Supreme Court to Consider Apple Appeal in Lawsuit Over iPhone App Prices
June 18 2018 - 10:49AM
Dow Jones News
By Brent Kendall
WASHINGTON -- The Supreme Court announced Monday that it will
hear an Apple Inc. appeal challenging the propriety of a lawsuit
brought by consumers who allege that the company illegally
monopolized the sale of iPhone apps.
The justices, in a brief written order, said they would review a
lower-court ruling that said consumers had legal standing to
proceed with their claims. Oral arguments will take place during
the court's next term, which begins in October.
The case, Apple v. Pepper, centers on allegations that consumers
pay artificially high prices for iPhone apps because Apple
maintains an exclusive marketplace for their sale and charges a 30%
commission to app developers. If developers could sell directly to
iPhone users and eliminate Apple as the middleman, prices would be
lower, the plaintiffs allege in their proposed class-action
lawsuit.
Apple denies that it has engaged in anticompetitive conduct and
says app developers, not the company, set the prices for apps sold
in the iPhone maker's App Store.
The App Store has become a significant contributor to Apple's
total revenue, generating about $100 billion in sales for
developers since its inception a decade ago. Last year, the company
said the App Store generated more than $26.5 billion for developers
-- a figure that implied Apple collected $11.36 billion based on
its 30% share of such sales.
The lawsuit, if it is allowed to proceed, poses a threat to that
business at a delicate time for Apple. Sales of the company's
iPhones are slowing and it is aiming to deliver future revenue
growth from its services business, which include the App Store,
mobile payments and its music-streaming business.
As the case comes to the Supreme Court, the immediate dispute
centers on who has the ability to sue over alleged overcharges.
Apple says app developers would have been the direct victims of
any alleged overcharges, and that consumers can't sue for damages
on the theory that some of the higher prices were passed onto
them.
The company cited a 1977 Supreme Court ruling that said claims
for damages belong only to the immediate victims of anticompetitive
conduct, meaning that downstream purchasers of a product can't
bring such claims.
Consumers say they can sue because they bought the apps directly
from Apple through an online store that it owns and operates.
The high court last October asked the Trump administration for
its views on the case. In response, U.S. Solicitor General Noel
Francisco urged the court to intervene, saying the lower court was
incorrect in allowing the lawsuit to go forward.
At the same time, Mr. Francisco suggested that governing Supreme
Court precedent in such cases has proven to be unworkable.
Write to Brent Kendall at brent.kendall@wsj.com
(END) Dow Jones Newswires
June 18, 2018 10:34 ET (14:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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