Supreme Court says Apple will have to face App Store monopoly lawsuit

The Supreme Court is letting an antitrust lawsuit against Apple proceed — and it’s rejected Apple’s argument that iOS App Store users aren’t really its customers. The Supreme Court upheld the Ninth Circuit Court of Appeals’ decision in Apple v. Pepper, agreeing in a 5-4 decision that Apple app buyers could sue the company for allegedly driving up prices. “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,” wrote Justice Brett Kavanaugh.

Apple had claimed that iOS users were technically buying apps from developers, while developers themselves were Apple’s App Store customers. According to an earlier legal doctrine known as Illinois Brick, “indirect purchasers” of a product don’t have standing to file antitrust cases. But in today’s decision, the Supreme Court determined that this logic doesn’t apply to Apple.

The court is careful to note that this is an “early stage” of the case — so there’s no ruling on whether Apple actually does have an unlawful monopoly in the App Store. But its decision could have larger ramifications for customers who want to sue any app seller for antitrust violations, and it sets the stage for a major battle between Apple and some angry customers.

Apple v. Pepper claims that by requiring iOS users to buy apps through its official App Store and charging developers a 30 percent commission, Apple is adding a mandatory fee that developers logically pass on to customers. “A claim that a monopolistic retailer (here, Apple) has used its monopoly to overcharge consumers is a classic antitrust claim. But Apple asserts that the [iOS users] in this case may not sue Apple because they supposedly were not ‘direct purchasers’” writes Kavanaugh. “We disagree. The plaintiffs purchased apps directly from Apple and therefore are direct purchasers.”

In the original Illinois Brick case, a court ruled that a brick manufacturer couldn’t be sued by someone who paid a separate contractor to build a structure with those bricks. But “iPhone owners are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain.” Apple, Kavanaugh’s ruling concluded, was simply using rhetorical tricks to claim it wasn’t a direct seller — and those tricks could let other companies evade legitimate antitrust claims.

If Apple does ultimately lose this case, it could have to repay anyone who was “overcharged” thanks to its App Store markup — or even open up the iOS walled garden. Apple has made other legal arguments to fight this outcome. It’s argued, for example, that customers are free to buy apps through other app stores on other mobile operating systems. But the Supreme Court explicitly isn’t addressing these arguments yet.

Apple did not immediately reply to a request for comment.

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