9th U.S. Circuit Court of Appeals revives antitrust lawsuit against Apple

“iPhone app purchasers may sue Apple Inc over allegations that the company monopolized the market for iPhone apps by not allowing users to purchase them outside the App Store, leading to higher prices, a U.S. appeals court ruled on Thursday,” Stephen Nellis and Dan Levine report for Reuters.

“The 9th U.S. Circuit Court of Appeals ruling revives a long-simmering legal challenge originally filed in 2012 taking aim at Apple’s practice of only allowing iPhones to run apps purchased from its own App Store,” Nellis and Levine report. “A group of iPhone users sued saying the Cupertino, California, company’s practice was anticompetitive.”

“Apple had argued that users did not have standing to sue it because they purchased apps from developers, with Apple simply renting out space to those developers. Developers pay a cut of their revenues to Apple in exchange for the right to sell in the App Store,” Nellis and Levine report. “The courts have yet to address the substance of the iPhone users’ allegations; up this point, the wrangling has been over whether they have the right to sue Apple in the first place.”

Read more in the full article here.

MacDailyNews Take: Every Garden of Eden, man must attempt to destroy.

They have the right to sue Apple… and to lose their case.

As we wrote in August 2013:

First: One would assume that a large corporation such as Apple would have had competent legal advice when they set up their App Store, in order that it be set up in legal fashion.

Second: On every iPhone, iPod touch, iPad, and iPad mini box, the potential buyer is informed of requirements, including “iTunes X.x or later required for some features” and also that an “iTunes Store account” is required. The plaintiffs were informed of the requirements prior to purchase. If the plaintiffs didn’t like the terms that came along with Apple devices, they should have opted for a pretend iPhone from any one of a dime-a-dozen handset assemblers. Then they could blissfully infest their fake iPhones with malware from a variety of sources.

Third: Apple doesn’t set the prices for paid apps.

Fourth: The amount by which Apple Inc. has driven down software prices across the board, on every major computing platform, makes legal actions such as this eminently laughable.

SEE ALSO:
Apple App Store antitrust complaint dismissed on procedural grounds by U.S. judge – August 16, 2013

43 Comments

  1. Wow, talk about being egotistical “Every Garden of Eden, man must attempt to destroy.” This ranks up there with modern day jouranalism that’s for sure.

    I hope most educated readers know that the in the legend as result of a serpent’s seduction a man and woman were expelled from the garden of Eden. I don’t believe Eden was ever destroyed in the legend.

    I guess it must be one of the only things you can do when you come from a terrorist nation that has a broken moral compass…destroy destroy, destroy, oh and a dash of torture every now and then for additional evil.

    1. What’s the matter RW, do you have another yeast infection in your vagina? It appears to be never ending from a pussy like you in your third world country.

      1. While I am from the free and civilized world, given the chance I’d rather be from a third world country than a fifth rate terrorist nation.

        That aside let me address the points you brought forward about the issue. Oh wait, you didn’t just another attack attack attack post.

        How very typical.

        1. It isn’t only the Americans who excel at killing. It’s the entire species Homo sapiens. Worldwide and throughout all time, they’ve methodically exterminated one species after another, and are working on reducing their own. Governments, policies, belief systems can be seen as just elaborate excuses for killing anything that twitches in the wrong direction.

          The only refuge to be found from the endless carnival of blood is in personal sanctuaries, like this secluded resort in which we meet. Two people in rapture with one another can forget about terror and moral condemnation for a few precious hours, across the span of this linen-clad table and with the help of a civilised libation.

          1. You should note that when it comes to important things most of them have been discovered and/or created by other living things.

            Now my post mentions attacking, not killing. It’s not just the entire species of Homo sapiens that excel at killing, but many plants, animals and microbes excel at killing.

            Notably the Spanish Influenza (caused by a virus) infected 500 million people across the world, and resulted in the deaths of 50 to 100 million (three to five percent of the world’s population over two years, making it one of the deadliest natural disasters in human history.

            Now compare that to the war casualties by Homo sapiens which is in the range of 300-800 million since time began and you get an idea how good others are at killing.

            Plus the elimination of species by humans is a drop in the bucket compared to the extinctions that have happened over the millions of years prior to humans for a variety of reasons

            The real kicker that I often bring to a discussion is that even with all the toxic materials and all the weaponry humans have they are not even close to having an arsenal that would eliminate life on the planet. Human life and a few plants and animals sure, but all life, sorry it’s not even close, though no one has ever given me a number of kilotons of nukes that would be required to kill all life.

            Life depends on life, and many creatures kill others to survive, it’s the way it’s been going for a long long time.

            I took some info from wikipedia.

            Nice seeing you again beautiful.

      1. Duh. Supreme Court justices, court of appeals judges, and district court judges are nominated by the President and confirmed by the United States Senate, as stated in the Constitution. The 9th circuit notorious leftist reign of idiocy is about to end.

          1. Party loyalty and gratitude for the appointment do matter to Supreme Court Justices. Even thus, as they are appointed for life, Justices can and do stray from the ideological fold, for they are as subject to a change of mind as any man, and may pridefully recoil from a mandate to do as others would wish. In short, a Supreme Court nomination is a bet; as much as a citizen’s vote is a bet; that your man will come through for you, and if he doesn’t, well, there’s always another chance, at the next election. —John W. Campbell, Jr.

          1. Hah! Majority of what?…….The Peoples Republic of California?

            Hillary won California 5,860,714 to Trump’s 3,151,821. 61.6% to 33.1% exclusive of the other candidates.

            But deduct her California vote from her national vote leaving her with 54,978,783, and deduct Trump’s California vote from his national total, leaving him with 57,113.976, he wins in a landslide in the other 49 states, 51.3% to her 48.7%.

            So, in effect, Hillary was elected president of California and Trump was elected president of the rest of the country by a substantial margin.

        1. MLK Day comes too early this year for the supermajority to cancel it with a vengeance. Maybe next year. Who the F needs all these stinking liberal holidays, anyway? Get back to work!

  2. Oh, you mean kinda like the ability to buy software for the Mac outside the app. store? All litigants need to do is show this hypocrisy of Apple to win. Easy win, time to put on my ‘Sue the bastards’ cap.

  3. Yes, of course; this follows naturally. Since, after all, Judge Denise Cote already found Apple guilty — GUILTY! — of severe, egregious, anti-trust behavior in the Apple & Publishers v Amazon & US DOJ “iBooks case”. In that case, Denise Cote prevented publishers from changing its selling terms for its e-books through its middleman, Amazon.

    Judge Denise Cote required publishers to continue to sell its ebooks to Amazon on the “wholesaler basis”, even after publishers realized it was a poor business decision — as pointed out by Steve Jobs of Apple. The “wholesaler basis” of sale transfers legal title of the product to the wholesaler (Amazon), who can then legally do whatever it wants with them, including selling the books at a loss. While this may make sense with paper books (in which the middleman takes on certain business risks of owning unsold inventory and incurring transportation & distribution costs), it makes absolutely no business (or common) sense for e-books, since the middleman (Amazon) has absolutely no risk of loss to bear for ebooks it sells online, in which case the agency basis of through-sale makes total sense. (Incidentally, almost everything Amazon sells online is sold on the Agency basis; Amazon takes a “cut” — it does not buy everything it sells.) Yet Denise Cote’s ruling prevented the publishers from changing its business policy once it realized Amazon was trying to screw them …to build its own, competition, publishing business. Unfortunately, she did not exhibit a penetrating mind as far as business (or common) sense goes. Even under the US’s existing anti-trust rules & interpretations, I believe Judge Denise Cote got her decision wrong.

    Our antitrust laws, precedents, & interpretations are sorely in need of clarification, particularly in the context of digital business — the original antitrust rulings relate to Standard Oil buying up independent gas stations (to suppress competition) nearly 100 years ago. Not exactly analogous to allowing Amazon to continue to screw Book Publishers by undercutting them on the e-book versions of their “new and best-selling” titles — which are the only ones the book publishers make any money on, and which therefore “pay the bills” of this beleaguered and shrinking industry thanks, in part, to Amazon and the 9th Circuit Court of Appeals. THANK YOU DOJ AND DENISE COTE!

    1. By Apple including the MFN clause stating that publishers could not price higher at Apple than what other vendors charged customers for the same book rather than the cost the publishers sold the book to the vendor, it created a situation where the Agency model was unfavorably exposed to pricing ‘wars’ unless it was the only model in use and as a result eliminate all retail competition for ebooks from the large publishers. Apple would have gotten away scott free if not for the MFN.

      The wholesaler basis of sale transfers legal title to do everything short of actually changing the book itself which is protected by copyright and as far as I know is not part of what is sold to retailers by the publisher. Why would Amazon not be on the hook for unsold copies of unsold ebooks? The wholesale model usually sells a set quantity (e.g. 500 units). Please don’t mix up the Agency model of inventory with the Wholesale.

      Undercutting Hardcover books occurs due to 2 conditions, ebook versions are released simultaneously or too soon after hardcover release and ebooks do not have separate ‘paperback’ and ‘hardcover’ versions. As such the most obvious ‘solution’ would be for Publishers to release ebook versions simultaneously with paperback.

      1. MFN, or “most favorable nation” status, is an international trading term relating to things like tariffs, excise taxes, and customs terms. It is not a business term. MFN has nothing to do with the case.

        SJ told the publishers Apple would be happy to sell their ebooks through its iBooks store but pointed out it made no sense to do so if lower prices were available elsewhere. SJ was pointing out the publishers’ folly — which they already figured out for themselves by then — of selling e-books TO Amazon on the wholesaler basis (which probably made sense for traditional printed books) rather than THROUGH Amazon on the Agency basis for e-books (basically a digital file). The crux of the issue is that the publishers never should have agreed to sell ebooks to Amazon on the wholesaler basis in the first place, as indicated in my post above. SJ basically told them they should sell their books on the agency basis. So the case boiled down to the court telling the publishers they could not revise their original (poor) business decision.

        You ask: “Why would Amazon not be on the hook for unsold copies of unsold ebooks?” Well, that is the point: there are no unsold e-books, are there? Each book consists of a single digital file provided by the publisher, which file is easily “sold” and transmitted to customers over the internet. There is no warehouse of unsold ebooks. What “risk of business loss” is Amazon taking on by selling the publishers ebooks online? None. (Unlike book retailers who might entail costs to warehouse, distribute, and sell printed books, and to dispose of unsold inventory.) That is precisely the point. This is why the publishers, by all rights, should have the legal right to modify their original (poor) decision to sell their ebooks to Amazon from the wholesaler basis to the agency basis.

        You say: “…the most obvious ‘solution’ would be for Publishers to release ebook versions simultaneously with paperback.” Disagree. The most obvious solution would be for the publishers to sell its e-books to Amazon on the agency basis. Amazon, in fact, is acting here in no capacity other than a distributor. Denise Cote and the DOJ screwed up by intervening to prevent the publishers from rectifying a poor business decision. I am sure they had no expectation that Amazon would undercut their only “best and new-release” titles that made them any money (including paying to publish a lot of titles that never recoup their costs). And I repeat: why should Amazon be entitled to buy ebooks on the wholesaler basis, when this is basically the only thing they actually buy and sell? Everything else Amazon sells is on the agency basis.

        1. Ok, what alternate term would you like to use for ‘MFN’? It has been used already in multiple articles regarding Apple’s ebook involvement and should be common knowledge by now.

          Pointing out their folly is one thing and perhaps that is how the publishers should have started, relieving Apple of its involvement in the mess. However I doubt Amazon or any other bookseller would easily capitulate without somehow leveraging their sales of physical copies of books in any ebook agreement with a publisher.

          If you buy books, even e-versions at wholesale, you are buying a ‘lot’, for example of 1000 units. If you, the vendor, do not sell all 1000 units would you not consider the remainder ‘unsold’? The ‘risk’ is that those units are already paid for, and as they are unspoilable by nature I doubt there are any provision for ‘returns’ as similar to that for physical copies. I agree that they be given the right modify their ebook agreements but by each individually coming to an agreement not as a collective in order to preserve retailer market competition.

          Ok, perhaps a rephrasing is in order. To preserve retail competition for the product (any single ebook title) and avoid undercutting hardcover sales, the most obvious solution would be for publishers to release ebook versions simultaneously with physical paperbacks.

          I would have to disagree with you about Amazon selling ‘everything else’ using the agency basis (no inventory). Wouldn’t the ‘agency’ model for everything else mean that Amazon has no need of the huge number and size of fulfillment centers, warehouses, their own cargo planes or ships and fleets of trucks? Obviously there are a lot of products Amazon does buy and hold for sale (inventory). Since there is inventory, I would submit that much if not all of that is bought wholesale from various vendors. That being said, Amazon is not exclusively using the wholesale model. Anything that is a Amazon Marketplace vendor or ‘fulfilled by Amazon’ is generally done in the agency basis of taking a cut with Amazon providing a certain level of service/guarantee.

          1. (1) Agreements governing business purchases and sales are generally referred to as “terms of trade”. “Purchase agreement terms” also works.

            (2) It is not a question of whether or not any party with an advantage would willingly give it up, as this is a simple matter of logic. (For the record, it was only Amazon who complained; there were no other retailers.) It is a question of what is legally right and consistent with good business principles.

            (3) You discuss “a lot of 1000 e-books” as if they had physical properties like print books. But e-books have no physical properties. An e-book is digital files consisting of 0s and 1s. It is easily stored and easily “shipped” …or transmitted… over the internet. All at essentially no cost to the distributor. The e-book distributor bears no real risk of loss, nor entails any real business expenses to purchase, store, pick-pack, and “ship” the product. Accordingly, Contract Law indicates this is an appropriate scenario for publishers to sell the e-books on the agency basis of sale. (Wholesaler basis of sale is appropriate when the seller wishes to transfer title — with all the implications of passing on subsequent business risks and expenses — to the distributor.

            (3a) I am glad you agree publishers should be allowed to modify their e-book selling agreements. Yes, ideally, each publisher would have come to this conclusion on their own and acted accordingly. But the fact they did not does not necessarily make them criminals. Yet the appearance of collusion exists based on the “smoking gun” rule: business people sat in a room and talked about selling prices of their products. Under existing antitrust rules, this is illegal _per se_, and it is likely why DOJ ruled as it did. However, the “smoking gun” rule is overly simplistic. The real litmus test in antitrust is whether or not the consumer is harmed following an abuse of market power. The question of whether or not consumers are harmed can be evaluated simplistically (as in the case of Standard Oil) or in a more sophisticated way. For example, not w.r.t. a few titles, but in the context of the entire publishing industry. And not w.r.t. a short time period, but in the context of multiple years of impact. I believe the DOJ used a simplistic definition of consumer harm when, in fact, a more expansive and sophisticated approach was appropriate. (The DOJ presumably has sophisticated techniques to assess the potential for consumer harm, since they must use such techniques to evaluate the possible antitrust implications of business mergers.) Incidentally, retail competition is the competition between the book publishers. (It is unrelated to prices sold to distributors.) As far as I understand, no discussion was ever made among publishers about their specific retail price policies of their books. It represents evidence (in the negative) against collusion on the part of the publishers.

            (4) You say: “the most obvious solution would be for publishers to release ebook versions simultaneously with physical paperbacks”. This is not obvious to me, and I disagree with the idea. There is no reason book publishers should be forced to do this. The markets for new titles, paperbacks, and e-books are distinct but inter-related market segments. There is no reason the book publishers should be denied the right to optimize their sales of all 3 market segments by choosing what, when, where, and at what prices to sell their products.

            (5) Go to the Amazon website and look into how you would sell something THROUGH them. (You are not selling things TO them.) So no, Amazon’s sale of physical products, as agent for manufacturers, has nothing to do with Amazon’s warehousing needs. Amazon warehouses manufacturers’ physical products under agency contract terms, then sells the item (as a distributor), and collects the selling price for the manufacturer, retaining an agreed percentage (or fee) to cover its costs of distribution and contribution to profit.

            The DOJ got this decision wrong. The publishers got screwed the most, as they are a long-struggling industry, and now the DOJ has prevented them from rectifying a bad business decision. (I believe the publishers had no inkling of what Amazon would do to undermine their businesses, and they failed to consider selling e-books on the Agency basis, since in the past they traditionally sold their (print) books on the wholesaler basis.) The fine to Apple represents petty cash. Unfortunately, the implications to the publishing industry are fairly substantive. And the legal implications are far reaching …and counter to good business practices.

            Over and out.

            1. (1) I see, then I will go with the term “MFN” as it pertains to Apple’s ebook involvement as the specific “term of trade” that was used to place pricing limitations on the Publishers. This is probably in line with everyone else using the term for this case.

              (2) It was primarily Amazon that complained as you say, but they were not the only one’s reluctant on changing to the agent model as may be assumed by Amazon being named. A group that includes Google, kobo and Barnes & Noble as the largest among them. There was no question of one way being more legal than another nor for ‘good’ or ‘bad’ business polidies (subjective).

              (3) I discuss “a lot of 1000 books” as I would a (1000) unit software license that could be individually resold. So in that sense they do have ‘inventory’ properties and as such does incur purchase cost and inventory ‘maintenance’ costs. As they are electronic files as you say the ebook itself may have a single copy, but the maintenance of the license assignment to account holders does take up some storage space on the behalf of the distributor unlike that for purchasing physical copies of books for at the very least the lifetime of the account’s existence. If I understand your parenthesized appropriateness of using the Wholesaler basis of sale, in the case of Amazon, do you not believe Amazon is taking on the risk of any problems that occur with a particular ebook title sold by them whether it take the form of refunds or updates? Looking at it from the Agency basis, do you really believe the publsihers are equipped to handle the risks and expenses for ebooks sold?

              (3a) I will agree that the large publishers conferring amongst themselves would appear to be a ‘smoking gun’ I don’t believe that alone (intention) would be enough. I believe the DOJ required action to rule as it did, in the Apple ebook case it was Apple’s insistence of pricing tiers. Between the “MFN” and the pricing tiers (the idea introduced solely by Apple) this was enough for them to rule as they did. I understand why you would believe that the ‘retail’ competition moved to the Publisher, but I think that is actually a mistake. At the Publisher level retail competition is eliminated for any single title since a given title does not (as far as I know) have more than a single publisher at any point in time. This is like saying there is retail competition for any store brand product. I like Star Trek novels for example and if I wish to purchase it under the Agency basis no matter where I purchase it it will be the same price since there is only one source (the publisher: simon and schuster) that sets the price. Zero retailer competition for Star Trek novels.

              (4) I believed the idea of selling the ebook version simultaneously with the paperback would be the most obvious since releasing the ebook version earlier would eat into HC sales or price the ebook version too high to be lowered easily when the PB version is released. If the ebook is released even later, after paperbacks, they would lose the ‘push’ that the marketing for the title would have given them. If you have a better suggestion please share.

              (5) Visiting the Amazon site as you suggest, it is easy to see they have 3 methods, the first is as you say a sell ‘through’ them (I’ll label this the “Agent” option), the second is a sell ‘to’ them (I’ll label this the ‘Wholesale’ option) and the final is also a sell ‘through’ them but with the vendor handling all fulfillment (I’ll label this the “true Agent” option). So you CAN sell to them with Amazon ordering more product from you when needed.

              The DOJ ruled as they did based on the evidence presented. As for whether that ruling was wrong or right is simply our opinion.. If the publishing industry is serious about taking on the risks of truly going Agent basis they really should be prepared to maintain the accounts of customers of every ebook they sell on their own servers. Till that happens the Publishers will always be at the mercy of the likes of Amazon or Apple.

            2. The reason people put “MFN” in quotes is to indicate they are using journalistic license, or an analogy, rather than a technically-correct term. They either don’t know the correct term to use or they think using a different term loosely and in quotes makes them look cool.

              I don’t understand the rest of what you are saying…

              Over and out.

            3. I simply specified that in our discussion I am using “MFN” as the specific term(s) that limited Publisher’s freedom in pricing difference between ‘outlets’. You suggested a much broader term. Besides, it was Judge Cote who first used “MFN” as the term to define those very terms/clauses in her draft opinion. I believe everyone else simply used it as the ‘correct’ term in that context and not as you believe journalistic license.

              I’m sorry I wasn’t clear enough for you in my reply. I tried to keep each of the points you enumerated in its own paragraph.

            4. Well, I guess that is basically my point: Judge Cote does not exactly know what she is talking about w.r.t. these important underlying business issues. The English language is very powerful. There is no need to make up new words, usages, or terms …certainly not in legal proceedings.

            5. I repeat: a new use of words & terminology has no place in legal proceedings. It can only serve to muddy the waters of communication, where legal proceedings should provide clarification. And it shows the speaker does not understand existing business terms. I am sorry: this is a legal case involving business issues, not a forum to introduce new words into the language. Legal and financial journalists should have called her out on it. Moreover, a singular unique and novel use of an existing term …including citations but a few others… does not meet the requirements for “passing into vernacular usage”. You cannot say Cote’s new usage for the term “MFN” has passed into the vernacular. That will take many years before any expert can decide if its use is widespread enough to consider it a new word, term, or usage in the language at large.

            6. I don’t think the term “MFN” as it relates to special terms between businesses was as uncommon as you believe. It appears that prior to Judge Cote’s 2013 use of “MFN” in her draft opinion and before the 2009 “collusion” the term “MFN” was used in legal documents years prior. I found 2 examples.

            7. (2) 2001 – “SLA between Palm Inc. and Handspring Inc.” (pg.15, sec.5.3)

              Sorry, this is in parts, WordPress doesn’t seem to like this link so you’ll have to search for the quoted part above. Should be the first result.

  4. MDN…
    How does this destroy the Garden of Eden?

    Is someone forcing you into other gardens against your will?
    You are perfectly free to stay within Eden’s walls, why do you care if I may choose to “laugh with the sinners?

    Do you also care which channels I watch at home?
    Should Samsung have a say in that?

  5. I like the idea that Apple controls what I can install on my phone because they have a vetting process to ensure the apps aren’t loaded with virus spyware etc. besides, I knew this was the case and accepted the terms and conditions leaving me responsible for the usage of the phone. Some like to make it appear as though they have no choice. That’s BS, if you want to install insecure programs then get another product, if you like your security then use Apple, or if you to break your system leaving it vulnerable then brick the damn thing, but frivolous lawsuits should be slapped down.

    1. All valid reasons and explanation of YOUR choices. I respect YOUR choice and would not seek to force you to shop outside the App Store. Leave MY choice alone.

      When there is only one store, it’s censorship, and censorship is not the answer. Also, it obstructs commerce by forcing developers to deal with Apple and customers are forced to give further money to Apple. Not a choice, mind you, just the only way.

      “That’s BS, if you want to install insecure programs then get another product”

      No sir, when I buy something it becomes my property. That comment is the same one nationalists use. “If you can’t speak the language, get out of the country…” Well, what if I DO speak the language but CHOOSE to speak another? I’m in my house after all.

  6. Allowing loading of software without going through Apple provides a mechanism that can be exploited for unintentional installation of malicious software. No, thank you: that’s why I don’t own Android. Leave it to the federal government to REQUIRE my phone be unsafe.

    1. Why would having multiple stores for iOS Apps owned by separate entities be a danger if you still stick with purchasing exclusively from Apple? There are many Android users that are not savvy enough to uncheck the “Unknown sources” which allows installation of apps from other than the Play Store, but at least they have the option of doing so and paying a different company with rates possibly more favorable to developers.

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