Supreme Court allows monopoly lawsuit over iPhone apps

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WASHINGTON-The Supreme Court ruled against Apple Inc. on May 13, green-lighting a class-action lawsuit against the company that litigants accuse of illegally monopolizing the market for iPhone software applications and forcing consumers to overpay.

Recently appointed conservative justice Brett Kavanaugh sided with the court's four liberal justices in the 5-4 ruling which upheld a lower court's decision. Based on its own interpretation of the legal precedent, Apple argues that consumers can only sue the developers due to their role setting prices. The company charges up to a 30% commission to developers who sell their products through the app store and bans them from selling their apps elsewhere. According to the plaintiffs in the case, Apple encourages app developers to increase their prices, as the company charges developers a 30 percent fee on sales.

In its defense, Apple has been arguing the company doesn't set the prices on the App Store; instead, the iPhone owners should only be able to sue the individual sellers on the platform.

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In essence, the Supremes decided that: "If the retailer's unlawful monopolistic conduct caused a consumer to pay the retailer a higher-than-competitive price, the consumer is entitled to sue the retailer under the antitrust laws". "We're confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric".

This story seems like it's about three things: (a) Apple, (b) an enormous and lengthy lawsuit, and (c) a brand-new decision by the U.S. Supreme Court.

Monday's ruling could imperil Apple's app marketplace and could have further implications for other large tech companies that may face lawsuits about allegations of monopolistic power.

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Today's ruling, Gorsuch said, could begin whittling away the decision in Illinois Brick and may also call other, older cases into question.

The dispute hinged in part on how the justices would apply a 1977 Supreme Court precedent. "Unlike the consumer in Illinois Brick", it writes, "the iPhone owners here are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain". But the Supreme Court held that iPhone owners have a "direct purchaser" relationship with Apple, and may sue under a precedent known as Illinois Brick. According to insiders, Apple intends to bring more app development in house and throw down the gauntlet to external developers who now create apps for the firm's devices. With Apple actively seeking to make a greater share of the apps available on the App Store it risks unsettling and upsetting third-party developers who have contributed to the Store's success.

An Apple store in Chicago.

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"Our cases have consistently stated that direct purchasers from alleged antitrust violators may maintain a suit against the antitrust violators", Kavanaugh wrote in an official opinion.