The U.S. Supreme Court will begin hearing arguments in October for a lawsuit against Apple’s 30 percent App Store fee.
The lawsuit began in 2011 with a number of iPhone buyers in a California federal court. According to court papers, the group was lead by plaintiff Robert Pepper of Chicago. The plaintiffs claimed Apple monopolized the sale of apps. This lead to inflated prices compared to apps available from other sources.
The case pivots on a U.S. Supreme Court ruling from 1977 that limits damages for anti-competitive conduct to those who are directly overcharged. A federal judge in Oakland, California threw out the suit because consumers were not direct purchasers. The 30 percent cut Apple takes from developers is passed onto consumers. This makes them indirect victims who pay an overcharge passed to them by someone else.
However the 9th U.S. Circuit Court of Appeals in San Francisco revived the litigation last year, arguing that Apple was a distributor. Apple sells apps directly to consumers, making consumers direct victims of the overcharge.
On Monday, the Supreme Court justices said they would hear Apple’s appeal against the ruling that revived the litigation. Furthermore, President Donald Trump’s administration reportedly backed Apple and urged the justices to take the case.
The lawsuit is critical for Apple and for e-commerce in general. Should Apple lose the suit, the company would need to pay out hundreds of millions of dollars. A victory, however, could secure other companies such as Google, Amazon and Facebook who run online marketplaces against similar litigation. The Supreme Court ruling could solidify or destroy the 1977 ruling the case — and other similar cases — hinge on.
Whatever the results of the Supreme Court ruling are, it will have a significant effect on e-commerce. Apple’s App Store alone is a massive player in e-commerce. In 2017, almost 3,000 apps made over a million dollars. Additionally, App Store developers have made over $100 billion USD.
The Supreme Court will hear arguments and rule in the nine-month term that starts this October.
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