The Supreme Court ruled against Apple in the Apple v. Pepper case on Monday. The Justices voted 5-4 in favor of Pepper and said iPhone owners were direct purchasers who may sue Apple for alleged monopolization, Kimberly Robinson reported for Bloomberg Law.
As of last November, seven plaintiffs in Apple v. Pepper had filed four antitrust cases class-action complaints against Apple since 2011. The allegations stemmed from Apple’s business model, which charges developers 30% commission for each sale and prohibits them from selling iPhone apps outside the app store.
Apple didn’t immediately respond to request for comment.
Apple, which became the US’ first trillion-dollar company last year, has been struggling in recent months. The company makes about two-thirds of its revenue from the iPhone, but people just aren’t buying as many smartphones. They’re holding onto their devices longer, and in places like China, they’re increasingly opting for phones from Apple’s rivals like Huawei and Oppo. That means Apple has to grow its operations beyond the iPhone, and it’s counting on its services operations to become an even bigger business.
The App Store is a major part of that business. Anything that threatens the App Store could hurt Apple’s push to become a services powerhouse.
The Pepper lawsuit was initially dismissed because the commission is imposed on the developers, not the purchasers who are suing. But the plaintiffs appealed and the Ninth Circuit Court of Appeals ruled that they had standing to sue Apple.
Apple told the court in an appeal that the outcome of this lawsuit could affect e-commerce venues such as Google Shopping, Amazon and Facebook’s marketplace. Those online marketplaces act as middlemen between consumers and third-party businesses. The companies take commissions on sales, but don’t set retail prices for the products they sell.
“This is a critical question for antitrust law in the era of electronic commerce,” Apple stated in its petition. “The threshold issue is who may seek damages based on allegedly anticompetitive conduct by Apple that allows it to charge excessive commissions on apps distribution: the app developers, the plaintiff consumers, or both?”
Originally published at 7:40 a.m. PT
Update at 8:04 a.m. PT: Adds background information.