Apple's Supreme Court defeat sends antitrust shockwaves into Silicon Valley

Apple's defeat in the Supreme Court case on Monday rocked Silicon Valley, threatening further lawsuits against consumers and other lawsuits that could challenge the size and power of the tech sector.

For Apple, Decision 5-4 means that iPhone owners can bring a class action lawsuit against the company's App Store. The lawsuit accuses Apple of engaging in monopolistic practices by forcing Apple device owners to buy games and other software development only through the App Store, while Apple deprives itself of a share of sales made on his site.

The ruling does not say whether Apple's practices violate the country's antitrust laws. Nevertheless, it could nevertheless have serious repercussions on one of Apple's most lucrative business sectors, while subjecting the company to lengthy court proceedings that could make its decisions and internal proceedings fully visible. .

The decision, in which Conservative Justice Brett M. Kavanaugh joined the four Liberal judges of the court, could also pave the way for similar actions against a wide range of other companies such as that Amazon, Google and Microsoft, who had all urged the Supreme Court to: with the iPhone manufacturers in the memoirs submitted by their best advocates in Washington last year.

The judges' decision comes at a time when academics, technical leaders and even US presidential candidates have called on the federal government to investigate – and possibly sanction – Apple and other technology companies, fearing to harm competitors and consumers. Former Vice President Joe Biden joined this group on Monday, reporting to The Associated Press that the government should take a closer look at the size of large technology companies.

"The general feeling in Washington is that technology must be held accountable," said Rep. Ro Khanna, a Democrat whose district includes a slice of Silicon Valley. He said the court had reached the right conclusion by ruling against Apple.

Apple has long explained that it was largely using its App Store to protect consumers from predatory, unsafe or harmful software. Reacting to the decision, the company stressed Monday that it would prevail "when the facts will be presented and that the App Store does not constitute a monopoly of any extent."

The way Apple manages iPhone and iPad apps created by third-party developers is at the heart of the case. Apple allows the developer to set the price of an app, but levies up to 30% commission on each app sold, which hinders some software makers who view it essentially as a tax. Last quarter, Apple achieved a service revenue of nearly $ 11.5 billion, including sales of the App Store. According to market research company Kantar, Apple holds 45.5% of the US smartphone market. The Pew Research Center estimates that 77% of adult Americans owned a smartphone last year.

The 2011 complaint was headed by the plaintiff, Robert Pepper, who claimed that consumers were ultimately victims of Apple 's policies, as developers had increased the prices of their apps to cover commissions from Apple. Apple. In its response, Apple referred to a precedent of the Supreme Court, according to which only "direct purchasers" of a service could claim such antitrust action. The iPhone giant said that it was acting solely as an intermediary in the transaction, providing a showcase for consumers to find and buy the apps they've subsequently installed.

But the Supreme Court on Monday rejected Apple's interpretation. The ruling revealed that the iPhone giant's legal arguments were aimed only at "the Apple gerrymander in a similar lawsuit," wrote Kavanaugh, a conservative named by President Trump, on behalf of the company. a majority of the judges. in the case "contradicts the text of the antitrust law, which basically gives any aggrieved party the right to sue".

In doing so, the judges emphasized that their decision was narrow, leaving a key element of the lawsuit – that Apple is acting anticompetitively – unresolved. This case is left to a federal district court, a process that could take years and result in the payment of damages by Apple and the modification of its business practices, if any.

The District Court initially ruled in favor of Apple, finding that the plaintiffs were not legally entitled to sue. But this decision was overturned by the Court of Appeal of the Ninth Circuit. In anticipation of the Supreme Court decision, 30 states and the District of Columbia have asked judges to rule in such a way as to allow consumers to bring antitrust proceedings more easily.

In a statement, Apple defended its practices on Monday. "We are proud to have created the safest, most secure and reliable platform for customers and a great business opportunity for developers around the world," said spokesman Josh Rosenstock. . "The developers set the price they want to charge for their application and Apple plays no role. The vast majority of apps in the App Store are free and Apple does not derive any benefit. "

The decision of the Supreme Court could still have broader implications for the technology industry. "For all those who have a platform, it's one less thing to hide behind," said a partner of a leading Silicon Valley law firm that does not have a platform. was not allowed to speak in public.

"I would expect that many cases will be filed against a larger number of companies," said Avery Gardiner, one of the best competition experts at the Center for Democracy and Technology, a group based in Washington. "There are other people who own app stores." Google has an app store. Someone will be eagerly looking for practices that could impact pricing. in the Google app store. "

Theoretically, a company like Amazon could also be a target, said Valarie C. Williams, antitrust attorney at Alston & Bird, which has represented companies such as Microsoft and Nokia. "For some online markets such as Amazon, where consumers connect online and pay Amazon while a seller is in fact a third party, this seems to be [saying] they are direct purchases, "she added. Anything would depend on the fact that Amazon actually acted anticompetitively, she said.

Google declined to comment. Amazon has not responded to requests for comments. (Jeffrey Bezos, chief executive of Amazon, is the owner of the Washington Post.)

Anticipating such a threat, Amazon, Google and other tech giants had urged the nation's nine judges to rule in favor of Apple before last year's oral proceedings. Speaking through professional organizations, such as the Computer & Communications Industry Association, they argued that allowing the lawsuit would result in "significant adverse effects on competition by discouraging the development of services. Innovative Platforms ".

The CCIA reiterated this fear on Monday, saying in a statement that the decision "would unintentionally expose companies offering digital platform services to unintentional liabilities." Another group – ACT | The App Association, which counts Apple and Microsoft as sponsors, also voiced fears of a flood of new lawsuits.

"Under this ruling, only trial lawyers will benefit from platform simplification as a retailer and supplier model," Morgan Reed, the group's chief executive, said in a statement.

The Supreme Court's decision against Apple marks only the latest antitrust headache of the technology industry. Last week, one of Facebook's co-founders, Chris Hughes, called on the US government to dismantle the social media company. Federal regulators have recently set up a special task force to determine whether the sector poses a threat to competition and consumers. And presidential candidates in 2020, especially Democratic Senator Elizabeth Warren, have threatened to regulate technology even more severely. Warren has previously criticized Apple for its management of the App Store.

The lawsuit also adds to Apple's antitrust issues globally: In Europe, the technology giant is facing a potential investigation for its practice of collecting a commission from developers who sell through its App Store. The streaming music service Spotify is officially complaining about this practice with regulators in Brussels, historically more aggressive than their counterparts in the United States. Previously, Apple had disputed Spotify's claims, claiming that it had never sought to limit access to its rival's bids.

Robert Barnes contributed to this story.