Apple Must Face Lawsuit Claiming It Ran App Store Monopoly

Image courtesy of Adam Fagen

A federal appeals court has breathed new life into six-year-old lawsuit over Apple’s alleged monopoly control of its App Store. 

The complaint, originally filed in 2011, claimed that iPhone owners were paying higher prices on apps because of an Apple policy that only allowed applications from the company’s own App Store.

The plaintiffs contend that this practice was in violation of U.S. antitrust laws because Apple also required iPhone software developers to turn over 30% of what they charge for an app. This requirement, argues the lawsuit, increased prices and excluded competitors from the iPhone “aftermarket” of apps.

Apple argued successfully in the lower courts that it was simply the middleman in the App store, that developers essentially rented space from the company and then sold directly to consumers. This would mean Apple did not directly sell products to consumers and would not be liable for any kind of damages.

However, yesterday a three-judge panel at the Ninth Circuit Court of Appeals concluded [PDF] that the District Court judge had erred in accepting this argument, because iPhone users were in fact direct purchasers from Apple.

“Apple’s analogy is unconvincing. In the case before us, third-party developers of iPhone apps do not have their own ‘stores.’” the ruling states, noting that Apple actually forbids developers from selling apps through their own stores.

With Thursday’s decision, a lawyer for the plaintiffs tells Bloomberg that if the plaintiffs prevail, class members — people who owned iPhones between 2007 and 2013 — stand to share in most of Apple’s 30% take from the App Store during that time frame.

Based on federal law, the damages awarded to consumer in an antitrust case could triple, meaning Apple’s costs could reach into the hundreds of millions of dollars, Bloomberg notes.

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