On May 13, the Supreme Court ruled that iPhone users can sue Apple for engaging in monopolistic business practices. Justice Brett Cavanaugh authored an opinion affirming consumers’ right to hold businesses accountable for their anti-competitive conduct. In a 5 to 4 decision, the court found Apple can be subject to legal action for the way it runs its App Store.
The High Court’s latest decision stems from a class-action lawsuit that was filed in 2011. A group of iPhone owners argued the company’s practice of charging App Store developers 30 percent of their revenues force them to raise prices. Because Apple doesn’t allow users to download iPhone apps from any other source, users argued they were harmed by having to pay exorbitant fees.
As the iPhone owners have pursued their claim through the court system, Apple has maintained it doesn’t set developer pricing. The company further argued the exclusivity of its platform is a method of quality control. The Supreme Court rejected Apple’s arguments and ruled the “indirect purchaser” protections of the Illinois Brick Doctrine don’t apply to Apple.
The Supreme Court did not label Apple a monopoly with its new decision. Instead, the judges only determined it can be subject to antitrust claims. However, Justice Cavanaugh’s opinion noted the firm’s attempt to evade liability was “gerrymandering,” a statement that’s sure to be brought up in future litigation.
Apple didn’t seem overly concerned with the Supreme Court’s landmark finding. In a press statement, the company asserted it was not a monopoly and denied any role in establishing developer pricing. To support its position, the firm pointed out developers can build their apps for a number of different platforms. But Apple’s chief rival in the app space, Google’s Play Store, doesn’t demand developers use its marketplace exclusively.
The electronics manufacturer also expressed confidence that it will prevail in the forthcoming case.
If the Cupertino, California-based corporation loses the pending antitrust suit, its effect on the company could be considerable. As there are more than 90 million iPhone owners in the U.S., an adverse judgment could force the firm to pay out billions of dollars. Additionally, a court could force Apple to open up its infamously guarded ecosystem.
As the firm is transitioning its core business from products to services, the antitrust lawsuit couldn’t have come at a worse time.
The Spotify Connection
In the aftermath of the Supreme Court’s finding, Apple’s problems may extend beyond a class-action suit. Earlier this month, it was reported the European Union (EU) will investigate a complaint alleging the firm is a monopoly. Music streaming service Spotify asked the EU to investigate because it alleges the company harmed its growth.
The Swedish streaming service set up a website accusing Apple of preventing it from expanding within the iOS ecosystem. It also argued the App Store’s profit-sharing agreement forced it to raise prices, which in turn affected its financial performance.
The Supreme Court’s ruling will probably impact Spotify’s complaint in two ways. One, the EU might view the high court’s finding as proof that Apple engages in anticompetitive behavior. Two, the music streamer could team with other app developers to file a separate class-action suit against the tech firm. Though Spotify is the only developer to publicly air its grievances with Apple, other disgruntled companies might join in if they smell blood in the water.
If that happens, Apple’s main concern will shift from being brand evolution to survival.