Apple must face claims of monopoly in iPhone app market

An appeals court has ruled that Apple must face antitrust charges in a lawsuit that alleges that the company monopolized the market for iPhone apps.

The U.S. Court for Appeals for the Ninth Circuit reversed Thursday a decision by a lower court and ruled that the app buyers filing the lawsuit are direct purchasers of iPhone apps from Apple, rather than from app developers, and hence have standing to sue. Apple was a distributor of iPhone apps, selling them directly to buyers through its App Store, according to the court.

The proposed class-action lawsuit started in 2011 with the complaint changing several times.

The purchasers object to the 30 percent “surcharge” that they pay to Apple. The company collects 30 percent of the revenue of third-party apps on its store, with the balance going to the developer, in a closed system in which Apple controls which apps can run on an iPhone, according to court records.

Apple had argued that it does not sell apps but “software distribution services to developers,” and hence cannot simultaneously be a distributor of apps to app purchasers, Circuit Judge William Fletcher wrote for the unanimous panel. Apple’s description of its role as that similar to the owner of a shopping mall that leases physical space to stores was “unconvincing,” as third-party developers of iPhone apps do not have their own stores, he added.

The courts have yet to address the complaints of the app purchasers, who allege that Apple prohibits app developers from selling iPhone apps through channels other than the App Store, threatening to cut off sales by any developer who violates this rule, according to court records. Apple is also said to discourage iPhone owners from downloading unapproved apps, threatening to make iPhone warranties void if they do so.

Apple did not immediately comment on the decision.

The suit covers purchases of apps from 2007 to 2013 but Bloomberg quoted Mark Rifkin, a lawyer for the plaintiffs, as saying that he may try to extend the proposed class action suit to include purchasers who have bought apps for the iPhone up to the present. Apple is being sued for damages and the court is being asked to order the company to change its app store rules.