Photographer: Daniel Acker/Bloomberg

Apple Must Face Consumer Lawsuit Over iPhone Apps Monopoly

Updated on
  • San Francisco appeals court revives antitrust class-action
  • Claims filed on behalf of app buyers from 2007 to 2013

Apple Inc. must face consumer claims that it tried to monopolize the market for iPhone apps from 2007 to 2013 in a class-action lawsuit seeking hundreds of millions of dollars in damages.

A federal appeals court in San Francisco revived the proposed class-action lawsuit Thursday after a lower-court judge dismissed it. The three-judge panel concluded the judge erred in finding that the consumers lacked standing to sue as “direct purchasers” of apps.

An Apple spokeswoman declined to comment on the court’s decision.

Consumers alleged in a complaint originally filed in 2011 that Apple violated U.S. antitrust law by requiring iPhone apps to be sold at Apple’s App Store and prohibiting third-party app developers from selling the software outside of it. Apple requires iPhone software developers to turn over 30 percent of what they charge for an app, increasing prices and excluding competitors from the iPhone “aftermarket” of apps, according to the suit.

Mark Rifkin, a lawyer for the plaintiffs, said Thursday that millions of consumers should be able to recover most of Apple’s 30 percent take from app store sales. He said that while the case hasn’t won class-action status yet, he may seek to expand the scope of the class to include everyone who has bought apps for iPhones to the present. Based on a provision in federal law that triples the damages awarded in antitrust cases, he estimated Apple’s exposure could reach hundreds of millions of dollars.

Apple said in its defense that “it does not sell apps but rather sells software distribution services to developers,” according to the court’s decision.

Apple cited a 1977 Supreme Court ruling that bars consumers from recovering damages from a company if it doesn’t directly sell its products to consumers. The appeals panel said Thursday the lower court erred in accepting this argument since iPhone users are direct consumers of content in the App store.

“Apple’s analogy is unconvincing,” the court said. “In the case before us, third-party developers of iPhone apps do not have their own stores.”

The case is In re Apple iPhone Litigation, 14-15000, U.S. Court of Appeals for the Ninth Circuit (San Francisco).