A class-action lawsuit claiming that Apple’s monopoly on its own App Store jacked up prices for consumers can now proceed, according to a new appellate court decision.
Apple’s app monopoly comes under scrutiny
As iPhone users know, Apple only lets its mobile devices run apps purchased from the App Store. No external apps are allowed. That’s what upset some iPhone owners who say that stranglehold on the marketplace effectively created higher prices for them. In 2012, they took their gripe to the courts.
The following year, a court ruled in favor of Apple, effectively shutting down the iPhone owners’ claims and saying their case couldn’t proceed.
The lower court sided with Apple in 2013, which said that it only serves to provide developers with an outlet to sell their apps. Apple basically argued it couldn’t be sued because the plaintiffs purchased their apps from developers, not from the company itself — which only created the platform on which the developers sell.
But now according to a Reuters report, the 9th U.S. Circuit Court of Appeals has overturned that lower court’s ruling. The plaintiffs’ case — in which they say Apple’s monopoly on the iOS market for apps led to prices that were 30% higher — can proceed.
“Apple does not take ownership of the apps and then sell them to buyers after adding a markup of 30%,” Judge William Fletcher wrote in his opinion. “Rather, it sells the apps and adds a 30% commission. But the distinction between a markup and a commission is immaterial. The key to the analysis is the function Apple serves rather than the manner in which it receives compensation for performing that function.’
Apple had no comment on the ruling, according to Reuters.
Interestingly, the actual substance of the plaintiffs’ original claim has yet to be evaluated on its own merits; all the legal action so far has been about whether or not the case could even proceed!
As this legal battle ramps up, we’ll keep you updated as Pepper et al v. Apple Inc., case number 4:11-cv-06714 moves through the U.S. District Court for the Northern District of California.
Apple’s model vs. Google’s model
The iPhone maker’s ‘walled garden’ ecosystem in which it controls every app that has the ability to get onto Apple products is the complete opposite of Google’s open source approach for Android.
Google allows any developer to create an app and upload it to the Google Play store with little oversight.
It’s chaos, but it’s the free market in its purest form, according to Clark. Such a system leads to a lot of great freemium products where developers give you apps with some basic functionality for free and you decide if you want to pay for more functionality.