Supreme Court Rules on Apple's App Price Fixing

The Supreme Court has ruled that lower courts can hear a case claiming Apple's pricing policy for its apps breaches anti-trust laws. The claimants say Apple has a monopoly, and its mandatory commission drives up prices unfairly.

The case centers on two main differences between apps on Apple mobile devices and those on rival systems such as Google's Android. The first is that it is virtually impossible to install an app on an iPhone or iPad from a sources other than the official iTunes App Store - something Apple cites as being important for security reasons.

The second is that publishers have to pay Apple thirty percent of the app's sale price, providing that the app is not being distributed as 'free'.

Market Definition Disputed

The main legal talking point in the case has been the definition of the market, where the alleged monopoly exists.

The plaintiffs say that iOS users don't have any choice about where they get apps for their device. It means that when developers pass on the cost of the Apple commission by charging higher prices for apps, consumers have no option but to pay the extra money.

Apple's defense is that the company isn't a buyer or seller, but instead a middleman between device users buying apps from developers. It notes that developers can choose for themselves how much to charge customers (as long as the thirty percent commission is paid). It also argues that if developers think thirty percent is too much, they have the choice to concentrate on app stores for other operating systems instead.

The legal battle so far has been whether or not the plaintiffs had the right to sue, rather than whether or not Apple had breached antitrust laws. Apple argues that because iOS device users don't directly buy apps from Apple (even though apps are sold through the Apple app store), they don't have the legal right to sue.

That dispute went all the way to the Supreme Court, which rejected Apple's argument. The case itself will now continue through the legal system. (Source: supremecourt.gov)

Royalties On Subscriptions Also Questioned

The case comes at the same time another element of Apple's pricing policy is under challenge in Europe.

Music company Spotify says that in addition to Apple taking thirty percent commission on apps, it also takes a thirty percent commission on sales made through an app - such as people subscribing to Spotify's premium music service. (Source: bbc.co.uk)

According to Spotify, the policy acts as a tax on consumers. It also argues that it's unfair some apps are able to avoid paying this commission, for example, when Uber charges a customer for booking a car ride through the iPhone app.

What's Your Opinion?

Did the Supreme Court make the right decision? Should Apple have the right to take whatever commission it chooses from developers who use its store? Does the iTunes App Store constitute a monopoly?