Can Apple Keep the Consumers Away?
Written by Tanya Tate,
On Monday, the United States Supreme Court Agreed to hear Apple, Inc.’s (“Apple”) challenge to a class action antitrust lawsuit brought by consumers who allege that Apple has an illegal monopoly on how apps can be purchased for Apple devices. Specifically, the consumers asserted two primary arguments: 1) that Apple improperly monopolized the distribution of apps[1], and 2) that Apple charges its app developers unreasonably high commissions for the apps they provided, which in turn increased prices for the consumers. Apple responded to both arguments asserted by the consumers and then went on to assert its own defense claiming that the suit was improper as the app developers, not the consumers, were the “direct purchaser” and therefore the only ones with standing to bring the suit. The Supreme Court limited its grant of certiorari only to Apple’s claim of lack of standing.
The USSC previously ruled in Illinois Brick Co v. Illinois that, “only the overcharged direct purchaser, and not others in the chain of manufacture or distribution” have the right to bring an antitrust lawsuit. So then, it seems that this debate will center on whether the consumer or the app developers are the “direct purchasers”. The consumers argue that they are the direct consumer since they pay Apple directly for the apps, and then Apple passes on payment to the developers. Apple, on the other hand, contends that the app developers are the “direct purchasers” arguing that it does not sell the apps (as the consumers contend), but instead simply rent out space in the app store to the developers, making the developers the “direct purchaser”. Apple is appealing from the 9th U.S. Circuit Court of Appeals ruling in January of last year where that court held that the consumers were the direct purchasers and therefore could proceed with their antitrust lawsuit. Should the consumers prevail, it could subject other tech companies with similar commission based models, like Amazon, to consumer pursued antitrust suits.
[1] Android handles this issue differently giving consumers the ability to purchase apps through its store, Google Play, but also giving them the option to purchase discounted apps on the Amazon Appstore; an option Apple does not provide.