Supreme Court rules against Apple, allowing lawsuit targeting App Store to proceed

Apple Shares Fall After Supreme Court Allows Consumer Lawsuit Over App Store

Apple didn't have an immediate comment.

In a 5-4 ruling, with Donald Trump appointee Brett Kavanaugh siding with the court's four liberal justices, the decision essentially clears the way for a class action lawsuit against Apple to proceed.

With Monday's ruling, it will kick the case back to a lower court, where iPhone owners and Apple will continue what is likely to be a lengthy legal battle.

A district court decision had said that the iPhone users did not have standing to bring their antitrust claim because the developers - not Apple - are the ones selling the apps. Given that the App Store is a monopoly - meaning there's really no other way to legally get an app on an iPhone - the plaintiffs argued that the size of the cut necessitated app developers set higher prices to offset it.

The case against Apple began when a handful of iPhone owners sued the company on the grounds that it was unlawfully monopolizing the aftermarket for apps. Given Apple's size and reach, it is well positioned to make a lot of money from its App Store regardless of how the litigation goes; however, following the Supreme Court ruling, the growth argument for Apple shares just became a little harder to make.

The decision also could let consumers sue Amazon by arguing that the fees it charges third-party sellers inflate the prices of products, said Hal Singer, an economist at Econ One Research Inc. and a senior fellow at the George Washington Institute of Public Policy.

Kavanaugh's opinion was joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor.

Four conservative justices dissented. During oral arguments past year, conservative Justice Samuel Alito questioned if the precedent that Apple cited now "stands up" in the digital ecosystem.

Gorsuch's dissenting minority opinion cited the landmark Illinois Brick Co. v. Illinois case of 1977 to say that "an antitrust plaintiff can't sue a defendant for overcharging someone else who might (or might not) have passed on all (or some) of the overcharge to him". You can read the entire decision related to the case here. That's not an easy calculation to do-and it's not a problem that comes up if developers sue Apple instead. Apple told the Supreme Court that the App Store has been very successful and offers over two million apps. "That is why we have antitrust law".

"Apple posits that allowing only the upstream app developers - and not the downstream consumers - to sue Apple would mean more effective antitrust enforcement", the Supreme Court said in the decision.

A monopsony, as we all recall, can occur when a company becomes the sole buyer of goods or labor, concentrating all the market power on its side.

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