U.S. Supreme Court opens door for App Store lawsuit that Apple will likely win

On Monday, “the Supreme Court ruled 5-4 against Apple, opening the door for a class action lawsuit against Apple related to the App Store,” Gene Munster and Will Thompson write for Loup Ventures. “The suit will likely take many years to litigate and we expect it to result in a ruling favorable to Apple.”

“Here’s what an anti-competitive case against Apple will look like based on the origins of Apple v. Pepper: Apple only allows iPhone owners to purchase apps through the App Store, and the company takes a 30% cut of revenue generated from sales. Because that 30% cost is passed onto the consumer via higher prices rather than absorbed by the app developer, consumers are ‘overpaying’ for apps and digital goods,” Munster and Thompson write. “Basically, the claim is that Apple’s position as the owner of the App Store and Apple’s control of the device itself has led to anticompetitive practices.”

“We do not believe Apple is engaging in anticompetitive behavior. We see the necessity for Apple to charge developers to operate and maintain a platform and ecosystem,” Munster and Thompson write. “The benefits of a single party operating that platform for developers and, ultimately, consumers, include trust, safety, security, curation, and access to customers.”

Read more in the full article here.

MacDailyNews Take: Obviously, running the App Store costs Apple some amount.

We think the ultimate ending to this legal challenge will be that developers will be able to take payments in their apps without being forced to give Apple a cut or as much of a cut as today.

Companies that currently are large enough to work around Apple and send users to their own sites for payment include Amazon and Netflix. Apple will likely need to end this practice and allow all developers to allow users to subscribe to services, buy ebooks, etc. within their apps without a 15%-30% fee. A smaller fee may be tenable, as Apple does have costs to run the App Store, of course. We’ll see after the legal gears grind glacially and eventually spit out their end results.

By the way: 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.

Note also that Apple doesn’t set the prices for paid apps.

Lastly, 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.

Apple’s statement regarding the U.S. Supreme Court’s decision, released yesterday:

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. — Apple Inc.

SEE ALSO:
Analyst: Apple investors ‘overreacting’ to U.S.-China trade war and Supreme Court App Store ruling – May 14, 2019
U.S. Supreme Court Justice Kavanaugh’s Apple App Store decision has ‘shaken up’ antitrust law – May 13, 2019
U.S. Supreme Court allows antitrust suit against Apple over App Store; AAPL slides 5% – May 13, 2019
Supreme Court rules against Apple in App Store antitrust case – May 13, 2019
Antitrust, the App Store, and Apple – November 27, 2018
Trump administration backs Apple in U.S. Supreme Court over App Store antitrust suit – November 26, 2018
Apple defends App Store fees in U.S. Supreme Court – November 26, 2018
Apple defends App Store fees as U.S. Supreme Court weighs consumer suit – November 23, 2018
Apple wants U.S. Supreme Court to undo previous decision regarding an antitrust suit – October 31, 2018
U.S. Supreme Court will decide if Apple’s App Store is an anti-competitive monopoly – June 19, 2018
U.S. Supreme Court to consider Apple appeal in antitrust suit over App Store prices – June 18, 2018
US DOJ sides with Apple over App Store antitrust allegations in Supreme Court brief – May 10, 2018
9th U.S. Circuit Court of Appeals revives antitrust lawsuit against Apple – January 13, 2017
Apple App Store antitrust complaint dismissed on procedural grounds by U.S. judge – August 16, 2013

31 Comments

  1. The absence of a competitive store for iOS applications is anticompetitive out of the gate, and a fundamental reason why anti-trust laws exist at all.

    It is assumed that lack of competition, without regulation, drives up prices, as we have no way of knowing whether 30% is generous or fleecing. Why do you think price fixing is illegal? It is tantamount to a common price structure which hurts competition and drives up prices.

    Now… if developers had any balls, they too would join the lawsuit, but they would be understandably afraid of having their applications banned.

    1. The competitive app stores for android are one reason I won’t by an android device. The potential for abuse with malware, spyware, viruses, etc. is too high. I get tired of receiving virus emails from friends android devices that have been infected. Getting safe apps from the app store is a benefit from Apple controlling the distributed apps for their phones.

      1. I don’t understand the reasoning here. Do you expect that should you own an Android device and never turn on “Allow 3rd party Sources” nor visit any App Store outside of Google Play (or Amazon if you have a Fire device), somehow those 3rd party App Stores will infect your device with malware?

      2. So…
        To whatever extent this is already happening with emails from Windows and Mac computers and Android phones doesn’t bother you, but the non-existing iOS issue does?

        O….kay….

  2. “and we work hard every day to make our store the best, safest and most competitive in the world. — Apple Inc.”

    And they should nobly continue to strive to do so.

  3. This would be bad if Apple charged developers to post their apps on the app store but it is free to post your apps. Last I checked most apps are 99 cents and are you saying they are passing on the 30% to consumers.. Blah!

      1. Then Windows and Android are your team, Apple doesn’t have to have a store that has one million apps, it could be a store that has the 500 best apps available. And all the hardware would still sell.

        1. If Apple owned the IP of all the Apps in their store, I would agree with you. Meanwhile, I don’t need license, or ideological purity to own or judge objects of commerce.

  4. So maybe Apple could charge developers a flat to evaluate and list their products out of the gate, and then a smaller fee for delivering each sale to the end user. The developer could set the price of the app as they chose and take as much or as little profit as they wish. Somehow, I don’t think developers would think this is a better arrangement, unless they were hugely successful.

      1. I didn’t offer a position about other folks being able to sell apps for iOS. Don’t assume you know my position on that. If there were other vendors, insuring security might become a problem. I don’t know. For sure, it would be the buyer’s problem if he or she installed a malicious app. Other hardware manufacturers would have to do the same. I’m not sure how Google would feel about competition. Is that what you have in mind?

          1. Also don’t assume that we agree. I want to learn more. Can you give me a link to an android store not operated by Google? The link in your duplicated post takes me to a Walmart page.

            1. I can even email you an installable App. But the Amazon App Store can and does run on Android. Microsoft has some Apps you can download from their site, there are others.

            2. Thanks. Not sure what I think. But ultimately, what I as an individual think about this, the outcome is out of my control, so I won’t give any more mental energy to the topic.

    1. You could argue that the Annual Developer Fee Apple charges ($99 Individual/ $299 Enterprise) is the flat fee “to evaluate and list their products out of the gate”. In contrast Android developers pay a one time $25 fee.

  5. When I drop my UPS package in a FedEx drop box, they won’t deliver it! Just because FedEx set up the network, that doesn’t give them the right to deny my UPS Package. The nearest UPS drop box is THREE BLOCKS OVER.

  6. The lawsuit will have an uphill battle at least as far as initial app pricing is concerned. The issue will be whether or not app developers can escape the fees from in-app commissions.

    1. IMO the end result of all the proceedings will likely be Apple having to allow 3rd party iOS App Stores to exist. This in no way detracts from Apple’s App Store being as safe and secure as it is now.

        1. Apple has no say in App pricing. Where did you get that idea? The App publisher sets the price of his App. Apple charges 30% to sell it regardless of the price. There are apps available from free to over several hundred dollars and I’ve heard some are even more. Apple doesn’t set App prices.

          1. You’re right, I’ll rephrase. They influence developers to price their App to compensate for whatever rate Apple charges them. If a 3rd party iOS App Store does become the norm, one area of competition that would arise is the rates each App Store charges on App and in-App purchases. In short Apple indirectly influences App pricing.

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