U.S. top court leans towards allowing Apple App Store antitrust suit
U.S. top court leans towards allowing Apple App Store
antitrust suit
By Andrew Chung November 26, 2018
WASHINGTON (Reuters) - U.S. Supreme Court justices on
Monday appeared open to letting a lawsuit proceed against Apple Inc that
accused it of breaking federal antitrust laws by monopolizing the market for
iPhone software applications and causing consumers to overpay.
The nine justices heard an hour of arguments in an appeal
by the Cupertino, California-based technology company of a lower court's
decision to revive the proposed class-action lawsuit filed in federal court in
California in 2011 by a group of iPhone users seeking monetary damages.
The lawsuit said Apple violated federal antitrust laws by
requiring apps to be sold through the company's App Store and then taking a 30
percent commission from the purchases.
The case may hinge on how the justices apply one of the
court's past decisions to the claims against Apple. That 1977 precedent limited
damages for anti-competitive conduct to those directly overcharged rather than
indirect victims who paid an overcharge passed on by others.
Apple was backed by Republican President Donald Trump's
administration. Some liberal and conservative justices sharply questioned an
attorney for Apple and U.S. Solicitor General Noel Francisco, who argued on
behalf of the administration on the company's side, over their argument that
the consumers were not directly affected by purchasing the apps from Apple.
Liberal Justice Elena Kagan, explaining how an App Store
purchase is handled, said, "From my perspective, I've just engaged in a
one-step transaction with Apple."
Some conservative justices, including Trump appointee
Neil Gorsuch, wondered whether the 1977 ruling was still valid in a modern
marketplace.
Conservative Chief Justice John Roberts' questions
suggested he agreed with Apple's position. Roberts expressed concern that, for
a single price increase, Apple could be held liable by both consumers and App
developers.
The iPhone users, including lead plaintiff Robert Pepper
of Chicago, have argued that Apple's monopoly leads to inflated prices compared
to if apps were available from other sources.
Though developers set the prices of their apps, Apple
collects the payments from iPhone users, keeping the 30 percent commission on
each purchase. One area of dispute in the case is whether app developers recoup
the cost of that commission by passing it on to consumers. Developers earned
more than $26 billion in 2017, a 30 percent increase over 2016, according to
Apple.
Apple spokeswoman Rachel Wolf Tulley said in a statement
after the arguments that the App Store has fueled competition and promoted
innovation in software development, leading to millions of jobs in the sector.
"We are hopeful the Supreme Court will recognize
Apple's critical role as a marketplace for apps, and uphold existing legal
precedent by finding in favor of Apple and the millions of developers who sell
their apps on our platform," Tulley said.
CLOSING COURTHOUSE DOORS
Apple, also backed by the U.S. Chamber of Commerce
business group, has argued that a ruling siding with the iPhone users who filed
the lawsuit would threaten the burgeoning field of e-commerce, which generates
hundreds of billions of dollars annually in U.S. retail sales.
The plaintiffs, as well as antitrust watchdog groups,
said closing courthouse doors to those who buy end products would undermine
antitrust enforcement and allow monopolistic behavior to expand unchecked. The
plaintiffs were backed by 30 state attorneys general, including from Texas,
California and New York.
The plaintiffs said app developers would be unlikely to
sue Apple, which controls the service where they make money, leaving no one to
challenge anti-competitive conduct.
Along with Gorsuch, conservative Justice Samuel Alito
raised the reluctance of app developers to sue Apple in questioning the 1977
precedent.
Justice Brett Kavanaugh, another conservative Trump
appointee, pushed back against Francisco's contention that Apple's actions are
not the direct cause of higher prices for consumers, because app makers set the
final prices. Kavanaugh pointed out that "consumers are harmed then,
too."
Kavanaugh later suggested that the plaintiffs would have
a more clear-cut right to sue if Apple bought the apps from the developers and
sold them to consumers with its 30 percent commission.
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