On May 13, 2019, the Supreme Court of the United States ruled to allow a class action antitrust lawsuit, brought against Apple by a consumer group, to move forward in the legal process.
If success, the tech giant could be liable for millions of dollars of damages for fixing high prices on their products which were available only at Apple outlets.
The case is called Apple Inc v. Pepper et al. A group of four iPhone owners is suing Apple for unlawfully monopolizing the iPhone market, encompassing both the physical hardware – the phones – and apps that run on it.
On November 26, 2018, the group of iPhone owners argued in the U.S. Ninth Circuit Court of Appeals that the iPhone maker violated antitrust laws and forces higher prices for their products and services due to a lack of market competition. Consumers are forced to buy from Apple’s proprietary online storefront, the App Store:
“Apple Inc. sells iPhone applications, or apps, directly to iPhone owners through its App Store — the only place where iPhone owners may lawfully buy apps. Most of those apps are created by independent developers under contracts with Apple. Apple charges the developers a $99 annual membership fee, allows them to set the retail price of the apps, and charges a 30% commission on every app sale.”
The iPhone customers argued that Apple’s 30% sales commission from App Store purchases was passed on to the captive customers, constituting an unfair use of monopoly power. Apple’s lawyers argued that only app developers, and not users, should be able, legally, to bring such a lawsuit.
The litigious group members consider themselves, and all iPhone owners, to be “consumers who purchase goods or services at higher-than-competitive prices from an allegedly monopolistic retailer.”
On May 13, the Supreme Court (SCOTUS) handed down a 5-4 ruling to permit the class action antitrust suit to go forward.
Justice Brett Kavanaugh wrote the majority opinion which rejected Apple’s claims and was joined by the court’s liberal justices.
Regarding Apple’s legal defense, Kavanaugh gave the opinion:
“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.”
Gerrymandering is the drawing of political boundaries to give one party a numeric advantage over an opposing party. The Supreme Court decision shows that consumers forced to buy from one proprietary corporate source have the same jurisdiction (legal territory) as do app developer consumers, and therefore do not warrant a separate legal class or category.
The recent judicial ruling came as no surprise to many who observed that SCOTUS appeared unmoved by Apple’s legal arguments the previous November.
The wheels of justice grind slowly, but inexorably, onward. Apple has been embroiled in antitrust allegations for the past ten years.
A ruling in favor of Pepper et al. (“et al.” means “and others”) would mean that other large tech monopolies could be next to face charges of antitrust misconduct and stand trial for damages.
This would be very bad news to report at shareholder meetings, but very good news for the Little People – the consumers who pay Apple’s corporate salaries. Damages could amount to hundreds of millions of dollars.
Attorney David Frederick issued a statement on behalf of the iPhone user group, calling the decision “important for upholding consumer protections against the dangers of monopoly retailers like Apple. Apple’s monopoly control has distorted the prices for apps and it’s time for that abuse of monopoly power to end.”
Here is Apple’s official statement responding to the SCOTUS ruling against them:
“Today’s decision means plaintiffs can proceed with their case in District Court. We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.
“We’re proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world. Developers set the price they want to charge for their app and Apple has no role in that. The vast majority of apps on the App Store are free and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store.
“Developers have a number of platforms to choose from to deliver their software — from other apps stores, to Smart TVs to gaming consoles — and we work hard every day to make our store the best, safest and most competitive in the world.”