Apple v Pepper

[FordGT90Concept]

An appeal by Apple to escape an antitrust lawsuit involving consumer claims that the company is monopolizing the market for iPhone software applications resulting in higher prices.

Oral arguments: https://www.supremecourt.gov/media/audio/mp3files/17-204.mp3
Legalese: https://www.scotusblog.com/case-files/cases/apple-v-pepper/
In between: https://www.reuters.com/article/us-...s-with-8th-is-boon-to-consumers-idUSKBN14X2HV
Non-legalese: https://www.theverge.com/2018/6/20/...s-pepper-antitrust-lawsuit-standing-explainer

The first question the court has to answer is whether or not Pepper et. al. even have standing to sue. If yes, then the question becomes whether or not the 1977 ruling of Illinois Brick v. Illinois applies. If SCOTUS overturns Illinois Brick v. Illinois, it could open a legal Pandora's box against not only Apple, but Google and Ticketmaster. It could even extend to digital stores that mimic Apple App Store like Valve's Steam.

 

[Caring1]

Basically they are monopolising their App market, even Microsoft aren't as bad as they allow external Apps not downloaded through their App store.

If it's not Apple approved or in their App store, you can't install it on an Apple device (legally).

 

[FordGT90Concept]

Basically they are monopolising their App market, even Microsoft aren't as bad as they allow external Apps not downloaded through their App store.

But the Microsoft Store is as much of a monopoly for UWP as Apple's App Store is for iOS.

 

[bonehead123]

Oh my, here we go again with this monopoly lawsuit crap...... what slippery slope are we on this time around and for how many decades is this gonna drag on.... 2, 5, 10 ???????

This nonsense is getting real old real fast

 

[FordGT90Concept]

Should have an answer within the year.

 

[R-T-B]

Basically they are monopolising their App market, even Microsoft aren't as bad as they allow external Apps not downloaded through their App store.

So does google.

F-droid, anyone?

Oh my, here we go again with this monopoly lawsuit crap...... what slippery slope are we on this time around and for how many decades is this gonna drag on.... 2, 5, 10 ???????

This nonsense is getting real old real fast

It's not always nonsense. There have been some genuine good rulings like that one that basically saved Java from a steamy death as a language when MS tried to license it from Sun only to "extend" it into uselessness on other platforms.

But the Microsoft Store is as much of a monopoly for UWP as Apple's App Store is for iOS.

No, because you CAN load external apps. On an apple device you literally cannot, no workarounds. It's all signed.

 

[Aquinus]

On an apple iOS device you literally cannot, no workarounds. It's all signed.

Fixed that for you. You can in OS X, which also has an app store.

 

[R-T-B]

Fixed that for you. You can in OS X, which also has an app store.

meh, that thing still exists?

Yes, you are correct. Apple will change it in a few releases if they get past this though, watch...

 

[Aquinus]

Apple will change it in a few releases if they get past this though, watch...

Apple has actually made it easier to allow unsigned software to run in OS X in the last few years by doing things like letting you selectively allow unsigned software instead of just flat out allowing everything, which you can still do. They haven't been making this worse on the OS X side, but sure... I'm certain they'll get right to that.

 

[R-T-B]

Apple has actually made it easier to allow unsigned software to run in OS X in the last few years by doing things like letting you selectively allow unsigned software instead of just flat out allowing everything, which you can still do. They haven't been making this worse on the OS X side, but sure... I'm certain they'll get right to that.

I just remember when I dabbled in it. I'm pleased things have changed since then.

 

[DeathtoGnomes]

I think the whole argument over taking a cut from the developer versus charging a fee to the buyer will be the winning point. Charging the developer to put its app on the store shelves and then charging the iphone customer to pay for the App Store by increasing the price of a new iphone.

 

[FordGT90Concept]

9th Circuit said that the distinction is purely academic:

“Whether a purchase is direct or indirect does not turn on the formalities of payment or bookkeeping arrangements...”

In practice, there's a clear monopoly:

“Third-party developers of iPhone apps do not have their own ‘stores,’” the opinion said “Indeed, part of the anti-competitive behavior alleged by plaintiffs is that, far from allowing iPhone app developers to sell through their own ‘stores,’ Apple specifically forbids them to do so, instead requiring them to sell iPhone apps only through Apple’s App Store.”

I think Google will evade litigation stemming from this because they do support APKs. That said, the act of manufacturers enforcing a walled garden prohibiting the use of APKs without jailbreaking may be litigated. The manufacturers are basically enforcing a group boycott through which Google is the benefactor.

 

[FordGT90Concept]

SCOTUS ruled that the lawsuit against Apple can proceed (Kavanaugh voted with the liberal justices in a 5-4 decision):

In setback for Apple, U.S. Supreme Court lets App Store antitrust suit proceed

A divided U.S. Supreme Court on Monday gave the go-ahead to an antitrust lawsuit accusing Apple Inc of forcing consumers to overpay for iPhone software applications, a decision that could lead to billions of dollars in damages and put at risk the company's lucrative way of selling apps.

www.reuters.com

 

[Easy Rhino]

Just another money grab by some failed developers. EU does it too to Google. When they need money just create a lawsuit!

 

[FordGT90Concept]

App Store is anti-competitive in design and this lawsuit is fundamentally anti-trust in nature.

https://www.supremecourt.gov/opinions/18pdf/17-204_bq7d.pdf

TL;DR: SCOTUS ruled that consumer app purchasers are "direct purchasers" under Illinois Brick ruling so they have standing to sue.

Illinois Brick (1977) is the excuse that these types of arrangements sought refuge from antitrust suits.


Gorsuch makes a good argument in the dissent:

To evade the Court’s test, all Apple must do is amend its contracts. Instead of collecting payments for apps sold in the App Store and remitting the balance (less its commission) to developers, Apple can simply specify that consumers’ payments will flow the other way: directly to the developers, who will then remit commissions to Apple.

I think the point Gorsuch et. al. missed is that they're ignoring all of the damage that Illinois Brick has done (there are monopolies everywhere because all they have to do is hide behind a distributor to get protection from lawsuit via Illinois Brick).

 

[Easy Rhino]

App Store is anti-competitive in design and this lawsuit is fundamentally anti-trust in nature.

https://www.supremecourt.gov/opinions/18pdf/17-204_bq7d.pdf

TL;DR: SCOTUS ruled that consumer app purchasers are "direct purchasers" under Illinois Brick ruling so they have standing to sue.

Illinois Brick (1977) is the excuse that these types of arrangements sought refuge from antitrust suits.


Gorsuch makes a good argument in the dissent:

I think the point Gorsuch et. al. missed is that they're ignore all of the damage that Illinois Brick has done (there are monopolies everywhere because all they have to do is hide behind a distributor to get protection from lawsuit via Illinois Brick).

They created a store and they set the rules. It's not like developers/buyers were unaware of the rules or Apple switched the rules.

 

[FordGT90Concept]

Illinois Brick -> e.g. Menards -> consumer
where consumer buys product from Menards and Menards buys product from Illinois Brick.

Apple App Store doesn't fit that scheme, it's more like:
e.g. Mojang -> Apple -> consumer
where consumers buy Mojang's product from Apple whom buys a license on demand from Mojang.

Apple isn't making the product you're buying, they're acting as a gate keeper for the publishers/developers. This is why the majority believes Illinois Brick doesn't work here while the dissenting opinion wants to force Apple into the Illinois Brick mold (Apple untouchable). Keep in mind that over 30 states joined Texas submitting an amici brief saying they want Illinois Brick gone because it prohibits strong actions against monopolistic practices. The most any state can do right now is a slap on the wrist which makes it not even fiscally worth it to pursue which ultimately leads to megacorps like Apple.


Why do publishers agree to crappy terms at Apple App Store? Because it's the only option to reach those customers. They won't bite the hand that feeds. In the case of Illinois Brick, Menards could just get bricks from somewhere else. The only option for a company like Mojang is to flat out ignore the tens of millions of users iOS has. They can't afford to do that so they bite their lip and sign the contract.


I think what it fundamentally comes down to is if you're creating a digital marketplace, you have to create an open ecosystem around it. It can't be a walled garden where the creator becomes the gatekeeper because you're creating a monopoly. Think Microsoft pushing Internet Explorer on everyone: Microsoft didn't get in trouble in the USA because they didn't prohibit the use of other browsers. It was a barrier to entry but not much of one because one could point IE to Chrome/FireFox, download it, and the operating system itself did nothing to stop them from installing or using it. The only barrier was discovery. Apple does everything it can (licensing, discovery, access, installation, etc.) to stop it.

 

[moproblems99]

Keep in mind that over 30 states joined Texas submitting an amici brief saying they want Illinois Brick gone because it prohibits strong actions against monopolistic practices.

This is one where I feel law needs to stay out of. Apple creates product (iPhone). Apple makes rules on how software gets to product (AppStore). This has been the status quo from Apple for iPhones for 16 years. Developers are choosing to develop for iPhone. People are choosing to buy iPhone. There are no secrets here. No one is being forced. There is choice.

 

[FordGT90Concept]

I'll counter with the auto industry: most states prohibit car manufacturers from selling directly to consumers. They require third party dealerships which incentivizes competition among dealers to get consumers a better deal, even on the exact same vehicle.

A more similar analog is looking broadly at operating systems: Mac OS X, Linux, nor Windows have restrictive app stores like iOS has (only exception is UWP but that's an walled ecosystem inside of an unwalled ecosystem so consumers opt into it by choice). Why is that? What is the justification for it? Why is because of the internet. When all of these earlier operating systems were invented, the internet wasn't this accessible thing everyone connects to. Having all of your applications sourced through one internet source wasn't technically feasible. Because iPhone was being sold through Cingular/AT&T, being connected to an internet source was guaranteed by contract. The why turned into "why not?" It's another source of revenue for Apple long after the purchase was made. It's low risk and high reward thanks to the 30% fixed revenue share model and forced exclusivity through app signing. These points also serve as the justification for it. Instead of eliminating the competition, Apple embraced them and charging them for it. There's no way Apple loses from this arrangement...except through legal action.

This particular legal case was filed in 2011 so it has been bouncing around the court system for half of the iPhone's existence.

Developers are making apps for iPhone because they want/need access to the hundreds of millions of devices that run iOS. This represents a barrier to entry (no alternative means of access) which is a staple of anti-trust law.

To quote the ruling:

According to the plaintiffs, when iPhone owners want to purchase an app, they have only two options: (1) buy the app from Apple’s App Store at a higher-than-competitive price or (2) do not buy the app at all. Any iPhone owners who are dissatisfied with the selection of apps available in the App Store or with the price of the apps available in the App Store are out of luck, or so the plaintiffs allege.

Think of it from the perspective of participation in a market. The first choice is Apple product or a competitor's product (e.g. Samsung). There is a healthy market here with lots of options even if most of them operate on the same underlying principles. Let's pretend you choose Apple so now you want to expand what you can do with your device via software. Now you don't have a choice because it's literally (1) bend over and take it from Apple or (2) opt out of the market entirely. The latter isn't a choice because choosing Apple automatically enrolls you in the former. Even if you don't buy anything from the App Store, all of your preinstalled apps are updated through it. There's only one choice here: Apple or don't. In effect, they created a monopolistic marketplace inside of their product.

Why is the fact it is a marketplace is important? Because we're talking the exchange of money here. If apps were all free then this would be a non-issue but no, you got multiple publishers here selling their software and competing with other publishers. It's a market which means anti-trust laws apply.

 

[Easy Rhino]

Why do publishers agree to crappy terms at Apple App Store? Because it's the only option to reach those customers.

So? If it were a problem publishers would avoid Apple. It is almost as if Apple purposefully built the app store to make money off of their platform! God forbid!

 

[moproblems99]

I'll counter with the auto industry: most states prohibit car manufacturers from selling directly to consumers. They require third party dealerships which incentivizes competition among dealers to get consumers a better deal, even on the exact same vehicle.

Yep, unless you want to sell directly to the public - a la Tesla. And you can't. Which sucks because why do you need the middle man? A middle man should never be able to give the consumer a better price straight from the manufacturer.

Developers are making apps for iPhone because they want/need access to the hundreds of millions of devices that run iOS.

They don't need them. There are billions of devices available for app purchases on Android alone. Granted not all of them are of app purchasing grade. They want Apple users because they want that...special...demographic.

 

[FordGT90Concept]

Which sucks because why do you need the middle man?

Because, as I said, there's over 18,000 dealerships in the USA and they're all competing for your business. They do that by offering services, incentives, and financing so that the consumer, in the end, gets a better deal. EGS, GOG, Steam, Origin, uPlay are all like dealers. They're all selling the same products and they offer incentives to get you to do business with them.

Apple not only is the only portal through which to legally acquire applications for iOS, they also have a price fixing regime in place by requiring $#.99 increments which means sellers on the store can't apply competitive pricing. Apple not only prohibits competing stores from being established, they price fix at their store. Both of these are anti-trust behaviors.

 

[moproblems99]

Because, as I said, there's over 18,000 dealerships in the USA and they're all competing for your business.

LOL, I used to work at a dealership. The only competition was how to swindle as much money possible out of targets.

Some joking, but mostly not.

 

[Aquinus]

So? If it were a problem publishers would avoid Apple. It is almost as if Apple purposefully built the app store to make money off of their platform! God forbid!

Considering that's like cutting yourself off from half of the market, I would argue that to be successful, you can't really avoid Apple. The problem is that the only way into the Apple ecosystem is through the App Store. I can't just get a package and install it outside of the App Store like I can with Android devices. It's not really too much different than people wanting right to repair legislation.

 

[Easy Rhino]

Considering that's like cutting yourself off from half of the market, I would argue that to be successful, you can't really avoid Apple. The problem is that the only way into the Apple ecosystem is through the App Store. I can't just get a package and install it outside of the App Store like I can with Android devices. It's not really too much different than people wanting right to repair legislation.

I understand your argument, especially coming from the perspective of the developer. However, just because Company A creates an ecosystem does not mean Developer B has some sort of right to access that ecosystem that runs counter to the model of said ecosystem. I look at it from the perspective of a company trying to make an ecosystem that drives profit.