
US appeals court revives antitrust lawsuit against Apple - dvdhnt
http://www.reuters.com/article/us-apple-court-idUSKBN14W2VH
======
btown
Here's the actual decision: [http://law.justia.com/cases/federal/appellate-
courts/ca9/14-...](http://law.justia.com/cases/federal/appellate-
courts/ca9/14-15000/14-15000-2017-01-12.html)

Most of the document is about the complex procedural history of the case. The
meat of the new decision is on page 20 onwards:

> Apple argues that it does not sell apps but rather sells “software
> distribution services to developers.” In Apple’s view, because it sells
> distribution services to app developers, it cannot simultaneously be a
> distributor of apps to app purchasers. Apple analogizes its role to the role
> of an owner of a shopping mall that “leases physical space to various
> stores.” Apple’s analogy is unconvincing. In the case before us, third-party
> developers of iPhone apps do not have their own “stores.” 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.

...

> [W]e rest our analysis, as compelled by Hanover Shoe, Illinois Brick,
> UtiliCorp, and Delaware Valley, on the fundamental distinction between a
> manufacturer or producer, on the one hand, and a distributor, on the other.
> Apple is a distributor of the iPhone apps, selling them directly to
> purchasers through its App Store. Because Apple is a distributor, Plaintiffs
> have standing under Illinois Brick to sue Apple for allegedly monopolizing
> and attempting to monopolize the sale of iPhone apps.

(IANAL)

~~~
Steeeve
> In Apple’s view, because it sells distribution services to app developers,
> it cannot simultaneously be a distributor of apps to app purchasers.

What?!?

It's the _only_ distributor of apps to app purchasers.

~~~
k1t
It seems to be Apple's view that it is the app developers who are distributing
the apps (using Apple's distribution service).

Seems akin to FedEx saying they do not distribute packages, they merely sell
distribution services to shippers.

------
protomyth
"iPhone app purchasers may sue Apple Inc over allegations that the company
monopolized the market for iPhone apps by not allowing users to purchase them
outside the App Store, leading to higher prices, a U.S. appeals court ruled on
Thursday."

If this is deemed illegal then its going to get quite interesting on both the
phones and game consoles. Welcome back Atari 2600.

~~~
sjwright
> its going to get quite interesting on both the phones and game consoles

A key insight. Many companies sell products that in turn have marketplaces
which they wring some control over.

Game consoles is indeed an interesting one, because it parallels so perfectly.
If Apple must allow competitor markets within iOS, so must Sony and Microsoft.
(Note that physical game sales also require paying a commission to the console
maker, so it's a different market but the same business model.)

Or cable TV. Does Comcast have a monopoly on selling additional cable channels
and pay-per-view through my Comcast set top box? How is that any different?

~~~
astrodust
I went into McDonald's and I couldn't buy a Whopper. What's up with that? I'm
going to sue!

~~~
umanwizard
This is an invalid analogy for multiple reasons but for starters, you don't
give an argument that this unnaturally increases the price of hamburgers.

~~~
wooter
Just cause i like playing with analogies, should mcD have to sell any and all
soda?

~~~
yellowapple
McDonald's buys soda and resells it to customers. Apple does not buy apps and
resell them to customers.

The current situation in the iOS ecosystem would be more like McDonald's
forbidding you from bringing your own beverages into their restaurants, even
if they don't sell the same beverage (or even a competitor of one they do
sell) and you plan to buy their food.

Of course, restaurants can and do frown upon or even outright forbid the above
behavior, but they also don't charge multiple hundreds of dollars for you to
walk through the door.

~~~
ap3
Sounds like a bad analogy - Apple does buy the app for 70% of what they sell
it.

~~~
yellowapple
I wouldn't really call that "buying". If Coca Cola operated by setting up shop
inside a McDonald's and selling its soda, but had to give 30% of its earnings
to McDonald's, most people wouldn't say that McDonald's buys the soda. I guess
it could be interpreted that way, but it'd be a very weird way of doing so,
and would be (IMO) an incorrect interpretation of the semantic relationship
between the soda manufacturer and the restaurant.

To further demonstrate that semantic disconnect, the app developer is only
paid when Apple receives a payment from the user for that app. Modeled in
terms of McDonald's selling soda, it would be equivalent to McDonald's not
paying Coca Cola until someone orders and pays for a fountain drink. AFAIK,
this ain't the case.

In other words:

* McDonald's actually buys soda from Coca Cola, then resells it to customers

* Apple only facilitates the transfer of money (from user to developer) and application (from developer to user)

If anything, Apple is probably closer to an escrow than a retailer (another
bad analogy, I know, but certainly better than any notion of Apple buying and
reselling apps).

------
mbenjaminsmith
"[T]he obvious solution is to compel Apple to let people shop for applications
wherever they want, which would open the market and help lower prices"

Is that a joke?

I'd love to be able to sell iOS software directly to users. Even if there were
no viable channels outside of the App Store having the choice would make me
rest a lot easier.

But to state that "Apple's monopoly" has driven the price of software up is to
be laughably out of touch with reality. Maybe this has to be argued from the
point of view of the consumer and they thought "monopoly driving prices down"
wouldn't be a very good case?

~~~
vosper
Prices could be lowered by a store that takes a smaller commission, while
passing the same amount of money onto the developer. That would lower prices
for consumers without hurting developers. Or there could be commission tiers
that mean that the more successful the app the greater percentage the
developer gets.

~~~
kossae
Wouldn't the developer still price to market in this case? It would be ideal
that the decrease in commissions would be proportionate in developers' price
points, but more than likely you're still paying .99-1.99 on average for the
app. The developer is just making more in this case, not necessarily
benefiting the consumer any more.

~~~
xxs
This is speculation, also outside US prices tend not to end at .99.

~~~
tarboreus
Not really, it's basic economics.

------
edko
There used to be a rule for the Mac App Store (I don't know if it is there
anymore) that forbade developers from selling the same app at a lower price
somewhere else. Wouldn't this be a case of anti-competitive price-fixing?

~~~
Steko
No, this is how stores work. Wal-Mart will also not stock your game if you are
selling it for half MSRP on your website.

~~~
edko
I think there is a difference, though: I'd imagine Walmart would buy a certain
amount of copies of your game, and they would negotiate their purchase price,
squeezing you as much as they can. Then they would mark it up and sell it on
their own. If they see that you are selling it for half the price on your
website, then that gives them a stronger purchasing argument to lower your
price.

Apple, on the other hand, is imposing restrictions on which price you must
sell it to third parties, and, that, I think, is illegal.

~~~
Steko
No, Wal-Mart will demand with it's Buyer agreement that you not sell the
software elsewhere for less, using language that will look remarkably like
Apple's because again this is how store's work.

~~~
edko
Yes, but they do that as a buyer: you have to sell to them at the most
favorable price. Then they will sell it at whatever price they see fit. If
they want to bundle it for free with a toaster, they do not force you to do
the same. Apple, on the other hand, tells you: your sales price to a third
party cannot be lower than my sales price to a third party.

~~~
Steko
That's not forcing you to sell for free, that's preventing you from
undercutting, they are completely different. What Apple is doing is exactly
what Walmart does: you agree to not undercut the price here elsewhere.

------
IBM
This is a good reason for Apple to avoid going further down market. With 43%
market share [1] they're unlikely to be considered to have monopoly power by
courts [2]:

>Following Alcoa and American Tobacco, courts typically have required a
dominant market share before inferring the existence of monopoly power. The
Fifth Circuit observed that "monopolization is rarely found when the
defendant's share of the relevant market is below 70%."(22) Similarly, the
Tenth Circuit noted that to establish "monopoly power, lower courts generally
require a minimum market share of between 70% and 80%."(23) Likewise, the
Third Circuit stated that "a share significantly larger than 55% has been
required to establish prima facie market power"(24) and held that a market
share between seventy-five percent and eighty percent of sales is "more than
adequate to establish a prima facie case of power."(25)

>It is also important to consider the share levels that have been held
insufficient to allow courts to conclude that a defendant possesses monopoly
power. The Eleventh Circuit held that a "market share at or less than 50% is
inadequate as a matter of law to constitute monopoly power."(26) The Seventh
Circuit observed that "[f]ifty percent is below any accepted benchmark for
inferring monopoly power from market share."(27) A treatise agrees, contending
that "it would be rare indeed to find that a firm with half of a market could
individually control price over any significant period."(28)

When they're capturing over 90% of the profit in the smartphone industry
there's no advantage to increasing market share, and some pretty big costs.

[1] [http://www.macrumors.com/2017/01/11/iphone-31-smartphone-
sal...](http://www.macrumors.com/2017/01/11/iphone-31-smartphone-sales/)

[2] [https://www.justice.gov/atr/competition-and-monopoly-
single-...](https://www.justice.gov/atr/competition-and-monopoly-single-firm-
conduct-under-section-2-sherman-act-chapter-2)

~~~
AnthonyMouse
You're assuming the relevant market is smartphones but we're talking about app
stores.

Suppose Walmart is the only retailer on the East Coast and Target is the only
retailer on the West Coast. You're saying, isn't it great for Target that they
only have 43% total market share so they can't be a monopoly. But they're
clearly a monopoly on the West Coast, and it isn't practical for people on the
West Coast to buy their merchandise from a Walmart in Boston or Atlanta, which
implies they're different markets.

You can't buy an iOS app from Amazon or Google Play.

~~~
neotek
I can buy Candy Crush from Amazon and Google Play, isn't that the same thing?
It won't run on my iPhone, but it's fundamentally the same app, isn't it?

I'm asking this genuinely, from a position of ignorance, interested in hearing
an answer.

~~~
umanwizard
"It won't run on my iPhone" is a pretty gigantic difference, big enough IMO to
thoroughly contradict the claim that the two apps are "the same thing".

Anyway, you could also fly across the country to Target and buy "the same
thing" there (in GP's analogy).

------
bostand
This is ridiculous!!

There is no problem with limiting software distribution channels for your own
hardware in order to have a meaningful quality assurance.

What the DoJ should instead focus on is the crazy rules apple imposes in order
to limit any competition. For example you can not publish apps that compete
with their own stuff (that's why we don't have a real chrome or Firefox in
iphone). Even more ridiculous is that you are not even allowed to _mention_
apple competitors. Saying this app also support android wear will get you
thrown out of the store.

~~~
tracker1
They have a complete vertical monopoly in a dominant (not lead) integration
environment where migration to competitors is restrictive. Also, when _I_ buy
a toaster, I should be allowed to take it apart and replace the power cable if
I so need/choose to. Apple is stopping me from doing the same with my
iThing(tm), which is wrong.

~~~
bostand
That's a pretty bad analogy :(

A better analogy would be that your Apple toaster only works with Apple power
outlets and only accepts bread made or approved by Apple.

~~~
tracker1
In general, I'm just opposed to locked down platforms... I may never install a
3rd party build of anything on my phone, but I tend to buy phones that I
could. I'm still pissed at Asus (and the FCC) for locking down my latest
router (no tomato option).

~~~
bostand
Off topic: I don't think Asus had much of a choice in that particular case...

~~~
tracker1
Hence the (And the FCC) comment... there's a number of things that Asus could
do. Certify third party firmware configs. Abstract the radio firmware
interface to lock down certain bandwidth ranges, and signal power. I know it
can take a while... still pissed about it.

------
temp246810
I agree that apple is mean, but disagree they should be forced to open up
their platform.

Let's not forgot that apple has tiny market share compared to google, they are
only going after them because of their wealth.

2nd, let's not forget this was a completely natural monopoly. Apple didn't use
the success of one thing to create a monopoly in another, iPhone was tiny when
they introduced the app store. Is that the rule? If you're successful you have
to share in that way?

Lastly, while I don't dream of ever having even a fraction of a fraction of
the success apples had, it does suck to think that if you build something
others want, others can sue you for access to the platform. Bullshit. If you
don't like apples rules, don't play.

~~~
nrjdhsbsid
The monopoly is that phones have become so important for daily life that being
able to install software on them is nearly a requirement for normal living.

It's like having two car manufacturers and they both recommend "approved" gas
where they scrape 30% of the revenue as a tax. Anyone that wants to make their
gas "approved" has to pay 30% of the revenue.

The difference between apple and google is that Google hides a little switch
in the glove compartment that lets you use any gas if you want to. Apple on
the other hand will void your warranty and try their hardest to break your car
if you dare use unapproved gas or try to modify the car to use it

You could argue that you could just not drive a car if you didn't want to pay
extra for approved gas...

The core issue is that Apple has created a marketplace for something so
pervasive in daily life and has a complete monopoly on it. If the marketplace
was smaller or phones less important consumers could easily say "I don't like
the rules" and walk away

~~~
sbuk
> _The core issue is that Apple has created a marketplace for something so
> pervasive in daily life and has a complete monopoly on it._

That is a natural monopoly and not unlawful. They do not use the store to
leverage position in other markets, which is where antitrust comes into play.

~~~
nrjdhsbsid
They actively prevent developers from building their own app stores and
competing with apple's own apps.

Bell telephone had a similar monopoly. They owned the phone lines and wouldn't
allow any non-approved equipment connected.

Your view really depends on if you see the phone primarily as a platform for
apps or as an "apple phone" with some apps as neat little add-ons.

Antitrust comes about when a company has a high enough market share AND uses
this market share to bludgeon any competitions. Apple created a market, they
own the method of distribution, and they actively use their position to
prevent competition with their own products and stop alternative markets from
forming. Much like Bell

~~~
meanduck
> _Antitrust comes about when a company has a high enough market share AND
> uses this market share to bludgeon any competitions._

I feel like only a non-elected, inner circle within Govt gets to decide what
these condition will _return_ today. Even if the whole country is split 50/50,
its only their retval that matters.

In ideal society, a legal debate is nothing to be proud of. People's
lives/properties depends on it.

------
hamandcheese
I don't know if it's significant from a legal standpoint, but for as long as
there's been an App Store, it's been a walled garden. Yet Apple still became
the most profitable phone manufacturer, despite that. It's not like they took
advantage of their position in the market to force some new
anticompetitive/anti consumer behavior the same way Comcast might.

~~~
tracker1
Most monopolies are only sued (or considered in anti-trust) when they are in a
dominant position. In this case, there are two dominant phone platforms...
Apple's iOS (iStore only), and Android (multiple phone vendors, Play Store and
options to load whatever software a user wants).

In the Apple case, they've taken whatever legal means possible to stop side-
loading and alternative stores, dropped apps that try to sell via other paths.
They have a vertical stranglehold on the platform, and are in a dominant
position.

~~~
AlphaSite
It's entirely possible to sideload on iOS, all you need is an OSX machine and
a free Dev account.

Practical, no. But possible.

~~~
tracker1
And how do you sell an app to iOS users that don't have an OSX machine and a
dev account?

~~~
ajharrison
You don't? To build iOS apps you need X-Code. So you need a Mac.

------
josho
An interesting fall out from this case could be the requirement for platforms
to provide open and equal access to their APIs.

So specifically in this case the APIs for installing an app. But thinking more
generally the APIs for iCloud Drive or Siri as well.

Just think of being able to replace iCloud Drive with your own implementation
to sync to local Drive, S3, etc.

------
Keverw
Interesting. I wonder how this will turn out in the end...

Part of me feels like if Apple has to allow apps outside of the app store,
maybe they can then void your warranty. Like if you open up your computer and
start installing parts on your own...

If you install a virus, etc it should be the user's fault for using a non
trusted store. Why should Apple have to support somthing they didn't
authorize?

I haven't seen a antivirus app ever featured on iOS, but on my Android devices
I have... I thought it was kinda funny to install a antivirus on a phone or
tablet in the first place - but I guess they are just computers in the end
still and more to worry about when you leave them wide app.

------
wallace_f
Sorry if this is obvious - how is this different from the Google Play store?

~~~
swang
just a guess... google does not hold a monopoly over app selling in the
android program space. there's the amazon store and i'm pretty sure one of the
chinese hardware android companies have one.

~~~
thebaer
Yes, anyone can make their own Android app store and charge whatever they want
for the apps there.
[http://lmgtfy.com/?q=android+app+stores](http://lmgtfy.com/?q=android+app+stores)

------
lightedman
I wonder how bad this is going to get with the recently announced French
report on flight MS80 being downed by faulty Apple equipment (battery fire
from either iPad or iPhone 6S.) I smell lawyers. Lots of them.

~~~
umanwizard
How is that related to this case?

~~~
lightedman
It's related because it's Apple, and I can well imagine that a fire caused by
a faulty iPhone battery, killing dozens of people and downing an airplane, is
going to be a pretty costly lawsuit to fight/settle along with this anti-trust
suit?

~~~
icebraining
Apple has an higher revenue than the GDP of most countries, including some
Western European ones, and an healthy profit margin. I think they can afford
to fight two parallel lawsuits.

~~~
lightedman
GDP doesn't matter when it comes to angry families with pitchforks and
torches.

Start thinking about the reputational and potential future stock damages from
just having this information coming out.

------
meanduck
AFAIU antitrust lawsuit triggers when you break an implicit agreement with
customers i.e. breaking trust. But thats not what happened here. App Store is
sole distributor of apps. Customers knows this. Customers may even rely on it.

So what gives ? Specifically what can a business in general do to avoid such
fate ?

~~~
empath75
A trust is a monopoly and has nothing to do with consumer trust.

~~~
sbuk
Abd for it to be _anti_ trust, it must be abused in some manner. This is in
doubt.

------
sjwright
Having multiple middlemen selling the same app to the same customer isn't an
incentive for the developer to lower their prices. Given that app developers
set their own prices, Apple's effect on prices with their store "monopoly"
would be hard capped at 30%.

And unlike a traditional retail store, the whole process is exceptionally
transparent — every developer pays the same 30%, every developer gets boned by
the same restrictions.

Anyway, there _is_ a competitor to the App Store, it's the Play Store and it's
available to any consumer who wishes to shop there. Apple certainly doesn't
have a monopoly on app sales.

~~~
lightedman
"Anyway, there is a competitor to the App Store, it's the Play Store and it's
available to any consumer who wishes to shop there."

Except Android apps don't work on iPhone.

~~~
sjwright
What a remarkable insight.

The thing is, the law doesn't concern itself with iOS app sales, but rather
the overall market of app sales. Is the overall market of app sales healthy?
Yes, it most certainly is.

The reality is Apple doesn't control the marketplace of mobile apps. They
don't even have a majority of it. People are free to choose whatever handset
they like. And they do.

~~~
lightedman
"People are free to choose whatever handset they like. And they do."

Except for those tied to a specific device for work reasons. Blackberry,
anyone (that is, back in the day?)

~~~
lightedman
And meanwhile, my point is proven: "The policy also applies to private phones
used by employees for work purposes" Thank you Deutsche Bank for the
vindication. [http://www.smh.com.au/business/banking-and-
finance/deutsche-...](http://www.smh.com.au/business/banking-and-
finance/deutsche-bank-switches-off-text-messaging-20170113-gtrdg9.html)

