Supreme Court Rules on Apple's App Price Fixing

John Lister's picture

The Supreme Court has ruled that lower courts can hear a case claiming Apple's pricing policy for its apps breaches anti-trust laws. The claimants say Apple has a monopoly, and its mandatory commission drives up prices unfairly.

The case centers on two main differences between apps on Apple mobile devices and those on rival systems such as Google's Android. The first is that it is virtually impossible to install an app on an iPhone or iPad from a sources other than the official iTunes App Store - something Apple cites as being important for security reasons.

The second is that publishers have to pay Apple thirty percent of the app's sale price, providing that the app is not being distributed as 'free'.

Market Definition Disputed

The main legal talking point in the case has been the definition of the market, where the alleged monopoly exists.

The plaintiffs say that iOS users don't have any choice about where they get apps for their device. It means that when developers pass on the cost of the Apple commission by charging higher prices for apps, consumers have no option but to pay the extra money.

Apple's defense is that the company isn't a buyer or seller, but instead a middleman between device users buying apps from developers. It notes that developers can choose for themselves how much to charge customers (as long as the thirty percent commission is paid). It also argues that if developers think thirty percent is too much, they have the choice to concentrate on app stores for other operating systems instead.

The legal battle so far has been whether or not the plaintiffs had the right to sue, rather than whether or not Apple had breached antitrust laws. Apple argues that because iOS device users don't directly buy apps from Apple (even though apps are sold through the Apple app store), they don't have the legal right to sue.

That dispute went all the way to the Supreme Court, which rejected Apple's argument. The case itself will now continue through the legal system. (Source: supremecourt.gov)

Royalties On Subscriptions Also Questioned

The case comes at the same time another element of Apple's pricing policy is under challenge in Europe.

Music company Spotify says that in addition to Apple taking thirty percent commission on apps, it also takes a thirty percent commission on sales made through an app - such as people subscribing to Spotify's premium music service. (Source: bbc.co.uk)

According to Spotify, the policy acts as a tax on consumers. It also argues that it's unfair some apps are able to avoid paying this commission, for example, when Uber charges a customer for booking a car ride through the iPhone app.

What's Your Opinion?

Did the Supreme Court make the right decision? Should Apple have the right to take whatever commission it chooses from developers who use its store? Does the iTunes App Store constitute a monopoly?

Rate this article: 
Average: 4.7 (7 votes)

Comments

JimBo's picture

I seem to have heard this one before.

It's right out of the Chinese play book and exactly how tariffs work.

Tariffs are a tax strategy usually employed by socialist countries to apply "unnoticed" indirect taxation. My thought is that since Apple is charging developers a fixed percentage the act of doing this looks more like a tax than a simple listing fee that developers would pay. The other point is that Apple says it's to their advantage from a security standpoint to distribute exclusively through their store, if that is true, then how much is that security worth in dollars and how much of that should be shared with the developers to defray listing costs? Could not some savvy security firm break the monopoly by providing a secure interface to Apple and likewise scan check and review developers work cheaper than what Apple charges?

I see a big can of worms with all of this - It just feels down right Un-American.

swreynolds's picture

Just think of how bad things would be if Apple were really popular. You would have to buy every addon device from your Apple store. You would be gouged for it. They might even charge a royalty to use Firewire (Oh yeah, they do). Jobs is gone, but that part of him lives on.

Rusty's picture

Hmm.

matt_2058's picture

I moved to an iPhone just because I wanted to try it. I did a little reading and expected fewer choices compared to Android, and fewer free choices.

What was really surprising was the reliability. Apps actually work. I try out apps to find one with the features I want. Many Android apps were very inconsistent and hokey. Many were thrown together and just bad. Not so with the iPhone. Yea, sometimes I've gotta pay a few dollars for an app, but I know it will work properly. NAS access apps work great.

That 30% charge/fee/tax/whatever is ok by me. My phone is not crippled due to a poorly written app. At least there is some kind of security/quality check with this platform.

And a day later this was posted: "Researchers: Android Bloatware a Security Risk"

https://www.infopackets.com/news/10550/researchers-android-bloatware-security-risk