Apple must face iPhone app antitrust suit, top court rules

Bloomberg

Consumers can press ahead with a lawsuit that accuses Apple Inc. of using its market dominance to artificially inflate prices at its App Store, the US Supreme Court ruled.
The 5-4 decision could add to pressure the company faces to cut the 30% commission it charges on app sales. Lawyers pressing the case have said they will seek hundreds of millions of dollars on behalf of overpaying consumers. Apple fell 5.7% to $185.92 in New York.
Apple contended the lawsuit was barred under a 1977 Supreme Court ruling that said only direct purchasers of a product can collect damages for overpricing under federal antitrust law. That decision was designed in part to keep companies from having to pay twice for the same misconduct.
Justice Brett Kavanaugh, joining the court’s liberal wing in the majority, said App Store customers meet that test because they buy directly from Apple.
When a user buys an app, Apple collects the money, keeps the 30% commission and gives the rest to the developer. The company told the high court it passed $26.5 billion on to developers in 2017.
“The iPhone owners are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain,” Kavanaugh wrote.
“There is no intermediary in the distribution chain between Apple and the consumer.”
Apple said it is “confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.” The company said 84% of the apps there are free.
“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,” the company said.
Mark Rifkin, one of the law-yers pressing the suit, called the ruling “a major victory for consumers in an increasingly consumer-unfriendly environment.”
The Google Play store, Apple’s chief rival to the App Store, takes a similar cut of up to 30% from developers for app sales.
Benjamin Schachter, an analyst at Macquarie Capital, said in a note that “pressure is building” for Apple to lower the 30% commission. “If the rate is lowered at AAPL or GOOG, the other would quickly follow,” he wrote.
Apple and its tech-industry allies said before the ruling that a decision allowing the lawsuit could lead to expensive antitrust claims against other companies that run online marketplaces, potentially affecting Alphabet Inc.’s Google, Amazon.com Inc. and Facebook Inc.
The decision also could let consumers sue Amazon by arguing that the fees it charges third-party sellers inflate the prices of products, said Hal Singer, an economist at Econ One Research Inc. and a senior fellow at the George Washington Institute of Public Policy.
Like Apple, Amazon charges fees to third-party sellers on its platform and lets those sellers set their own prices. “Amazon was likely rooting for Apple to win this,” Singer said.
But dissenting Justice Neil Gorsuch suggested companies can easily insulate themselves from lawsuits going forward.