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By Pete Williams
WASHINGTON — The U.S. Supreme Court ruled Monday that customers of Apple can sue the company over claims that its App Store amounts to a monopoly that artificially inflates prices.
The ruling does not decide who’s right. Instead it says antitrust laws allow customers to proceed with their lawsuit.
Apple iPhones are designed to run only programs sold through its App Store. When software developers offer their products, Apple reviews them for compatibility and charges the developer a 30 percent commission. When a customer buys an app, Apple collects the purchase price and sends the rest of the proceeds to the developer.
It’s a long-standing rule of antitrust law that only a direct purchaser can bring a monopolistic pricing claim. Apple urged the Supreme Court to throw the case out, arguing that it’s simply operating a marketplace allowing app developers to sell their products. It’s the developers that set the price, Apple said.
But by a 5-4 vote, the court rejected that contention. The newest justice, appointed by President Donald Trump, Brett Kavanaugh, joined the court’s liberals and wrote the majority opinion.
“The iPhone owners purchase apps directly from the retailer, Apple,” he said. “If the retailer’s unlawful monopolistic conduct caused a consumer to pay the retailer a higher-than-competitive price, the consumer is entitled to sue.”
The court’s remaining conservatives disagreed. Writing for the four dissenters, Justice Neil Gorsuch said, “That’s not how antitrust law is supposed to work.” It’s the developers that set the price, they said, and the App Store is simply a pass-through.
The case began in 2011, when a group of iPhone owners sued, claiming that Apple’s monopoly for selling iPhone apps artificially raises the prices. They claimed prices would be lower in an open market.
A victory in the antitrust case could disrupt the App Store. Even though the average price of an app is just over one dollar, it generated an estimated $11 billion in revenue for the company in 2017. A loss for Apple could also expose the company to millions of dollars worth of damages.
Software developers have said that outcome would also disrupt similar online marketplaces that operate between app creators and customers. But some consumer groups say it could create competition that would lower prices.