AAPL Apple Inc

By Brent Kendall 

WASHINGTON -- Apple Inc.'s exclusive market for selling iPhone apps came under fire at the Supreme Court Monday, as justices considered whether consumers should be allowed to proceed with a lawsuit alleging the company has an illegal monopoly that produces higher prices.

The plaintiffs are a group of consumers pursuing a class-action lawsuit seeking damages on behalf of people who have purchased iPhone apps. They argue that prices are higher than they would be in a competitive market because Apple requires that all software for its phones be sold and purchased through its App Store.

App developers can only reach iPhone users through Apple's store, and the company charges the developers a 30% commission.

The case came to the high court Monday on the indirect but critical question of who has the legal right to sue over Apple's alleged monopoly.

The iPhone maker argues that consumers can't sue because the company doesn't directly set app prices, a responsibility that lies with the app developers. Apple says it only serves as a conduit, and consumers aren't really buying apps from the company.

If anyone can sue over the alleged monopoly, Apple's lawyers suggest, it would be the app developers themselves, since they're the ones buying directly from the company when they pay Apple to feature their software in its App store.

The justices, and the court system more broadly, have regularly wrestled in recent years over how old laws should interact with new technology, sometimes raising the question of whether current law is adequate to address a rapidly evolving technological landscape.

In this case, it was clear the justices had at least some familiarity with the issue through their own iPhones.

The court's four liberal justices pushed back against Apple's position during the hourlong oral argument. Justice Elena Kagan, among others, said that when she buys an app on an iPhone, she is engaging in a transaction directly with Apple.

"Here the person is transacting with the monopolist itself," she said.

Some conservative justices also questioned Apple's position, although at times for different reasons. Justices Samuel Alito and Neil Gorsuch questioned the propriety of a Supreme Court precedent from 1977 -- relied upon heavily by Apple -- that limits claims for antitrust damages to immediate victims of the anticompetitive conduct.

That case prohibits a purchaser from suing someone a few links earlier in the supply chain simply because higher prices were eventually passed on to them. Under Apple's theory, Justice Alito noted, only the app developers themselves could sue, and he asked whether any had done so.

No, said the lawyer representing Apple, Daniel Wall. But he noted that government antitrust authorities haven't challenged Apple either, suggesting the lack of legal action could reflect the absence of any anti-competitive behavior on Apple's part.

Chief Justice John Roberts spoke most sympathetically of Apple's position, saying the idea behind the 1977 ruling was to prevent companies from facing lawsuits from different groups of plaintiffs over the same behavior.

The Supreme Court hasn't explicitly said it would consider overruling past precedent in the case -- which it generally does when that is a possibility -- so it's not clear how Monday's discussion will factor into the outcome. A federal appeals court previously allowed the lawsuit against Apple to proceed, and the Supreme Court is considering that ruling.

A decision is expected by the end of June.

Write to Brent Kendall at Brent.Kendall@wsj.com

(END) Dow Jones Newswires

November 26, 2018 13:09 ET (18:09 GMT)

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