Supreme Court rules against Apple on app challenge

Apple Inc was dealt a major setback on Monday after the US Supreme Court ruled that a group of iPhone users can proceed with a lawsuit that alleges the tech giant employs unfair control over apps for its smartphones.

The high court's 5-4 decision gives the go-ahead to the iPhone users who filed a class-action lawsuit against Apple in 2011, alleging that it breaks US antitrust rules.

Associate Justice Brett Kavanaugh, who voted with the court's majority, said that when "retailers engage in unlawful anticompetitive conduct that harms consumers", customers of those companies have the right to question that company.

"That is why we have antitrust law," Kavanaugh wrote.

If successful, the plaintiffs could be in line for triple damages, and Apple could have to pay out a significant amount. It could also affect other tech companies.

But Apple won't go down without a fight, says one tech expert.

"Apple takes the control of its user experience very seriously, therefore it is going to fight this vigorously," Avi Greengart, lead consumer technology analyst at Techsponential, a New York-based research firm, told China Daily.

The lawsuit alleges that when Apple takes a 30 percent cut from the sale of each app – despite the apps being created by third-party developers – it forces developers to raise their prices, which impacts consumers.

The App Store paid developers $26 billion in 2017 and has more than 2 million apps. But they can only be downloaded from the App Store.

When presented with the lawsuit, Apple had responded with a prior Supreme Court ruling that said only direct purchasers of a service can bring an antitrust lawsuit. They attempted to use the defense that they could not be sued because the apps were made by other companies.

In a statement, Apple said 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 company said. "The vast majority of apps on the App Store are free, and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store."

But Kavanaugh joined with the liberal justices in the ruling and said: "Apple's line drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits."

Greengart said: "From Apple's perspective [opening up the App Store] is absolutely not what they want, but Apple does this already with the Mac. This isn't, 'Oh my God, how can Apple ever survive?' This is how the Mac works. But on a phone used by hundreds of millions if not billions of people, having a curated experience improves the user experience, and so Apple definitely wants to maintain that, the look, feel and the way the phone works, security — all those things are compromised if the user can bypass the App Store."

Apple has faced a turbulent year. Shares fell 5.3 percent on Monday following the Supreme Court ruling.

Last week, sales dropped 6.9 percent in Apple's worst week of trading this year, amid slower sales due to the escalating trade dispute between the US and China.

In January, Apple CEO Tim Cook warned that Apple's slowing revenue from China was a risk, especially to iPhone sales.