Friday, January 13, 2017
Ninth Circuit Revives Consumers’ Action Against Apple
Judge Fletcher Says iPhone Users Are Direct Purchasers of Apps from Apple
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeal yesterday revived a consumers’ antitrust action against Apple, Inc. in which the technology company is accused of monopolizing—or trying to monopolize—the market for iPhone apps.
The action, filed in 2011, complains that iPhone users can only obtain applications through Apple’s App Store, rather than being able to seek them from the developers directly, meaning higher costs in light of a 30 percent mark-up by Apple. The class covers “[a]ll persons in the United States, exclusive of Apple and its employees, agents and affiliates, and the Court and its employees, who purchased an iPhone application or application license from Apple for use on an iPhone at any time from December 29, 2007 through the present.”
At issue in the case is which the users of iPhones are direct or indirect purchasers from Apple. Both the opinion in the District Court and the Ninth Circuit hinged on Illinois Brick Co. v. Illinois (1977) 431 U.S. 720 in which it was held that indirect purchasers of goods or services cannot maintain antitrust actions.
District Court Decision
U.S. District Court Judge Yvonne Gonzalez Rogers of the Northern District of California on Dec. 2, 2013 dismissed the action based on the consumers’ lack of standing. She wrote:
“[T]he Court finds that the 30% figure for which Plaintiffs complain is not a fixed fee. but a cost passed-on to consumers by independent software developers. As such, any injury to Plaintiffs is an indirect effect resulting from the software developers’ own costs….Plaintiffs are barred from bringing claims because they are indirect purchasers.”
In his opinion reversing the dismissal, Judge William A. Fletcher said:
“The question before us is whether Plaintiffs purchased their iPhone apps directly from the app developers, or directly from Apple. Stated otherwise, the question is whether Apple is a manufacturer or producer, or whether it is a distributor….[I]f Apple is a manufacturer or producer from whom Plaintiffs purchased indirectly, Plaintiffs do not have standing. But if Apple is a distributor from whom Plaintiffs purchased directly, Plaintiffs do have standing.”
Shopping Mall Analogy
He recited Apple’s contention that it sells distribution services to developers and is like the owner of a shopping mall that that “leases physical space to various stores.”
Rejecting that argument, Fletcher declared:
“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.”
The judge announced this conclusion:
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.”
The case is In re Apple iPhone Litigation, 14-15000.
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