A group of iPhone owners who accuse Apple of violating US antitrust rules can sue the company, the Supreme Court ruled Monday. They claim Apple’s App Store is a monopoly.
Justice Brett Kavanaugh, in the majority opinion, said that when “retailers engage in unlawful anticompetitive conduct that harms consumers,” people buying those companies’ products have the right to hold the businesses to account.
“That is why we have antitrust law,” Kavanaugh wrote. The court’s four liberal justices joined Kavanaugh in the 5-4 decision.
The Supreme Court opinion notably does not accuse Apple of violating antitrust law: It holds that consumers have the right to sue the company for monopolistic behavior, because they purchase apps directly from Apple.
The ruling could have wide implications for other tech companies that operate similarly walled-off online storefronts, said Gene Kimmelman, president of the consumer advocacy group Public Knowledge and a former Justice Department antitrust official.
“It definitely should make tech companies wonder how the antitrust laws will be applied going forward in an online platform environment,” said Kimmelman.
The case stems from a 2011 class-action suit by iPhone owners alleging that by taking a 30% cut of app sales, Apple has encouraged app developers to raise their prices in response. Consumers have been harmed by the practice, the suit claimed, because Apple does not allow customers to download apps from any other source other than the iTunes App Store. Unlike Android, iOS customers can only get apps from that official source, which Apple says serves as kind of quality control to weed out security threats and apps that violate the company’s terms of service.
Apple (AAPL) argued that the iPhone owners do not have the right to sue because Apple (AAPL) is an intermediary. But the Supreme Court held that iPhone owners have a “direct purchaser” relationship with Apple (AAPL), and may sue under a precedent known as Illinois Brick.
Had Apple been allowed to set the terms of the legal fight, the court said, it would have hindered the ability of consumers to seek relief from alleged monopolists.
“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,” the opinion said.
Apple said it is confident it will ultimately prevail in the case now that it can proceed.
“The App Store is not a monopoly by any metric,” the company said in a statement. “Developers set the price they want to charge for their app and Apple has no role in that.”
The company also noted developers can build apps for other platforms, including smart TVs, rival operating systems and video game consoles. But the customers bringing the case note the iTunes App Store remains the only place Apple customers can get software for their iPhones and iPads.
Antitrust experts welcomed the Court’s reasoning that allowing Apple to avoid the class-action suit “would provide a roadmap” for others to evade the law.
“It’s important that we get rid of these silly, technocratic barriers to seeking relief under the antitrust laws,” said Sally Hubbard, director of enforcement strategy at Open Markets, a think tank that has criticized the tech industry as being too powerful and concentrated. What will follow will likely be years of litigation, she added. “I expect Apple will contest this heavily and fight this case for several years to come, because it’s a lot of revenue at stake.”
The Supreme Court did not rule on the customers’ likelihood of success — only that they have the right to sue. Apple argued that it was not a monopoly, rather a platform for app developers who can set their own prices. It has said that if the court allowed the case to proceed, it would disrupt the e-commerce market.
Apple’s stock fell 5.3% on the news. The broader market was down more than 2% Monday.
– CNN’s Ariane de Vogue and Steve Vladeck contributed to this report