Moscow, June 5 — “News. Economy” Group of developers of mobile applications for iOS filed in Federal court in California a lawsuit against Apple, accusing the company of abusing a leading position in the market. This writes Bloomberg with reference to the statement of the plaintiffs.
The plaintiffs consider “non-competitive” practice of selling apps for the iPhone exclusively through the official App store. Apple uses the App Store as a lever of pressure on developers — the company takes 30% of revenue from the sale of apps and allows you to set the price at least for $0.99. Also Apple requires that prices ending in 99 cents.
The lawsuit was filed in Federal court in the Northern district of California by Donald Cameron and company Pure Sweat Basketball Inc.
With such restrictions, “it is difficult to earn good money” in the store, which represents more than 2 million applications, say the developers. The lawsuit says that Apple initially had a monopoly position in the U.S. market, allowing developers to promote their apps for iOS anywhere except the App Store.
“The situation is similar practice when the retailer is a monopolist buys goods from the wholesale suppliers at artificially low prices, — says the lawsuit. In both cases, the creation of market competition would improve the situation.”
The interests of developers in court to represent the law firm Hagens Berman. The company urges all unhappy with the current state of the App Store the authors application to join the suit. In 2016 Hagens Berman won the case against Apple and other publishers, achieving compensation of $560 million, Then, the user group said that the ebook prices unreasonably high.
In may 2019, the U.S. Supreme court has allowed users to sue Apple. The court heard the case of iPhone users, who accused the company of monopolizing the market for apps. Download apps only from the App Store, but the prices are too high, they claimed.
Apple insisted that developers set prices on the App Store and the company receives a Commission as an agent. The Corporation also argued that there can not be a Respondent in this case because the plaintiffs are clients of the app developer, not Apple.
“The borders that is trying to install Apple, do not carry meaning, moreover, in order fraudulently to save the company from this and other similar lawsuits,” said the Supreme court judge Brett Cavanaugh. “We do not agree. The plaintiffs bought the app directly from Apple, which means that they are customers of the company,” added the judge.
The Supreme court ruling increases the likelihood that Apple will lose the case or will eventually be forced to deal with it in a disadvantageous conditions. In any case, it is likely that Apple will eventually have to reduce the interest fee in the App Store.
It is worth noting that while this case is in its early stages, and therefore still not been established for certain, whether Apple violated Federal antitrust law. However, the court’s decision could set a precedent, which would mark the beginning of the war between Apple and offended users, who have leverage on the company.
The plaintiffs will be able to demand billions of dollars in compensation for the damages if they win the lawsuit. According to Apple, the Supreme court ruling, allowing the case to continue, will pose a threat to e-Commerce is a rapidly growing segment of the U.S. economy, estimated in hundreds of billions of dollars a year.
The App Store is the basis of business services, which CEO Tim cook is betting.
For many years business telephone with Apple were quite stable, and the company managed to sell more devices, while increasing the price tag on the iPhone. But in the beginning of this year, the company warned investors that sales of the iPhone down amid falling sales in China in the context of the ongoing trade war.
Apple compensated for the fall in iPhone sales continuing growth of its business to digital services, which the company sees major growth driver. Services segment, which includes products such as the AppStore, Apple Pay, Apple Care and Apple Music has generated in the last quarter record revenue of $11.5 billion, which is 16% higher than a year ago. Currently it is the second largest source of Apple’s revenue, outpacing Mac and iPad.
Apple seeks to expand this segment even more: the company held a conference where they presented the new services that will be launched soon or is already available: Arcade gaming service, streaming service Apple TV+ news Apple News+ etc.
Despite the growing catalog of service offerings, the App store remains the biggest part of the business services, providing around one third of the income from this business, according to analysts on wall street. Moreover, only one App Store will bring 12% of the total gross profit of the company this year, forecast at KeyBanc Capital Markets. This is an impressive figure considering that the entire service business, Apple accounted for only 16% of the total sales for the first six months of the current fiscal year, indicating how lucrative is the App Store for the company.
But the Supreme court decision could kill the cash cow. We are talking about where the owners of “Apple” devices will download the application. The Apple ecosystem is built in such a way that the only way to get iPhone apps download through its App Store. The plaintiffs in the case argue that the fees are higher than they would be if Apple owned a monopoly on the app store.
Judge has not yet decided whether Apple has a monopoly, abused whether it it or what is the penalty for it; instead, they simply ruled that consumers have the right to sue Apple and their business can continue.
But this decision is a significant obstacle for Apple, as it increases the likelihood that the case will indeed be transferred to the court. It is easy to see how this can become a big problem for Apple.
For the plaintiffs will not be a problem to prove that Apple has a monopoly on distribution of iPhone apps. They also should not be too difficult to prove that the price that Apple will charge as a Commission as the owner of the site AppStore, makes these applications more expensive, as the developers lay the Apple Commission in the final application cost.
For example, Spotify charges $3 more clients who have subscribed to the service through the Apple app store than with those who subscribed directly through the web site. Spotify admits that this is done in order to cover the cost of royalties to Apple. And Spotify is not the only company-the plaintiff, which may indicate that they had similar practice pricing.
In other words, there is a big chance that Apple will lose the case. But even if this does not happen, the fees in the app store, the company may change. Meanwhile, a growing number of app developers have decided to completely abandon the Apple platform, offering customers a subscription through their own web sites.
All these effects threaten Apple’s lower profit from services and, worse, the global long-term strategy of the service industry Apple will have to reconsider.
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