Supreme Court To Decide, Is Apple's Walled Garden App Store Anti-Competitive?
If regular consumers want to install software on their iPhones or iPads (without jailbreaking, of course), the only way that this is permitted is via Apple’s App Store. This is Apple's curated walled garden for apps and games, and is strictly controlled. Developers must submit their apps to Apple for approval, and if they meet all of the company’s criteria (and are malware-free), they can be listed either as a free, freemium, or paid app.
However, a class-lawsuit filed against Apple is seeking damages over allegations that the Cupertino, California-based company is actually violating federal antitrust laws. The lawsuit claims that Apple is operating a monopoly on available software for the iOS platform and that developers have no choice to but to adhere to Apple's strict terms.
Also at issue is Apple's 30 percent commission that it takes from every sale of paid software on the App Store. Apple brought in an estimated $11 billion in revenue during 2017 from the App Store thanks to that 30 percent cut, with developers taking home the remaining 70 percent. However, the lawsuit alleges that developers are raising the cost of their apps to offset the commission fee. In the end, the plaintiffs say that iPhone and iPad customers are being overcharged and have no real recourse.
"Apple's intentionally closed system prevents competition," said David Frederick, who is a lawyer representing the customers filing the class-action lawsuit. "[This] enables the App Store to collect a higher price than if Apple were forced to entice app seekers in a competitive market."
For its part, Apple is pointing to 40-year-old case law that says that damages in anti-competitive cases can only be recouped by the direct victim. In this case, the direct victims would be the app developers, not the customers (who would we considered indirect victims). An Oakland, California judge tossed the case based on this 1977 Supreme Court ruling. However, the 9th U.S. Circuit Court of Appeals reversed the decision, stating that Apple was in fact selling apps directly to customers setting the stage for the Supreme Court showdown.
Apple's approach is different from Google's modus operandi with Android. While Google does operate the Play Store, which is a curated marketplace for apps and games, customers also have the opportunity to side-load apps on Android devices. This effectively bypasses the Play Store and any commissions that Google would take, albeit at the expensive of the greater visibility afforded by the Play Store (and the greater potential for malware). A prime example of this Play Store avoidance is Epic Games' decision to directly offer the Android version of Fortnite to customers.