Supreme Court Allows Against Apple Antitrust Case to Proceed--3rd Update
May 13 2019 - 11:28AM
Dow Jones News
By Brent Kendall and Tripp Mickle
WASHINGTON -- The Supreme Court ruled Monday that consumers can
proceed with an antitrust lawsuit challenging Apple Inc.'s
exclusive control over the marketplace for iPhone apps, threatening
the tech giant's slice of billions of dollars in software
sales.
Plaintiffs, who are suing on behalf of a class of app
purchasers, allege consumers pay inflated prices because Apple
requires that all phone software be sold and purchased through the
company's App Store. Apps would be cheaper if software developers
could sell them directly and bypass Apple as a middleman, the
lawsuit alleges.
Apple typically takes a 30% cut of every app it sells, and a 15%
cut of subscriptions sold through the app store after subscribers'
first year. The consumer lawsuit also complains about other App
Store rules that affect pricing, such as Apple's requirement that
every app price point end in "99 cents," meaning developers can
only set prices in one-dollar increments like $1.99, $2.99 and so
forth.
The Supreme Court's decision focused on a preliminary issue in
the case: whether consumers had a right to sue Apple over these
practices. The court, in a 5-4 opinion by Justice Brett Kavanaugh,
said they did.
The court rejected Apple's arguments that consumers can't sue
because it is the app developers, not the company, that set app
prices.
"If accepted, Apple's theory would provide a roadmap for
monopolistic retailers to structure transactions with manufacturers
or suppliers so as to evade antitrust claims by consumers and
thereby thwart effective antitrust enforcement," Justice Kavanaugh
wrote in a 14-page opinion.
Justice Kavanaugh, President Trump's most recent appointee to
the high court, was joined by four liberal justices: Ruth Bader
Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.
Four conservatives dissented: Chief Justice John Roberts and
Justices Clarence Thomas, Samuel Alito and Neil Gorsuch.
The high court didn't address the merits of the plaintiffs'
claims. If they ultimately win, the case could change the way apps
are sold and make Apple liable for significant monetary damages.
The case could take one to two years, if not longer, to
resolve.
The court's decision came on a day when Apple shares already
were trading sharply lower because of rising U.S.-China trade
tensions. Apple assembles most of its devices in China and counts
on China for about a fifth of its sales. As of mid-morning Monday,
Apple's stock price was down about 4.5%, while the broader market
had declined about 2%.
More broadly, Monday's decision could open the door to
additional consumer lawsuits against other tech companies that run
marketplaces on their platforms.
App-store sales account for about 35% of Apple' ballooning
services business. Apple has pointed to that business as a bright
spot in the face of declines in the number of iPhones sold. The
services business grew by about 30% during last fiscal year to
$39.75 billion.
The App Store offers developers access to 900 million iPhones
world-wide and generally reaches a more affluent audience than
rivals. Users of iPhones and iPads spent an estimated $46.6 billion
on apps in 2018, almost double what was spent for apps from rival
service Google Play, according to Sensor Tower, a market research
firm.
Apple said last year it had paid developers more than $100
billion from app sales over the past decade.
The company didn't immediately respond to a request for
comment.
Apple has said it is entitled to take a share of app sales
because it built the store and employs staff who review 100,000
submissions weekly for compliance with its rules around privacy and
content.
The Apple tax, as some developers have called it, has faced
criticism for years. In addition to the litigation on app sales,
separately the iPhone maker is facing pushback on how it handles
in-app subscription services.
In 2015, Spotify Technology SA began encouraging users to stop
subscribing through Apple by raising monthly pricing to $13 in the
App Store compared with $10 through the music service's
website.
Lately, Netflix Inc. and Fortnite creator Epic Games have moved
to avoid Apple's fees by offering their products outside the App
Store.
Apple's rules differ somewhat from those of Alphabet Inc.'s
Google, which developed the Android phone operating system. Google
also takes a 30% cut of apps sold in its Google Play store, but
Android phone can buy apps elsewhere, including directly from the
software maker in some cases.
Write to Brent Kendall at brent.kendall@wsj.com and Tripp Mickle
at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
May 13, 2019 11:13 ET (15:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Feb 2024 to Mar 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2023 to Mar 2024