Supreme Court Mulls Apple Appeal Over iPhone App Lawsuit

Apple’s contentious 30 percent commission for each app purchase is under the spotlight at the US Supreme Court.

It stems from an antitrust lawsuit originally filed in 2011 in California, by a group of unhappy iPhone users – with lead plaintiff Robert Pepper of Chicago. At the time those plaintiffs were backed by 30 state attorney generals.

The iPhone users were unhappy at Apple’s App Store fees, and the case that could have a widespread implications for the entire e-commerce sector.

Antitrust behaviour?

Apple began appealing a lower court’s revival of the proposed lawsuit in the summer to the Supreme Court.

The case hinges on the large commissions Apple charges to App Store developers.

The plaintiffs allege that app developers are unlikely to sue Apple, which essentially controls the service where they make money from.

The lawsuit alleges Apple’s practice of charging developers 30 percent of their software sales, and its requirement that apps are exclusively distributed via the App Store, mean higher prices for consumers, in violation of federal antitrust laws.

Apple argues the consumers who brought the case lack legal standing, arguing that it acts as an intermediary for software developers, and charges its fees to them.

A 1977 Supreme Court decision limits damages for anti-competitive conduct to those who are directly overcharged, rather than indirect victims of charges passed on by others.

An Oakland, California federal judge threw out the original 2011 lawsuit, saying consumers were not direct purchasers since the fees they paid were passed on to them by developers.

Appeals case

But last year in 2017 a San Francisco appeals court revived the case, saying Apple is a distributor that sells apps directly to consumers, and as such must face the antitrust claims.

The US Supreme Court is now hearing Apple’s appeal against that San Francisco appeals court ruling.

It is worth noting that the implications of the case could be very significant indeed for other companies that also offer similar “electronic marketplaces.”

Apple has previously said the App Store created a “dynamic new industry”, with developers earning more than $20 billion (£15bn) through it in 2016 alone, and more than 2 million apps on offer.

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