AAPL Apple Inc

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)

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