On Monday, Apple finally had its highly anticipated hearing before the United States Supreme Court. Since 2011, the tech giant has been fighting antitrust litigation that claims its App Store policies amount to an unfair monopoly. Those who were present at today\u2019s hearing say the case\u2019s outcome isn\u2019t looking great for Apple.<\/b>
\nOn Monday, Apple finally had its highly anticipated hearing before the United States Supreme Court. Since 2011, the tech giant has been fighting antitrust litigation that claims its App Store policies amount to an unfair monopoly. Those who were present at today\u2019s hearing say the case\u2019s outcome isn\u2019t looking great for Apple.
The case of Pepper v Apple Inc has taken a complex path to the highest court in the land (which we\u2019ve previously covered), but the most important thing to know is that lower courts have disagreed over whether Robert Pepper and three other Apple users who joined him in a class-action suit even had the right to sue the iPhone maker. Pepper argues that by forcing iOS users to get apps from the Apple App Store and charging developers a 30-percent cut of their revenue, the company is creating a system in which no one can compete and higher prices are absorbed by the consumer. Apple cites precedents like Illinois Brick and Hanover Shoe to argue that it is simply acting as a middleman between app developers and users and, therefore, cannot be legally blamed for any \u201cpassed on\u201d charges. The company argues that if consumers have a problem with the prices of apps, they should have to take it up with individual developers.
The case will not, no matter which way it swings, take down Apple\u2019s iOS walled garden\u2014but it could compel the company to at least install a door .
After seven years of being stalled in the system, the Supreme Court will now decide if Pepper has the right to sue Apple… or at least it will issue a decision sometime in the next few months. For now, all we have is a transcript of the hearing and impressions from those who were able to attend the hearing in person. Let\u2019s take a look at those impressions first:
Los Angeles Times:
Associated Press:
USA Today:
The reports coming out of the courtroom almost universally agree that the justices did not appear to be buying Apple\u2019s arguments, and almost all used the term \u201cskeptical.\u201d But skeptical questioning could simply be the product of holding a thorough hearing.
After reviewing the transcript, it seems clear that Justice Sonia Sotomayor was leaning heavily against Apple. She explained to Apple\u2019s attorney, Daniel Wall, that the precedent set by Illinois Brick doesn\u2019t appear to apply the way that he thinks it does.
That case found that customers couldn\u2019t sue a brick monopoly because they weren\u2019t the direct purchasers of the bricks. The customers were purchasing the bricks from masons who acted as an intermediary. As the direct purchaser of the bricks, the masons were the only ones who had legal standing to sue the brick monopoly. Establishing the direct purchaser as the one who has legal standing to sue in an antitrust case was intended to prevent multiple groups from suing a company for the same offense. \u201cThis is not quite like that,\u201d Sotomayor told Wall. \u201cThis is dramatically different. This is a closed loop.\u201d
In Apple\u2019s view, it gets paid a commission to provide the tools for developers to create an app that is then directly sold by the developers to users through the App Store. Sotomayor and others rejected the idea that iOS users are directly purchasing from the developer. \u201cApple took 30 percent from the customer, not from the developer,\u201d Sotomayor said. Wall pushed back, saying that even the Ninth Circuit Court of Appeals, which previously ruled against Apple\u2019s overall case, agreed that \u201cthe payment flow is immaterial to the Illinois Brick issue.\u201d Justice Stephen Breyer interjected at that point to say, \u201cI wouldn\u2019t think that\u2019s true, even if they concluded it.\u201d
Breyer laid out his point of view on the arrangement with an analogy:
The exchange went on like this with Wall complicating matters and Breyer insisting on bringing it back to simply illustrations of who is and is not the \u201cdirect purchaser.\u201d
If all this sounds confusing, do not worry, it is confusing. Simply put, the justices that gave Wall the hardest time didn\u2019t appear to buy the argument that Apple is not directly selling its apps to users. At one point, Sotomayor bluntly said, \u201cI\u2019m sorry, the\u2014the first sale is from Apple to the customer.\u201d
But what might be the most intriguing part of the hearing was that this argument may have given us a preview of the antitrust case itself if the Supreme Court allows it to move forward. When Wall tried to say that the case is arguing the 30-percent commission constitutes the official \u201cinjury\u201d against consumers, Sotomayor insisted that the alleged injury is actually the suppression of a cheaper price. \u201cThey have to go out and prove at the next step how, without this monopoly, they would have paid less,\u201d she said. \u201cIt could be as little as a\u2014a penny or nothing or it could be something more.\u201d
Chief Justice John Roberts seemed to be the only one on the court who was convinced that Apple\u2019s case was sound, saying, \u201cto the extent it might be said that Apple is a two-sided market, they\u2019re\u2014they\u2019re subject to suit on both sides of the market for a single antitrust price increase that they\u2019re alleged to have imposed.\u201d In other words, Roberts was saying that Apple was vulnerable to the very outcome that Illinois Brick was designed to prevent\u2014two distinct parties suing over the same offense. Justice Elena Kagan said that argument is wrong because the damages in each situation are entirely different. Kagan insisted that users would be able to sue because they\u2019re paying too much and developers would be able to sue on the grounds of lost profits.
Today\u2019s hearing isn\u2019t going to resolve anything about walled gardens in tech aside from consumers\u2019 right to sue, but it did give us some hints that an argument could be made that developers and users have different complaints that they could potentially take to court. However you feel this case should shake out, the argument that Apple can be sued for its iOS monopoly seems relatively strong.
[ Supreme Court of the United States]<\/p>\n