iPhone App Prices Spark Supreme Court Battle

John Lister's picture

A seven-year-old case into Apple app pricing is heading to the Supreme Court. It's a technical case that centers on the percentage Apple takes from every iPhone or iPad app sale.

The case isn't about the royalty itself, which is 30 percent of every sale through the iTunes store. Various legal and technical measures mean that's the only way developers can distribute iOS apps, so there's no way around paying the royalty.

Instead, the legal question is whether or not consumers have the right to take legal action against Apple over the system. Such lawsuits, of which several have been proposed, are based on the idea that the mandatory commission leads to higher pricing passed on to consumers. Critics suggest that it's a case Apple's monopoly status over iOS apps, which in turn harms consumers. (Source: bbc.co.uk)

Apple Says It's Just An Agent

Regardless of the merits of such an argument, Apple maintains that the consumers don't have the right to bring such cases. It says that the iTunes store simply acts as an agent to facilitate a sale from the developer to the device owner. In turn, even if Apple was exploiting a monopoly position, it would only directly affect the developers (who pay the royalty) rather than the customer.

Apple has cited a ruling in a 1977 case that says laws on anti-competitive behavior only apply to the people who directly pay higher costs, rather than anyone who winds up paying more because those costs are passed on. That ruling was based partly on the problem of objectively deciding how to split the responsibility for the higher prices.

eBay, Uber Could Be Affected

Both sides in the current case say the outcome could have much wider implications. Apple says a decision against it would threaten online companies that act as go-betweens such as eBay or ticket resellers.

Contrastingly, the groups wanting to bring lawsuits against Apple say it could allow other companies to avoid legal action. One gave the example of Uber potentially being able to say passengers can't sue it because it's simply acting as an agent for drivers. (Source: reuters.com)

What's Your Opinion?

Do you think the mandatory 30 percent royalty is anti-competitive behavior? Should the 'market' in question being iOS apps alone or all mobile apps? Even if it is anti-competitive behavior, should end users be allowed to sue Apple for the effect on the prices that developers charge?

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Dennis Faas's picture

If this holds up then I should be able to sue my car manufacturer for gas price fixing! After all, you can't drive a car unless you put gas in it (or batteries for that matter).

All kidding aside, this argument is ridiculous. You can't sell apps unless the process can be done in a safe environment, and Apple provides that environment for its users. If it wasn't for the App Store, the apps would not have any exposure at all and wouldn't sell.

Apple could theoretically get around this "price fixing" issue by having a third party sell the apps for them, but it would just mean more money added to the price of the app because now you've included a middle man to provide the same service Apple is already providing. The same thing goes for Google Play, eBay and the like.

petershaw's picture

" If it wasn't for the App Store, the apps would not have any exposure at all and wouldn't sell."

I can't honestly believe you think that statement is true. You would never apply it to Android or Windows apps and so it should not be applied to Apple apps.

Apple's selling method for apps is just another example of how they keep their products closed so that they can hike prices and prevent competition. The Apple monopoly is entirely to the detriment of consumers. Yet the lemmings that buy Apple lock themselves in and continue to "love" the world's greediest company.

One of today's stupidities is Microsoft bing prosecuted for anti-competitive practices while Apple is allowed to exploit it's anti-competitive monopoly.

ThirdChord's picture

It kinda irks me that if I want to put an app on my iphone/ipad I have to get it through Apple store. On the other hand if I want to go somewhere I could call Uber, a cab company, take a bus, drive my own car, ride a bike, walk, etc. I have a choice to decide how much I want to spend (in currency or effort). Not so with the Apple monopoly on apps. They say they are providing protection. But then again, it is a service I have no choice in paying for. I could take my business to another provider, and that may be exactly what I do.

David's picture

Do you want an app for your iPhone? What are your options. Apple store or....... Apple store. No choice. Are the prices you pay what the seller would sell them for? No, Apple takes a cut, from the app and from any in-app purchases. Apple is a monopolistic marketplace, the only place to find someone servicing the IDevice market, and their monopoly causes financial harm to everyone who has to make a purchase through it.