Every time an iPhone or iPad owners buys something from the App Store, Apple gets a 30 percent cut. Having raked in an estimated $11 billion from that arrangement in 2017, the company is understandably committed to maintaining the status quo. However, an antitrust case against Apple that started in 2011 is on its way to the US Supreme Court, and it could change the way you buy apps.
The case (Apple Inc. v. Pepper) brought by Apple customers faces an uphill battle. The position of the plaintiffs is that Apple’s complete control over application distribution on the iPhone has caused pricing inflation. If you want to make apps for iOS devices, you can only distribute them in the App Store. If you want to charge money for them, Apple will always take a piece of the action. The platform is fully locked down, so there’s no official method to install apps from third-party sources.
At the heart of this case is the 1977 Brick Doctrine, which comes from the Illinois Brick Co. v. Illinois Supreme Court case. The court held that you cannot sue for antitrust damages if you’re not the direct customer of the accused. For example, if someone has a monopoly on RAM chips and sells them at an inflated price to OEMs, you can’t sue the chip supplier because your computer was too expensive.
Apple and the Department of Justice claim that consumers don’t have the standing to sue Apple because they’re not the direct customers. Developers set the prices, so they’re actually to blame. On the other side, the plaintiffs accuse Apple of monopolizing the distribution of apps. If developers could release apps via other stores or just on their own websites, prices might be lower.
If the plaintiffs were to prevail, they would be able to sue Apple for damages, and the company might be forced to open the iPhone up to third-party app distribution. This is the Android model, where Google has its own store but allows consumers to enable installations from third-party sources. There are open source repositories of apps, as well as the Amazon Appstore. This option hasn’t slowed the growth of the Play Store as far as anyone can tell, and it offers Android users more choices.
If Apple wins in the high court, consumers would have fewer grounds to bring antitrust cases against increasingly wealthy and powerful technology firms. Other companies that rely on commissions to earn money (like Amazon) could also be shielded from similar lawsuits.
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