Supreme Court debates whether Apple can be sued for monopoly over sales of iPhone apps

Los Angeles Times

WASHINGTON, D.C. — The Supreme Court heard a potentially significant antitrust case Monday to decide whether Apple can be sued for using its monopoly power over its iPhones to profit from the sale of apps.

Lawyers for the Trump administration joined with Apple in urging the high court to throw out the case, but they ran into skeptical questions from most of the justices.

“This is a closed loop,” Justice Sonia Sotomayor told a lawyer for Apple. Users of the iPhone have to buy apps through Apple, she said, and that at least looks like a monopoly arrangement.

“Consumers are harmed too,” added Justice Brett M. Kavanaugh, since they allegedly pay higher prices because Apple takes a 30 percent commission on the sale of apps.

The outcome in Apple v. Pepper is being closely watched — not only by developers who make apps for Apple but by online vendors who sell products on other platforms like Amazon.

The justices will not decide whether Apple must pay damages for using its monopoly power. At issue now is only whether the antitrust suit against Apple can proceed to further hearings and a trial on whether Apple wields monopoly power.

But much of corporate America has joined in support of Apple and argued that such broad antitrust claims should be blocked at the starting gate.

Apple’s lawyers rely on a long-standing court doctrine that holds only “direct purchasers” may bring an antitrust claim. They describe the iPhone as akin to a shopping mall where consumers can freely shop for apps and buy what they choose. Under this “shopping mall” theory, a shopper cannot sue the owner of the mall by asserting he or she paid too much for a product at a store.

In Apple’s view, the antitrust laws would allow a suit only from the victims of this alleged monopoly, which could be the developers of the apps, not consumers who buy the apps.

But the 9th Circuit Court of Appeals allowed the antitrust suit to proceed on the theory that Apple acts as a distributor with monopoly power over certain products —in this instance, apps on the iPhone.

The four liberal justices suggested they were inclined to permit the suit to go forward.

Justice Elena Kagan said she believed she was buying directly from Apple when she used her credit card on an iPhone to buy an app. “I’ve engaged in a one-step transaction with Apple,” she said. If so, the consumer is a direct purchaser and should therefore be permitted to bring an antitrust claim.

At points during the argument, Justices Neil M. Gorsuch and Kavanaugh appeared to agree. Both said they were skeptical of the 1970s-era rule that bars antitrust suits against manufacturers if consumers bought their products through middlemen, not directly from the maker.

Kavanaugh pointed to the words of the key antitrust law, which says “any person injured” may bring a claim. And the complaint in this case was brought on behalf of purchasers of apps who alleged they pay too much because of Apple’s control of the app store.

It will be several months before the justices hand down a ruling in the case.


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