The Supreme Court announced it would consider a case that asks whether consumers can sue Apple for the way it manages millions of apps for iPhones and iPads, threatening to expose not only Apple but also its tech industry peers to new antitrust scrutiny.
WASHINGTON – The Supreme Court on Monday announced it would consider a case that asks whether consumers can sue Apple for the way it manages millions of apps for iPhones and iPads, threatening to expose not only Apple but its tech industry peers to new antitrust scrutiny.
The new fight in front of the nation’s nine justices stems from a lawsuit initiated in California almost seven years ago. Robert Pepper and three other iPhone-owning plaintiffs allege that Apple has “monopolized” the market for iPhone apps because it has total control over the games, utilities and other offerings that appear in its App Store.
Apple has vigorously opposed the lawsuit, and courts have split as to whether consumers are directly harmed by the iPhone giant’s App Store policies. After a recent loss, Apple appealed to the Supreme Court, which must address whether consumers have standing to bring such a case in the first place.
A loss for Apple could mean trouble for other companies, like Google and Microsoft, which also have their own repositories for third-party apps on smartphones and other devices. It could mean a “potential flood of lawsuits,” said Morgan Reed, the leader of ACT The App Association, a Washington D.C.-based trade group for app makers that is sponsored by Apple. It has asked the Supreme Court to halt the lawsuit.
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A spokesman for Apple did not immediately respond to an email seeking comment. Arguments are slated for the court’s next term, which begins in October.
The lawsuit could also force Apple to rethink the way it manages its App Store, long considered one of the most highly curated platforms in the business. For one thing, Apple generally takes a 30 percent cut of all third-party apps sold through its own portal. In the eyes of plaintiffs, that fee ultimately hurts consumers because developers pass those added costs on to iPhone and iPad users who purchase the paid apps.
Consumers “don’t like the fact that they’re being forced to buy apps only on the App Store, and they’re forced to pay a 30 percent markup,” said Mark Rifkin, a senior partner at Wolf Haldenstein who represents the plaintiffs.
A key issue facing the justices is who exactly is Apple’s customer.
Apple has argued that its policies target developers, not consumers. It has likened itself to a shopping mall that “leases space to various stores,” which then sell to shoppers. In a digital context, Apple says consumers aren’t buying apps from the company – they’re buying them from the creator of those apps through the App Store interface. The arguments rest on a Supreme Court decision from the 1970s, which found consumers can’t seek damages in cases where a company allegedly charged a third party, and that third party passed the costs onto its customers.
A lower court ruled in Apple’s favor. Then, In 2017, the Court of Appeals for the Ninth Circuit saw it differently. It sided with plaintiffs, granting them a green light to sue because they are “direct purchasers from Apple.” That created a conflict with other courts’ rulings, opening the door for Apple to petition the Supreme Court in September.
A month later, the justices asked the U.S. government – which isn’t a party to the court battle – to share its views. The solicitor general in May similarly suggested the Supreme Court take a closer look, arguing the lawsuit against Apple should not have proceeded in the first place.