Yesterday, the Supreme Court gave Apple a major defeat in an antitrust case. A group of iOS users claimed that Apple had unfairly driven app prices with its locked App Store. Apple claimed that users did not have the right to sue since they actually purchased developer apps instead of Apple. Justice Brett Kavanaugh, who spoke for a majority of the court, disagreed.
The new verdict states that app buyers are Apple's direct customers, giving them the right to continue with their antitrust case. This has no immediate consequences for Apple because there is still a long legal battle ahead. But if the plaintiff's case persists, it can change the relationship between digital platforms and users, giving customers the basic right to sue technical platforms to break the antitrust law.
What is Apple v. Pepper ?
As we mentioned earlier, Apple v. Pepper is an antitrust lawsuit filed by Robert Pepper in 2011. The plaintiffs in Apple v. Pepper claim that Apple's basic App Store model is an illegal monopoly. Apple only provides access to iOS apps through the App Store, and requires developers to pay a 30 percent commission. The plaintiffs claim that this fee is being forwarded to users who have nothing else to buy their apps.
In the past eight years, Apple has claimed that app buyers do not have the legal right to sue at all. The company called on a 1970 case called Illinois Brick Co. v. Illinois, which prevents "indirect buyers" from filing antitrust traits. Then it claimed that Apple's direct customers were developers, not users, so they are the only ones allowed to complain.
A lower court agreement agreed with Apple's interpretation, but the ninth court of appeal ruled in favor of the plaintiffs, and Apple brought the case to the Supreme Court. Yesterday, the Supreme Court ruled on the early question with Illinois Brick and maintaining the ninth circuit decision. So we still don't know if Apple is a monopoly, but we know that customers can sue to settle that question.
Why did the Supreme Court judge against Apple?
The court (in the 5-4 majority) decided that using an app store was fundamentally different from sending a product down a traditional supply chain. In Kavanaugh's words:
iPhone owners are not consumers at the bottom of a vertical distribution chain trying to sue manufacturers at the top of the chain. There is no intermediary in the distribution chain between Apple and the consumer. IPhone owners buy apps directly from Apple's reseller, who is the alleged antitrust switch. IPhone owners pay the alleged overcharge directly to Apple.
Illinois Brick was about traditional commercial supply chains. The State of Illinois sued a mortgaging company for pricing. It claimed that the company had sold its product to a general contractor at an inflated price, the general contractor had sold the bricks to another contractor, and that the contractor had been hired for a government project, thus costing the government more money. The court rejected this long chain of causality and cast the claim out.
However, iPhone users have a clear and direct relationship with Apple. As Justice Elena Kagan said in previous oral arguments, consumers are experiencing the "one-time deal with Apple" when buying an app. Apple claimed that the commission system still separates it from a direct seller, but the court said it just broke hair. "Apple's line drawings don't make much sense," Kavanaugh wrote, "other than as a way to clear Apple out of this and similar trials."
What happens now?
According to Mark Rifkin, who represents the plaintiffs in Apple v. Pepper the case is very briefly kicked back to Ninth Circuit. Then it returns to a lower district court where both parties will begin the discovery. In other words, they will look for evidence to argue for the actual monopoly issue.
After that, Apple must actually defend itself against the running of a monopoly. The company outlined some arguments in a statement yesterday, claiming that the "App Store is not a monopoly in any metric". It insists that locking the App Store helps Apple protect user privacy and security, and that developers can sell the same apps on many different devices – including Android phones, TVs, and game consoles.
However, the plaintiffs argue that these alternatives do not matter. "The fact that they have a market share of [less than] of 50 percent of smartphones does not mean that they do not have a 100 percent share of the distribution of iPhone apps – which they absolutely do," Rifkin says.
That's also what it is worth mentioning what does not happen right now: some concrete changes from Apple. Again Apple has not been found guilty of running a monopoly and it will probably take years to answer that question. A court could pronounce an order while the trial is continuing and requires Apple to change its policy somehow.
The plaintiffs want Apple to offer partial repayments on all paid iPhone apps, as Rifkin says. to compensate "all buyers, wherever they are, who bought iPhone apps for their iPhones at any time since the phone was introduced in 2007." They also want Apple to allow some alternative method of buying apps.
Apple can for To take these steps a settlement without losing in court. "If Apple is prepared to provide meaningful relief to consumers ending illegal practices and compensating consumers for their harm, then we would be stupid not to listen to that kind of approach," Rifkin says. However, this would leave large legal issues unanswered.
If Apple loses, the ruler could set a precedent that would make it easier to sue other antitrust platforms. But it is not clear how wide that precedent would be. iPads and iPhones are uniquely locked down devices, so the biggest arguments against Apple cannot apply elsewhere. Rifkin uses Google's Play Store as an example of a healthy and non-monopolistic marketplace. Even on a locked down gaming console with an online store, it's typically a separate physical media market. "I believe in the real world right now, the only company that does business like Apple runs is Apple," Rifkin says.
But as physical media becomes rare and the app is more important, Apple v. Pepper may be more broadly relevant. Microsoft has just announced an Xbox without a diskette, for example, and if the owners can only buy games through a digital store, they can claim that Microsoft is running an unfair monopoly.
If Apple wins, is this decision still important? 19659023] Definitely. The Supreme Court just removed a major obstacle to filing an antitrust lawsuit as a digital platform user, unlike a seller or developer. In turn, it may mean more antitrust persecution.
"The person carrying the use of antitrust violations tends to be the consumer," explains John Bergmayer, senior advisor for digital rights nonprofit Public Knowledge. "They will often be the ones who have the strongest incentives to bring matters." In contrast, developers risk damaging an important relationship if they file a platform, and they can raise prices to cover inflated costs.
Of course, when this obstacle is cleared, this decision does not make consumers more likely to win a lawsuit. "This does not say whether Apple violated the antitrust law," said John Bergmayer, senior adviser at Digital Rights Nonprofit Public Knowledge. "It just says you can get more lawsuits."
So will more people start suing platforms?
It's plausible and not everyone thinks it's good.
Morgan Reed, president of the industry group The App Association, claims that yesterday's decision could lead to heavy cases that will not ultimately help consumers. Reed points to the Supreme Court's dissenting opinion, in which Justice Neil Gorsuch argued that platforms may attempt to avoid the label "direct seller" with ineffective solutions, allowing developers to handle their own payments and then write a check to Apple.
On the other hand, if Apple loses Apple v. Pepper then some platforms may face several lawsuits. "If suddenly there are a number of victories against plaintiffs against platforms … then it turns out that this doctrine initially allowed violations of the antitrust law," said Bergman. "Because this legal doctrine prevented the only party who was really harmed from bringing the suit. "
Is this part of the larger backlash against tech?
Apple v. Pepper was filed nearly ten years ago, long before the recent talks on antitrust reform and regulation. The Supreme Court upheld an early 2017 decision As we discussed above, this is not a sweeping rewrite of antitrust law or a call to break up Apple, nor will the government make it easier to sue technical companies for other reasons. to determine if anyone is standing to file an antitrust complaint – not whether they can suck a platform to throw them out or facilitate harassment.
VanAugh's choice aside with four liberal righteous could theoretically reflect a growing republican push to regulate tech companies: he is the latest justice, only appointed last year while tech backlash was in full swing. But Rifkin insists that this decision was based on a question of interpretation, not party politics.
But even though there is no direct link to other problems, is Apple vs. Pepper surely . ] part of an attempt to limit the enormous power of a few big tech companies. "We've seen explosive growth in the App Store and it not only reflects the growth and popularity of the iPhone apps. It also reflects Apple's iron-fisted control over the distribution," Rifkin says. "The concentration of control in the hands of a single company, whether Apple or Another company should help us not only prove our case – but I also think we can show that this is the wrong thing for e-buying and the economy in general. "