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Supreme Court rules Apple will face antitrust suit for its iPhone apps

By David G. Savage • May 13, 2019 at 5:09 PM

WASHINGTON — The Supreme Court cleared the way Monday for Apple to be sued under antitrust laws for allegedly monopolizing the sale of apps on its iPhones.

Justice Brett M. Kavanaugh, speaking for a 5-4 majority in which he was joined by the court’s four liberal justices, said consumers who contend they paid too much for the apps that Apple controlled had a right to sue.

“Ever since Congress overwhelmingly passed the Sherman Act of 1890, protecting consumers from monopoly prices has been the central concern of antitrust. That is why we have anti-trust law,” he wrote in Apple vs. Pepper.

Kavanaugh stressed the ruling only cleared the way for the suit. It did not mean the plaintiffs would finally prevail, he said.

The ruling in this closely watched case may open the door to suits against other online giants whose platforms serve as a sales outlets for the products of other companies.

Much of corporate America had joined in support of Apple and argued that such broad antitrust claims should be blocked at the starting gate. So did the Trump administration.

Apple maintained that it could not be sued over its App Store because it was an electronic marketplace for products and services of other companies. App developers set the prices for each app in the Apple store, but Apple receives a 30 percent commission, Kavanaugh noted.

Apple said it was like the owner of a shopping mall who could not held liable for monopoly prices charged by one or more of the retail stores. The company relied on a Supreme Court precedent from 1977 which said only “direct purchasers” may sue a company under the antitrust laws. This meant, for example, a consumer could sue a retailer, but not a wholesaler or a manufacturer of a product.

But the justices sided with the 9th U.S. Circuit Court of Appeals, which ruled that the suit against Apple could proceed.

Apple “sells the apps and adds a 30 percent commission,” Judge William Fletcher wrote for the 9th Circuit. It “is a distributor of the iPhone apps, selling them directly to purchasers through its App Store.” As such, the plaintiffs have standing “to sue Apple for allegedly monopolizing and attempting to monopolize the sale of iPhone apps.”

When the justices heard arguments in the case in November, both conservatives and liberals were skeptical of tossing out the antitrust claim entirely based on legal precedents set during the industrial era.

The suit began in 2011, and a federal judge ordered it dismissed on the grounds that purchasers of iPhone apps had no antitrust claim against Apple. But the 9th Circuit Court of Appeals, in a 3-0 opinion, revived the claim and allowed the suit to proceed on the grounds that the consumers are “direct purchasers” of apps from Apple and may have been forced to pay monopoly prices.


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