The U.S. Supreme Court ruled that an antitrust case against Apple can proceed on Monday, after the plaintiffs argued the tech giant’s “monopoly power” over the App Store allows it to unfairly drive up app prices.
“Apple’s line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits,” Justice Brett Kavanaugh wrote, after a 5-4 decision to uphold the Ninth Circuit Court of Appeals’ decision in “Apple v. Pepper.”
The plaintiffs claimed that by forcing iOS users to buy apps through its App Store, Apple can charge app developers a 30% commission on all sales — a fee the developers ultimately pass on to consumers. Apple argued since its users were buying their apps from the developers, it was nothing more than a middle man for the transaction. Apple pointed to an earlier case that said customers cannot sue if they are not “direct purchasers” of the company; the plaintiffs said they were in fact “direct purchasers” because they paid Apple, rather than the app developers.
“A claim that a monopolistic retailer (here, Apple) has used its monopoly to overcharge consumers is a classic antitrust claim. But Apple asserts that the [iOS users] in this case may not sue Apple because they supposedly were not ‘direct purchasers,'” Kavanaugh wrote. “We disagree. The plaintiffs purchased apps directly from Apple and therefore are direct purchasers.”
The ruling not only opens Apple up to other antitrust lawsuits but could also have a profound impact on its business. The company recently reported its Services sector, which includes App Store sales, hit a quarterly record of $11.5 billion in revenue. Those gains could be dented if the company is forced to allow iOS users to buy apps outside the App Store, or if Apple reduces its 30% cut of all sales.
Apple’s stock dropped 5% in early-morning trading, hitting $187 per share.