Time to break up Apple’s App Store monopoly?

On Monday the Supreme Court will consider in Apple v. Pepper whether to overturn Illinois Brick.

From The Antitrust Bar vs. Apple ($) in Saturday’s Wall Street Journal:

A decade ago Apple revolutionized software development and the smartphone with its one-stop application shop where consumers could download games, social media and other applications. Apple assumed overhead functions for developers including protecting intellectual property and intermediating financial transactions. In return, it collects a 30% commission on app purchases.

Apple’s App Store freed developers to innovate and expanded distribution of their products—epitomizing Steve Jobs’s famous axiom that people don’t know what they want until you show it to them. The App Store launched with 500 apps but now has more than two million. Google, Microsoft and others have imitated Apple’s model to the benefit of consumers world-wide.

Yet plaintiff lawyers now want a share of the bounty. A class action on behalf of all App Store purchasers alleges that Apple monopolizes the app market and overcharges consumers by collecting the 30% commission. Plaintiffs are seeking treble damages under the Clayton Act.

The relevant precedent here is the Supreme Court’s landmark 1977 Illinois Brick Co. v. Illinois decision that bars indirect purchasers from bringing antitrust suits for “pass-through costs.”

Yet a Ninth Circuit Court of Appeals panel said app purchasers could sue and “whether app developers are direct purchasers of distribution services from Apple in the sense of Illinois Brick makes no difference.” …

Online marketplaces of all sorts including e-Bay, Amazon Marketplace, and Etsy that charge sellers fees or commissions could be affected. Ditto sharing-economy services such as Airbnb and TaskRabbit.

My take: The Trump Administration has sided with Apple and against the Ninth Circuit of Court of Appeals. Getting out the popcorn.

See also: Apple v. Pepper: This is what makes it interesting

9 Comments

  1. Etienne Delagrave said:

    Does anybody knows when anything actionnable from this procedings going to emerge? Same day? A few days, a few weeks later?

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    November 24, 2018
    • David Emery said:

      Months… The Supreme Court usually works slowly.

      (and a particularly nasty pox on class action lawyers, who pocket huge fees and actual class members get next-to-nothing. That’s been my experience on several class actions where I was a member of the class. It often wasn’t worth the effort to file for the $5 settlement.)

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      November 24, 2018
  2. Gregg Thurman said:

    Trying to assess the makeup of the court. I don’t think this suit will survive a SCOTUS review

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    November 24, 2018
  3. Fred Stein said:

    App Store is a store. Many on-line and brick and mortar store set the rules and fees for others to sell 3rd part products in their stores.

    Monopoly? They don’t set prices. They encourage business models where third parties make money from services, such as personal banking, travel, ride-share, room-share. I would bet the App sales represents a small fraction of the total wealth created from Apps distributed in the App Store.

    50% is a common starting point for store-front retail. But store-front retail is for too complicated to get into details here.

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    November 24, 2018
  4. Jonathan Mackenzie said:

    This isn’t the fight. This is just to decide who has standing. Apple argues only developers have standing. The first step is to decide if App Store customers can bring the suit. We are a ways away from arguments about whether the App Store is an illegal monopoly.

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    November 24, 2018
  5. David Emery said:

    Seems to me the monopoly argument is because the only way to get an app onto an iPhone is through the App Store. That’s an argument that the end user can make. But the end user has no say in the commission the developers and the App Store agree to.

    Of course, the (expletive deleted) lawyers don’t give a rodent’s posterior about either end users or developers. This, like most class-action lawsuits, is about padding the wallets of the lawyers. Now THAT’S A GROUP whose fees should be investigated!

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    November 24, 2018
    • Fred Stein said:

      Just checked (not being a lawyer): One can still jail-break an iPhone, usually to get non-approved Apps and lose Apple’s protections.

      As a metaphor, shopping centers have similar controls and revenue share models for those that wish to sell on their premise.

      Or buy an Android phone.

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      November 24, 2018
    • John Konopka said:

      The App Store is the only really easy way. Corporations can directly distribute apps to their employees. You could also register as a developer, get the source code, and compile and install. You could also get a code from a developer to install an unreleased app. These are limited to about a hundred copies.

      There is common sense and there is the law. It makes sense that Apple, acting as a store front, could charge a distribution fee and 30% is less than many others charge for similar services. The lawyers are looking for something in the fine print on which they can get a favorable ruling. If they blow up the App Store and ruin it for everyone else but get a few hundred million as a settlement they’re happy.

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      November 24, 2018

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