
U.S. Supreme Court will hear Apple's appeal of App Store class-action lawsuit - sidhanthp
https://www.reuters.com/article/us-usa-court-apple/us-top-court-mulls-apples-app-store-commissions-in-antitrust-case-idUSKBN1JE1JH
======
DannyBee
The issue here is very different than people seem to think.

The supreme court granted cert on one question:

"Whether consumers may sue for antitrust damages anyone who delivers goods to
them, even where they seek damages based on prices set by third parties who
would be the immediate victims of the alleged offense."

(This is apple's statement of the question, and thus necessarily is tilted in
how they see things)

The petition summary has more details and is quite short:
[http://www.scotusblog.com/wp-
content/uploads/2017/10/17-204-...](http://www.scotusblog.com/wp-
content/uploads/2017/10/17-204-petition.pdf)

There is a circuit split on this issue, which is likely why the supreme court
took it. It's mostly about indirect purchasers vs direct purchasers. Indirect
purchasers cannot sue, only direct purchasers can, mainly because it's really
hard to apportion damages properly.

The previous major case on distribution monopolization was an eight circuit
case about ticketmaster, Campos v. Ticketmaster Corp,
[https://caselaw.findlaw.com/us-8th-
circuit/1097030.html](https://caselaw.findlaw.com/us-8th-
circuit/1097030.html). Section II of that opinion is a fairly readable rundown
of the issue of direct vs indirect purchasing and who gets to sue.

Ticketmaster held that people paying greater distribution fees to ticketmaster
as a result of their monopoly could not sue, as they are indirect purchasers.

The ninth circuit, in the apple case, held differently, holding that apple was
selling directly to consumers, regardless of whether app developers got to set
price. The opinion, which is also quite readable, is here:
[https://www.leagle.com/decision/infco20170112133](https://www.leagle.com/decision/infco20170112133).
Again, i'd just read the part starting with "plaintiffs are direct purchasers"

Personally, i think the dissent in ticketmaster (and the ninth circuit) got it
right. This is also what the ninth circuit explicitly says. In these models,
only the people at the bottom make sense as the people to sue, as when you
control distribution carefully like this, they are the only injured party.

~~~
mark212
> only the people at the bottom make sense as the people > to sue, as when you
> control distribution carefully like > this, they are the only injured party.

Here's the case for manufacturer's standing: the manufacturer (app developer)
might argue that the distributor's (Apple's) monopoly on distribution hurts
them just as much if not more since the inflated price means they're selling
less quantity than they would in a non-monopolized marketplace. Even though
they technically set the price, having to pay Apple's rake on the App Store
means that they must inflate their prices by at least 30% to bring them back
to the price they'd otherwise sell at in the absence of the distributor.

In any event, I thought the case was a dog on the merits. How can Apple
possibly be a monopolist, despite their 100% share of application sales on
iOS, since the relevant market is for app-capable cell phones -- not iOS.
Plenty of folks, the majority in fact, vote with their dollars by buying
Android devices.

~~~
DannyBee
App developers definitely have standing here (and the 9th circuit opinion says
so). They just have a much harder time showing injury (and thus standing)
because they are not paying the fees :)

Instead, they have to make the indirect argument you do, and it's unclear what
the _harm_ is. They are not paying 30% more, the consumer is. There's no data
to suggest they are selling less. Who is really injured?

The same issue arose in ticketmaster - outside of consumers, everyone else has
a really hard time showing injury.

Meanwhile, the consumers, who directly pay the monopoly fee, are directly
injured.

~~~
ericd
They could always drop their price to the amount they could charge without the
30%, and get supply/demand price sensitivity curves. If a bunch of apps did
this, you could get statistically significant data.

A law firm could easily pay a number of app makers to try this out in exchange
for the data, and then make a huge class action out of this.

I think the big challenge is that there are a number of confounding factors,
like Apple's ranking algorithms.

~~~
mstolpm
Wouldn’t that „test“ imply that Apple isn‘t doing any kind of
marketing/promotions through the 30% cut? At least here in Germany, discounts
and boni of 10-15% when buying iTunes gift cards are quite frequent. And these
discounts influence at least my app buying behavior. In addition, these
discount offers are advertised and so indirectly promote the App Store to
millions of people. Developers profit from this in one way or the other.

In your test just cutting the 30% „Apple tax“, the developer would still
profit from these discounted gift cards. But it’s not the developer giving the
discount from his cut, but Apple from the 30%. Moreover, the 30% covers not
only handling and processing App Store Infrastructure and sales, but as well
the editorial sections of the App Store promoting news apps daily. There
already exist reports on how this editorial content boosts app sales.

So, your test would still take all this for granted and therefore would be
highly skewed. The data would not be „statistically significant“ at all.

~~~
ericd
I never said Apple doesn't do anything for their 30%, and I make no judgements
about whether it's warranted. My comment was just a thought experiment about
how a law firm might approach making a case for damages, given the
conversation people were having.

You may buy iTunes cards. I've never bought them, nor even looked at them. I
don't know which of us is more representative, but I don't think that
invalidates the broad strokes of a test like I describe.

------
CobrastanJorji
> its phones’ ecosystems are closed for security reasons since it can vet App
> Store apps for malicious code and other dangers.

I'm not saying that this is not true, but given that Apple's app store revenue
will probably be greater than global movie ticket revenue in 2018, I suspect
that "security precaution" is perhaps not 100% of the motivation behind
blocking all competition.

~~~
mankash666
That's some fucked-up mental gymnastics of an excuse to explain the existence
of the app-store. It's like having your refrigerator manufacturer enforce
purchasing of groceries that he's vetted to save you from a salmonella
infection, where the manufacturer keeps 30% of the grocery revenues, and
arbitrarily controls what groceries can be purchased in the first place

Outside of apple, software is bought and sold in a secure manner without
forking 30% to Apple, or having Apple mark you as a threat and toy-fuck you
out of business [1].

[1]: [https://www.macrumors.com/2018/05/24/apple-rejects-valve-
ste...](https://www.macrumors.com/2018/05/24/apple-rejects-valve-steam-link-
app/)

~~~
s73v3r_
And you do have the ability to purchase phones which use those other channels.

~~~
mankash666
Doesn't have ANY bearing on the fact that Apple is anti-competitive. No excuse
for one company to break the just because others follow the law

~~~
s73v3r_
But the point is that Apple is not breaking the law. This is not an anti-
competitive move by them.

~~~
mankash666
And by what legal authority did you just state that?

Microsoft was forced to ship competitive browsers in the OS to avoid monopoly
claims, but Apple - unlike Microsft, they won't even allow 'un-blessed' apps
to RUN on the phone. Seems patently illegal

~~~
Jtsummers
Microsoft did a lot of shit to warrant their anti-trust suit. The browser
thing was one bit.

How about how they spent $1 billion to market IE (a _free_ product) in order
to cut into a potential (though indirect) competitor's product (Netscape).
Netscape's browser was reaching the point (as early as this was in the WWW
days) of being a potential host for cross-platform software applications. This
terrified MS as it would eliminate a lot of their foothold in the business
market, in particular.

How about how when Compaq and others wanted to sell non-Windows OSes,
Microsoft threatened them with increased Windows licensing fees. They had
access to OEM rates which meant they could participate in the cut-throat and
very low margin PC business. Without those rates, they would _have_ to raise
their prices. Even an extra $100-200 would price them above their competitors.
This was done to eliminate the OS competition (or constrain it).

What has Apple done that is equivalent to these actions? And how has Apple's
(minority) marketshare enabled them to do these things?

~~~
mankash666
All you've started here is that you dislike Microsoft. There's zero moral
difference in Apple's actions on the app store and Microsoft from yesteryears

~~~
Jtsummers
Moral and legal are different things and you keep conflating the two.
Additionally, you're the one that brought up Microsoft's anti-trust issues. If
you're going to make a comparison, make it correctly. And if you're going to
talk about moral and legal, make sure you distinguish between the two
concepts.

------
MBCook
The Supreme Court isn’t ruling on if the App Store is legal, they’re ruling on
if the class has grounds to sue correct?

~~~
mi100hael
Correct

 _> The U.S. Supreme Court on Monday agreed to take up Apple Inc’s bid to
escape a lawsuit accusing it of breaking federal antitrust laws_

[https://ca.reuters.com/article/businessNews/idCAKBN1JE1JH-
OC...](https://ca.reuters.com/article/businessNews/idCAKBN1JE1JH-OCABS)

------
Spivak
> Businesses that potentially could be threatened by such consumer litigation
> are electronic marketplaces like the App Store, ticket site StubHub,
> Amazon’s Marketplace and eBay where individual sellers set prices.

I don't think the important fact of the case is the fact that sellers can set
their own prices, but the fact that a single entity has total control over the
distribution of a broad category of 3rd-party consumer good. So it's not
Amazon and StubHub that should be worried, but groups like Nintendo,
Microsoft's Xbox division, Sony, or The Blu-ray Disc Association.

~~~
heartbreak
> I don't think the important fact of the case is the fact that sellers can
> set their own prices

This is actually an important fact of the case. The case isn't about Apple's
total control over the App Store, it's about whether end-users can sue.

------
debt
Apps are extremely tricky. The 30% does seem like a lot but if you consider a
few things:

 _Apple is providing an instantaneous, global distribution network._

Save your ability to market the app, you can effectively guarantee the same
experience across billions of disparate devices. The open web can not provide
the same piece of mind in terms of security to the end user.

 _The app vetting process isn 't free._

Apple is ensuring quality within the App Store. Bad apps still get past
Apple's vetting rules and are retroactively denied all the time. This creates
extremely a strong sense of trust between the customer and Apple. Consumers
become less and less risk-averse when it comes to downloading new apps from
the App Store. Again, I'd argue this runs counter to the open web due to its
long history of leaks, hacks, privacy violations, phishing attempts, etc. The
Apple App Store currently has the highest bar for an "open" ecosystem of
independently-developed software.

 _Apple provides the service of the App Store at its own expense._

The App Store has pulled in $100BB over 10 years which is great, but I'm sure
they'd turn it off in a heartbeat if it consistently caused serious security
breaches within the phone.

Tim Cook has gone on record so many times about the personal and private
nature of the phone. Whether it's possible or not for a rogue app to
circumvent Apple's numerous security safeguards is irrelevant as security is a
policy Apple takes extremely seriousl; maybe to their own detriment.

 _Apple has a history of providing basic, free alternatives to apps that
monopolize particular verticals within the App Store._

Calculator, Flashlight, the various flavors of Timer functionality, the new
ARKit Ruler app, etc. I don't view these Apple-provided apps as akin to drug
stores offering basic alternatives to things like Tylenol etc. it's good for
the overall App market economy as it should stem the rise of local monopolies.

Ironically, the only app in which Apple does not offer an alternative is the
App Store. The App Store isn't an alternative, it's simply the only way to
download apps.

I do see a future where phones will have a heavily-reduced version of iOS that
offers a small subset of Apple-created apps without the App Store. The numbers
don't lie, most iPhone users do not download apps, or only download less than
10 apps over the lifetime of the phone.

At the end of the day, apps must be vetted for quality because Apple has a
brand to maintain. They simply can't allow apps that seriously compromise the
performance of the phone or the privacy of the data on it. It's not within the
realm of an allowable reality as per Apple policy.

The 30% taken by Apple may be eclipsed by the App Store ad revenue. I assume
they'll greatly reduce the 30% cut moving forward as the App Store ad revenue
increases.

~~~
zaroth
Something else which can’t be overlooked.... Apple developed iOS, and
extremely extensive APIs and documentation to go along with them which enable
these apps to exist in the first place.

In many cases Apple has done the R&D and then productized entirely new
hardware and software interfaces which apps leverage. When you develop on iOS
you stand on the shoulder of a giant who has enabled, through extraordinary
investment of labor and capital, a significant portion of the actual end-user
experience of running any given app.

One might even say about 30% of that overall experience is Apple’s own work
product in the first place.

All that is before you even get to the extremely valuable services actually
provided by the small piece of the puzzle which is itself called the “App
Store”.

------
dang
Url changed from [https://www.theverge.com/2018/6/18/17474760/apple-app-
store-...](https://www.theverge.com/2018/6/18/17474760/apple-app-store-ios-
supreme-court-lawsuit-hearing-pepper), which points to this.

------
ocdtrekkie
It's hard to even characterize the level of impact a case like this could
have. For years, the tech industry has understood that the key to success is
to control the platform, and then get other developers building on and
generating income for your platform. Imagine the sheer number of businesses
that may have their business model blown apart by this.

If a company is ruled against on having their own app store on their own OS on
their own devices, when they aren't even a monopoly-level player in the larger
market, this will blow apart nearly any app store model out there.

I'll, uh, get my popcorn ready.

~~~
simion314
> this will blow apart nearly any app store model out there. But on OSX you
> have an app store and you can side load applications, so you can have them
> both.

~~~
ocdtrekkie
OS X and Windows will probably be okay because the "default" is to install
outside the store. It's not really considered "sideloading". But most other
platforms with single-source app stores will be in trouble.

~~~
simion314
Why the default is important in this case, if the device owner can enable side
loading in an easy way then I am okay with a secure default. Hopefully some
progress is made and OSX and Windows remain unlocked even if MS and Apple are
slowly pushing in the other direction.

------
mankash666
This kind of behavior - where whole swaths of consumers pay inflated prices,
and have choice severely restricted, but the company enforcing such monopoly
gets away on a ludicrous technicality, needs to end.

However you look at it, completely locking down hardware owned by the user, to
apps blessed by the manufacturer is the text-book definition of anti-
competitive, and lest we forget, didn't exist before Apple's false "but it's
all for the consumer's good" marketing blitzkrieg. Regardless of the B.S.
mental gymnastics employed by Apple and it's shills, it is unfairly placed as
a kingmaker in a $60B app-store market - and it's app store is designed to
place it as a monopoly controller of software running on it's phones.

~~~
artimaeis
> However you look at it, completely locking down hardware owned by the user,
> to apps blessed by the manufacturer is the text-book definition of anti-
> competitive

[https://www.ftc.gov/enforcement/anticompetitive-
practices](https://www.ftc.gov/enforcement/anticompetitive-practices)

[https://en.wikipedia.org/wiki/Anti-
competitive_practices](https://en.wikipedia.org/wiki/Anti-
competitive_practices)

The practice of locking down hardware is many things, but textbook
anticompetitive it does not seem to be. Apple isn't working with other vendors
to fix prices (cheap Android devices are far more common), reduce quality, or
innovation.

~~~
mankash666
From the wiki link: "Protectionism, tariffs and quotas which give firms
insulation from competitive forces"

This is indeed text-book protectionism

~~~
artimaeis
How does the level of locking of the Apple App store on iOS or Mac OS insulate
Apple from outside competition the likes of Samsung, Google, Huawei, etc?

Edit: In fact, doesn't the locked-down state of the hardware actually
encourage competitors to release their own products? Anti-consumer could be
valid here, but anti-competitive just doesn't seem correct.

~~~
mankash666
Who's arguing the app store inhibits handset competition? Did you even read
the article?

The argument is that Apple chokes app developers ON THE APP STORE. The
existence of other handset manufactures is irrelevant

~~~
Retric
Gillette Razor Blades are not a monopoly. They are simply part of a product
which is in a highly competitive market.

Talking about a monopoly within an ecosystem misses what a monopoly means in
economic terms. It's a question of consumer choice and leverage.

------
mnm1
If the Apple app store isn't a monopoly I don't know what is. These kind of
practices make Microsoft's anti trust practices from the 90's look like
child's play. I hope the Supreme Court doesn't fall for their bullshit lies
about security being the reason for this setup but I doubt any of the justices
will even understand the case properly, let alone make intelligent decisions.

~~~
Jtsummers
Microsoft had something like a 97% marketshare. Apple is nowhere near that.
They spent $1 billion to market a free product in order to eliminate or
undermine a competitor (Netscape). They threatened hardware vendors with
increased licensing fees if they sold non-Windows PCs (this helped kill BeOS
and held back some efforts on selling Linux to consumers as well). MS did all
of this and got away with it because of their marketshare. Without it, they
wouldn't have gotten nearly as far as they did in these behaviors.

Apple isn't in the same position, at all.

~~~
berthe
>> If the Apple app store isn't a monopoly I don't know what is.

> Microsoft had something like a 97% marketshare. Apple is nowhere near that.

Whether a company is a monopoly or not seems to depend a lot how the market in
question is defined, for instance:

Apple has a 100% marketshare in the distribution of iOS apps. Monopoly-era
AT&T had far less than a 100% marketshare in electricity-powered devices.

~~~
Jtsummers
That is a fair statement, but as far as the FTC is concerned that's probably
not enough. The fact is that there are alternatives (for both consumers and
developers) to the iOS app store. They don't get products from or on iOS, but
they can still buy and sell comparable products.

By the reasoning of your statement, all that's needed to establish a 100%
monopoly is a sufficiently narrow definition of market. Walmart has a 100%
monopoly on products (legally/officially) sold in Walmart stores. Do they have
a monopoly as far as the FTC and courts are concerned?

[https://www.ftc.gov/tips-advice/competition-
guidance/guide-a...](https://www.ftc.gov/tips-advice/competition-
guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined)

EDIT: Fixed typo

~~~
berthe
> The fact is that there are alternatives (for both consumers and developers)
> to the iOS app store. They don't get products from or on iOS, but they can
> still buy and sell comparable products.

But that's usually always true: 90s era Windows users had alternatives in the
Macintosh and Sun workstations, and Monopoly-era AT&T users had alternatives
in CB radios, etc.

That explainer you linked even uses language that excludes some competitor
products: "Microsoft was found to have a monopoly over operating systems
software for _IBM-compatible_ personal computers" [emphasis mine].

That is a fair statement, but as far as the FTC is concerned that's probably
not enough....

> By the reasoning of your stament [sic], all that's needed to establish a
> 100% monopoly is a sufficiently narrow definition of market.

I don't think the reasoning in my statement is sufficient to identify a
monopoly, and it wasn't indented to be such. What I was trying to communicate
is that you can't _disprove_ a monopoly based on comparing marketshare
numbers, and the actual determination is probably rather complicated and
requires a lot of expert judgement.

I think Apple's business practices warrant careful and continuous antitrust
scrutiny. If they're a monopoly, the form that takes will probably be
significantly different than the one taken by 90s-era Microsoft.

~~~
Jtsummers
There were alternatives to Windows on IBM-compatible PCs, but MS actively
worked to block them in the marketplace. MS also actively worked to block
competitors who would break platform-centric software via things like (as
Netscape was after) creating a platform-agnostic software delivery platform.

It's also important to note that the FTC doesn't actually care about
monopolies in all cases. They care about monopolies that arise from abuse and
anti-competitive behavior or that are used to abuse consumers and competitors.

Show that Apple is in a monopoly position (as a player in the mobile
hardware/software business space) and that they got there by way of anti-
competitive behavior. Or that they've abused this position to artificially
control pricing and other things. That's what needs to happen to establish an
anti-trust case against them.

