Apple will defend app store pricing at US Supreme Court next week

Noel Cummings
November 29, 2018

But the company says the popularity of software for iPhones and its App Store shouldn't obscure that consumers buys apps from developers, not Apple. When software developers offer their products, Apple reviews them for compatibility and malware and, once they are approved, charges the developer a 30 percent commission. Additionally, the 30 percent commision that Apple takes means higher app prices for consumers. "From my perspective, I've just engaged in a one-step transaction with Apple", she said. Today, the two parties will argue whether or not consumers are entitled to damages in antitrust cases, even when the goods were sold by third parties who actually set the prices. The U.S. Supreme Court hears argument Monday on whether customers can sue by claiming that such an arrangement amounts to a monopoly that jacks up prices. However, the lawsuit alleges that developers are raising the cost of their apps to offset the commission fee.

"They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their App Store", said Frederick. Under this "shopping mall" theory, a shopper can not sue the owner of the mall by asserting he or she paid too much for a product at a store. The company told the high court it passed $26.5 billion on to developers past year.

Apple enjoys a 30 percent cut for all sales down via the App Store and the general idea is that consumers are getting gouged since they can not purchase apps directly from developers at basically 30 percent cheaper. "If there's an antitrust issue, the drivers can bring a claim but passengers do not have standing".

Several justices appeared skeptical of Apple's argument.

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If the case succeeds, the damages paid to consumers could be tripled but first a decision has to be made on whether the case is allowed to proceed.

"The harm to the consumers here is that they have to pay higher prices for apps", Francisco said, because "Apple controls the pipeline that connects app makers on the one hand and iPhone users on the other".

Apple is supported by President Donald Trump's administration. "The plaintiffs were backed by 30 state attorneys general, including from Texas, California and NY".

The lawsuit was filed by Chicagoan Robert Pepper in 2011 saying Apple's monopoly leads to inflated prices because there's no competition.

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Going to the 9th Circuit Court of Appeals, Apple was classified as a distributor of apps that are sold directly to consumers, giving developers the right to bring suit against the company under antitrust laws.

The lawsuit was initially dismissed because the commission is imposed on the developers, not the purchasers who are suing.

A ruling is expected in late spring.

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