Apple will tell the Supreme Court that it can’t be sued by iPhone users who say the App Store is a monopoly

Posted Posted by Admin in News     Comments Comments Off on Apple will tell the Supreme Court that it can’t be sued by iPhone users who say the App Store is a monopoly
Nov
28

The court’s decision in the case, which is named Apple Inc. v. Pepper, No. 17-204, could have an impact beyond Apple. It could also open up other tech companies that operate electronic marketplaces, like Facebook, Ebay, Amazon and Alphabet’s Google, to similar challenges.

In a statement, Apple said that its App Store has fueled competition. The company said the store is responsible for the creation of millions of jobs and more than $100 billion in payments to app developers.

“We are hopeful the Supreme Court will recognize Apple’s critical role as a marketplace for apps, and uphold existing legal precedent by finding in favor of Apple and the millions of developers who sell their apps on our platform,” the company said.

Despite affecting the biggest tech companies in the world, Monday’s case hinges on how the Supreme Court’s justices will apply a decidedly low-tech ruling from the latter half of the 20th century.

The precedent the court is revisiting was set in Illinois Brick Co. v. Illinois, a 1977 dispute in which the court ruled in favor of concrete brick manufacturers. The state of Illinois sued the brickmakers for allegedly inflating their prices, causing an increase in the the cost of public building projects.

The court ruled that even though the increased brick costs might hurt Illinois indirectly, only the contractors who actually bought the bricks had standing to sue. That established the so-called “Illinois brick doctrine,” which says that only the direct purchaser of a good can collect damages from a monopoly holder.

Apple, which is supported by the Justice Department, will argue Monday that it is not directly selling apps to iPhone users. Rather, Apple will say that it is acting as an agent for app developers, who ultimately are selling their wares to consumers. In exchange for the commission Apple takes on app sales, the company provides access to its vast user base and performs other services, such as malware detection.

That view is supported by The App Association, an industry group that represents developers. The group has said that, in its view, “the customer is unequivocally buying from the app developer, not the platform the developer sold their app through,” and cautioned that a ruling against Apple could jeopardize the app economy.

But the iPhone owners bringing the suit take a different view. They argue that Apple directly sells the apps in its store, and has gone to “great lengths” to keep it that way, both by establishing technical barriers to other marketplaces and by penalizing those who jailbreak their devices.

While Apple does not price the goods in its App Store, the iPhone users argue that Apple still exercises control over pricing. Apple requires that that any app sold have a price that ends in 99 cents, such as $1.99.

Herbert Hovenkamp, one of the country’s top antitrust experts and a professor at the University of Pennsylvania School of Law and The Wharton School, the university’s business school, joined a brief supporting the iPhone owners in the case.

In an interview, Hovenkamp said that the case is distinct from Illinois Brick.

In that case, he said, it was the brickmakers who were alleged to be conspiring to inflate prices. But in this case, the equivalent party — the app developers — are innocent, potentially even victims of the alleged monopoly.

“Illinois Brick assumes that you’ve got an antitrust violator, and that violator sells to some innocent retailer or distributor, or someone in the middle, and then that innocent retailer sells to someone who then sues,” Hovenkamp said. But, in this case, it’s different: Apple, the alleged violator, is the one in the middle, he said.

A ruling is expected to come by late June.

WATCH: Steve Jobs defends his commitment to Apple on CNBC in 1997

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Apple will tell the Supreme Court that it can’t be sued by iPhone users who say the App Store is a monopoly

Posted Posted by Admin in News     Comments Comments Off on Apple will tell the Supreme Court that it can’t be sued by iPhone users who say the App Store is a monopoly
Nov
28

The court’s decision in the case, which is named Apple Inc. v. Pepper, No. 17-204, could have an impact beyond Apple. It could also open up other tech companies that operate electronic marketplaces, like Facebook, Ebay, Amazon and Alphabet’s Google, to similar challenges.

In a statement, Apple said that its App Store has fueled competition. The company said the store is responsible for the creation of millions of jobs and more than $100 billion in payments to app developers.

“We are hopeful the Supreme Court will recognize Apple’s critical role as a marketplace for apps, and uphold existing legal precedent by finding in favor of Apple and the millions of developers who sell their apps on our platform,” the company said.

Despite affecting the biggest tech companies in the world, Monday’s case hinges on how the Supreme Court’s justices will apply a decidedly low-tech ruling from the latter half of the 20th century.

The precedent the court is revisiting was set in Illinois Brick Co. v. Illinois, a 1977 dispute in which the court ruled in favor of concrete brick manufacturers. The state of Illinois sued the brickmakers for allegedly inflating their prices, causing an increase in the the cost of public building projects.

The court ruled that even though the increased brick costs might hurt Illinois indirectly, only the contractors who actually bought the bricks had standing to sue. That established the so-called “Illinois brick doctrine,” which says that only the direct purchaser of a good can collect damages from a monopoly holder.

Apple, which is supported by the Justice Department, will argue Monday that it is not directly selling apps to iPhone users. Rather, Apple will say that it is acting as an agent for app developers, who ultimately are selling their wares to consumers. In exchange for the commission Apple takes on app sales, the company provides access to its vast user base and performs other services, such as malware detection.

That view is supported by The App Association, an industry group that represents developers. The group has said that, in its view, “the customer is unequivocally buying from the app developer, not the platform the developer sold their app through,” and cautioned that a ruling against Apple could jeopardize the app economy.

But the iPhone owners bringing the suit take a different view. They argue that Apple directly sells the apps in its store, and has gone to “great lengths” to keep it that way, both by establishing technical barriers to other marketplaces and by penalizing those who jailbreak their devices.

While Apple does not price the goods in its App Store, the iPhone users argue that Apple still exercises control over pricing. Apple requires that that any app sold have a price that ends in 99 cents, such as $1.99.

Herbert Hovenkamp, one of the country’s top antitrust experts and a professor at the University of Pennsylvania School of Law and The Wharton School, the university’s business school, joined a brief supporting the iPhone owners in the case.

In an interview, Hovenkamp said that the case is distinct from Illinois Brick.

In that case, he said, it was the brickmakers who were alleged to be conspiring to inflate prices. But in this case, the equivalent party — the app developers — are innocent, potentially even victims of the alleged monopoly.

“Illinois Brick assumes that you’ve got an antitrust violator, and that violator sells to some innocent retailer or distributor, or someone in the middle, and then that innocent retailer sells to someone who then sues,” Hovenkamp said. But, in this case, it’s different: Apple, the alleged violator, is the one in the middle, he said.

A ruling is expected to come by late June.

WATCH: Steve Jobs defends his commitment to Apple on CNBC in 1997

Comments are closed.

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