At issue is whether Apple's walled garden approach to its iOS platform - in which developers are pretty much forced to sell their iPhone and iPad software exclusively via Cupertino's official App Store and pay Apple a 30 per cent cut - is artificially raising prices and a violation of U.S. antitrust laws on monopoly control. It held that Apple acts like a retailer that buys products and then resells them.
Going to the 9th Circuit Court of Appeals, Apple was classified as a distributor of apps that are sold directly to consumers, giving developers the right to bring suit against the company under antitrust laws. In that earlier ruling, the top court limited damages in monopoly-related cases to only those directly harmed instead of anyone who indirectly was overcharged.
Tens of thousands of software developers set the prices and agree to pay Apple a 30 percent commission on whatever they sell, the lawyer representing Apple said in the courtroom. Under this "shopping mall" theory, a shopper can not sue the owner of the mall by asserting he or she paid too much for a product at a store.
The arguments dealt with the fruits of technology that, over the past 10 years, have made more than 2 million apps available to iPhone users, but in the courtroom there were also references to older antitrust cases involving concrete, aluminum, natural gas and shoes.
An Apple spokesperson said in a statement to Fortune that the App Store "has fueled competition and growth in app development", which created millions of jobs and resulted in over $100 billion in payments to developments worldwide.
So as Apple sees it, even if the App Store amounted to an illegal monopoly - and the company insists it isn't - only the app developers could sue, because they're the actual buyers of Apple's distribution service. The company's lead Supreme Court lawyer, Dan Wall, declined to discuss the case in advance of the argument. "Apple took 30% from the customer, not from the developer". The group says the appeals court ruling threatens to disrupt what has been an innovation-friendly system for developers and platforms.
Software developers say that outcome would disrupt similar online marketplaces that operate between app creators and customers. And if the Supreme Court allows the lawsuit to go forward, it could be longer than that before there's a verdict.
'Illinois Brick's rule is increasingly hard to apply in the modern world, with its growing commerce in intangible rights through new platforms, ' the states argued.
Most states already allow downstream purchasers to collect damages, and the group says courts have been able to ensure that companies don't have to double-pay. A judge could triple the compensation to consumers under antitrust law if Apple ultimately loses the lawsuit.
The court will decide the case by late June.
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