unfair monopoly prices must be brought by the ‘first buyers’ in a chain of transactions.”

Apple claims that the app developers are first, whereas the plaintiffs claim consumers are.

The suit was originally filed in 2011, when plaintiff Robert Pepper claimed that Apple’s alleged monopoly inflated app prices. A federal judge threw out the suit, however, arguing that consumers were not directly affected by Apple’s commission policy as it is app developers, and not Apple, who decide to put the extra 30-percent cost on consumers.

The Ninth Circuit Court of Appeals reopened the case last year after it argued consumers buy apps directly from Apple and not from app developers.

Apple has argued that a decision in favor of the plaintiff would harm e-commerce, which generates billions of dollars in U.S. retail sales. The plaintiffs argue, however, that leaving consumers without a way to contest monopolistic practices could encourage such practices to proliferate.

According to the Associated Press, eight of the nine Supreme Court justices appeared skeptical of Apple’s position. Justice Elena Kagan said consumers seem to purchase directly from Apple.

“I pick up my iPhone,” Kagan said. “I go to Apple’s App Store. I pay Apple directly with credit card information that I’ve supplied to Apple. From my perspective, I’ve just engaged in a one-step transaction with Apple.”

The Supreme Court likely will release its decision in late spring. According to Apple Insider, a ruling in favor of Pepper could prove damaging to Apple and the rest of the tech industry. A victory for Apple, on the other hand, could severely restrict consumers’ ability to sue over antitrust violations, according to 18 scholars of antitrust law writing in a Supreme Court filing.


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