Earlier this week, Apple took a blow to its operations that could eventually lead to serious issues with its profitability. A class-action lawsuit against the company stated that the App store was an unlawful monopoly.
Basics of the Lawsuit
The lawsuit was enacted by four iPhone users who believe that Apple was breaking antitrust laws. These laws were passed by Congress back in 1890 and have evolved to keep up with the digital age. The overall objective of these laws is to protect the process of competition for the consumer’s benefit and create a culture for businesses to operate in an efficient manner with reasonable prices and high quality. The three core standards for antitrust today are:
While these are federal laws, many states have their own antitrust laws that state attorney generals or private plaintiffs enforce. The Apple consumers wanted to challenge Apple because the tech giant only allows apps for iOS devices to be downloaded through their proprietary store.
All About the Money
The main concern over the accused monopoly is that Apple uses its power to charge more than it should for the apps in the store. The tech company’s defense is that they do not directly set the retail price for apps available in the store. However, the company currently receives a 30% commission on all app sales in its store. Consumers argue that this rate results in inflated prices for them.
The company countered by saying that only app developers should have the ability to bring forth a lawsuit of this nature because they are the ones who deal with Apple directly. The Supreme Court decision, which won in a 5-4 vote, stated that consumers had a right to sue because they directly purchase apps from the Apple store.
Part of Apple’s official statement said, “We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric. Developers set the price they want to charge for their app and Apple has no role in that. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store.”
The Effects of the Future Court Cases
While it will take several years for any cases that are brought against Apple to be awarded decisions, there could be serious ramifications for the company. On a less severe level, if Apple were to lose, they may have to pay damages to consumers or developers for violating antitrust laws. On a larger scale, after a legal defeat, Apple would have to change their app store policies and in turn, lose money on each app store purchase. Even worse for their profitability, they may have to allow rival sellers of iOS apps into the store.
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