- In 5-4 ruling, the Supreme Court gave the go-ahead for a lawsuit by iPhone owners accusing Apple of monopolizing the market for iPhone apps.
- The ruling upheld a lower court’s decision to allow the proposed class action lawsuit to proceed.
- The decision comes as online marketplaces operated by large tech firms have come under heightened scrutiny in recent months.
- Revenue from the App Store is increasingly important for Apple as iPhone sales have slowed.
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The U.S. Supreme Court on Monday gave the go-ahead for a lawsuit by consumers accusing Apple Inc. of monopolizing the market for iPhone software applications and forcing them to overpay, rejecting the company’s bid to escape claims that its practices violate federal antitrust law.
The justices, in a 5-4 ruling, upheld a lower court’s decision to allow the proposed class action lawsuit to proceed. The plaintiffs said the Cupertino, California-based technology company required apps be sold through its App Store and extracted an excessive 30 percent commission on purchases.
Apple shares moved lower after the ruling.
The Supreme Court’s decision was authored by Justice Brett Kavanaugh, which is available in full below.
Apple had said that iPhone owners could not sue the company because they are not the “direct purchasers” in this case. The company’s argument centers on the fact that since app developers are the ones setting the prices for iPhone apps, not Apple, that iPhone owners cannot sue Apple.
The District Court initially agreed with Apple and dismissed the complaint. But the Ninth Circuit reversed that decision, concluding that since iPhone owners buy apps directly from Apple’s store and have no other option for purchasing apps, they are the “direct purchasers.”
Kavanaugh writes that if the company’s practices result in consumers paying higher than necessary prices, customers should be able to sue. Supporting Apple’s argument could also leave room for other firms to structure their practices in such a way to evade antitrust laws, the document also says.
“If the retailer’s unlawful monopolistic conduct caused a consumer to pay the retailer a higher-than-competitive price, the consumer is entitled to sue the retailer under antitrust laws,” the document says.
The ruling comes as digital marketplaces run by large tech firms are under more scrutiny than ever. In March, Sen. Elizabeth Warren proposed a plan that would break up large tech firms like Amazon, Google, and Facebook. The plan would also ban these companies from competing in the same marketplaces that they operate. While Apple was not mentioned in Warren’s initial plan, she later told The Verge that the iPhone maker should be subject to regulation as well.
“You’ve got to break [Apple] apart from their App Store,” she said. “It’s got to be one or the other. Either they run the platform or they play in the store.”
App developers are also filing complaints against Apple because of the way the company runs its App Store. Spotify recently submitted an antitrust claim with the European Commission, which was prompted by Apple’s rules that “limit choice and stifle innovation,” company CEO Daniel Ek wrote in an open letter in March. He wrote that the 30% commission Apple claims on transactions would force the company to inflate the price of Spotify Premium.
The ruling also comes as revenue from digital services like the App Store is increasingly important for Apple as it grapples with slowing iPhone sales.
Apple did not immediately respond to Business Insider’s request for comment.