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Antitrust lawsuit over iOS App Store to move forward, despite Apple's arguments

Antitrust lawsuit over iOS App Store to move forward, despite Apple's arguments

May 13, 2019 | By Alissa McAloon

The Supreme Court has shot down Apple’s argument that iOS users aren’t the App Store’s customers, an argument the company made to deflect an antitrust lawsuit currently brewing over its App Store policies.

The court’s decision is not a statement on whether Apple did or did not violate antitrust laws. Its move to shut down Apple’s dismissal, however, does make it possible for that anti-trust case to continue on in lower courts.

The original 2011 suit filed by a group of iPhone users alleged that Apple has created a monopoly through its first-party App Store, the only channel through which iOS users are able to legitimately buy and download apps for the platform.

Because Apple receives 30 percent of any sales made by games on the App Store, some developers mark up their prices on the platform to compensate. In the view of the lawsuit, iPhone users are inescapably paying “higher-than-competitive” prices for apps because of Apple’s alleged monopoly.

Apple fired back, saying that iPhone owners were indirect customers since they were purchasing apps from the developers hosting games on the App Store rather than Apple itself, and thus couldn’t file an antitrust case against the company according to a legal precedent established through an earlier case known as Illinois Brick.

“A claim that a monopolistic retailer (here, Apple) has used its monopoly to overcharge consumers is a classic antitrust claim,” reads the Supreme Court’s decision. “But Apple asserts that the consumer-plaintiffs in this case may not sue Apple because they supposedly were not “direct purchasers” from Apple under our decision in [Illinois Brick Co. v. Illinois]. We disagree. The plaintiffs purchased apps directly from Apple and therefore are direct purchasers under Illinois Brick.”

Apple aimed to argue that developers are the ones selling apps to customers since they're the ones setting the final price and, according to its read on the rules set forth by Illinois Brick, Apple was then too high up on the supply chain to be hit with an antitrust lawsuit from iPhone users. The court, however, disagreed with that view and pointed out that this would "draw an arbitrary and unprincipled line among retailers based on retailers’ financial arrangements with their manufacturers or suppliers."

"Apple’s line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits," reads the document.

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