Supreme Court To Rule On iPhone App Fees

The Supreme Court has agreed to decide whether Apple must face a lawsuit by consumers who allege that the App Store's pricing model violates antitrust laws.

The battle centers on Apple's app-store business model, which generally calls for a 70-30 revenue split with developers. (Two years ago, Apple tweaked its formula to allow developers who offer subscriptions to retain 85% of their app's revenue after the first year.)

In a complaint brought in 2011, a group of iPhone users allege that Apple's 30% commission from developers gets passed on to consumers. The users argued that Apple was only able to charge the 30% mark-up because it wielded monopoly power over the distribution of iPhone apps.

U.S. District Court Judge Yvonne Gonzalez Rogers in the Northern District of California dismissed the lawsuit in 2013, ruling that the developers -- and not iPhone users -- are the ones affected by the 30% commission.

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But a three-judge panel of the 9th Circuit Court of Appeals reversed Rogers' ruling and reinstated the suit in 2017. Those judges ruled that Apple was a distributor, and therefore could be sued "for allegedly monopolizing and attempting to monopolize the sale of iPhone apps."

Apple then asked the Supreme Court to take the case, essentially arguing that purchasers of apps should not be able to bring antitrust cases that stem from deals between itself and app developers.

The industry group ACT | The App Association sided with Apple, arguing in a proposed friend-of-the-court brief that the company's free structure offers benefits for consumers and developers. Apple's revenue-split model allows "independent app developers to set their prices based on their business models, while allowing the app platform to retain a nominal fee for providing app developers with access to a broad set of customers, promoting a virtuous cycle of innovation," the organization wrote.

Last month, the Trump administration also sided with Apple and asked the Supreme Court to take the case.

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