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US case over Apple’s app store monopoly allowed to proceed

By | Published on Tuesday 14 May 2019

Apple

The US Supreme Court has ruled that Apple customers in America can pursue an antitrust lawsuit against the tech giant over its alleged app store monopoly. It’s a case that will be closely followed by Spotify which has filed its own complaint in Europe over its rival’s app store policies, albeit with regulators rather than the courts.

The American case sees a group of iPhone users accuse Apple of anti-competitive behaviour by only allowing apps to be sold for iOS devices via its own store, and then charging a 30% commission on sales, which most app makers pass on to users.

The Supreme Court wasn’t asked to consider the core arguments in this case but instead was required to rule on whether or not the customers behind the lawsuit could even sue Apple over its app store policies. The tech giant argued that when an iPhone user buys an app through its store the transaction is with the app developer not Apple itself, so therefore customers should take up any issues over pricing with those developers.

However, in a 5-4 decision, the Supreme Court did not buy that argument, ruling that the legal precedents presented by Apple did not apply in this dispute. The court said: “If a retailer has engaged in unlawful monopolistic conduct that has caused consumers to pay higher-than-competitive prices, it does not matter how the retailer structured its relationship with an upstream manufacturer or supplier”.

Apple’s app store commission applies not only to initial app downloads, of course, but also to some in-app purchases, including subscriptions (even if the latter does drop to 15% after one year). This causes problems for services like Spotify which simply can’t afford to hand over 30% (or even 15%) of monthly subs to Apple, so it must pass on the extra costs to any subscriber who chooses to sign-up through its iOS app. Which, of course, makes it look like a Spotify subscription is more expensive than an Apple Music subscription.

One solution is to not allow in-app subscriptions, so that customers sign-up via a service’s own website, and then just logs in via the iOS app without undertaking any transaction there. Content-based subscription services increasingly do this, but Apple’s iOS rules make it tricky to communicate to users how they go about subscribing outside of the app.

This is what led to Spotify’s complaint filed with the European Commission earlier this year. Heavily criticising Apple’s app store policies, Spotify demanded that “consumers should have a real choice of payment systems, and not be ‘locked in’ or forced to use systems with discriminatory tariffs”, before adding that “app stores should not be allowed to control the communications between services and users”. Apple hit back accusing Spotify of just not wanting to pay its fair share to utilise an ecosystem it has spent billions developing.

In the back and forth between Spotify and Apple after the former filed its complaint in the EU in March, the same debate came up about who, exactly, owns the customer relationship whenever iPhone uses do some Spotify streaming. Though, whereas in the US case Apple was keen to stress the user was the app maker’s customer, in its statements over Spotify’s competition complaint it seemed to say the opposite.

Setting out its argument as to why stingy Spotify should be happy to share its subscription fees with a rival business, Apple argued it deserved to be paid for going out of its way to “connect Spotify to our users”. Spotify responded by saying its concerns of anti-competitive behaviour were in fact “evident in Apple’s belief that Spotify’s users on iOS are Apple customers and not Spotify customers, which goes to the very heart of the issue with Apple”.

So, it seems, Apple sometimes thinks of iOS app users as its customers and other times as the customers of its developer partners, depending on which legal claims it is seeking to counter. But either way, even if the US Supreme Court has now ruled that the American case over the app store can proceed, most of the arguments relating to anti-competitive behaviour are still to be properly assessed, by regulators in Europe and judiciary in America.

Apple said yesterday that it remained confident it would prevail once those arguments were put fully into the spotlight. “Today’s decision means plaintiffs can proceed with their case in district court”, it said. “We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.

The Apple statement went on: “We’re proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world”. Running through its policies again, it went on: “Developers set the price they want to charge for their app and Apple has no role in that. The vast majority of apps on the App Store are free and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store”.

“Developers have a number of platforms to choose from to deliver their software”, Apple concluded, “from other apps stores, to smart TVs to gaming consoles, and we work hard every day to make our store the best, safest and most competitive in the world”.

So there you have it. Expect plenty more scrutiny of Apple’s app store practices in the months and years ahead.



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