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Apple to tell Supreme Court it can’t be sued in App Store dispute | CNBC

A nearly decade-long battle over Apple’s App Store is set to finally be argued before the justices of the U.S. Supreme Court on Monday, setting up a high-stakes showdown over whether the company can be forced to pay damages to iPhone owners who say the App Store is an unlawful monopoly.

The iPhone owners who brought the suit allege that Apple’s 30 percent commission on app sales amounts to price gouging passed on to consumers. iPhone owners can only buy apps through the App Store, unless they bypass Apple’s rules by “jailbreaking” their phone, which modifies the iPhone’s software so users can download apps outside the App Store. Jailbreaking an iPhone voids its warranty.

Apple, which is supported by the Justice Department, will argue Monday that it is not directly selling apps to iPhone users. Rather, Apple will say that it is acting as an agent for app developers, who ultimately are selling their wares to consumers. In exchange for the commission Apple takes on app sales, the company provides access to its vast user base and performs other services, such as malware detection.

That view is supported by The App Association, an industry group that represents developers. The group has said that, in its view, “the customer is unequivocally buying from the app developer, not the platform the developer sold their app through,” and cautioned that a ruling against Apple could jeopardize the app economy.

But the iPhone owners bringing the suit take a different view. They argue that Apple directly sells the apps in its store, and has gone to “great lengths” to keep it that way, both by establishing technical barriers to other marketplaces and by penalizing those who jailbreak their devices.

While Apple does not price the goods in its App Store, the iPhone users argue that Apple still exercises control over pricing. Apple requires that that any app sold have a price that ends in 99 cents, such as $1.99.

Herbert Hovenkamp, one of the country’s top antitrust experts and a professor at the University of Pennsylvania School of Law and The Wharton School, the university’s business school, joined a brief supporting the iPhone owners in the case.

In an interview, Hovenkamp said that the case is distinct from Illinois Brick.

In that case, he said, it was the brickmakers who were alleged to be conspiring to inflate prices. But in this case, the equivalent party — the app developers — are innocent, potentially even victims of the alleged monopoly.

“Illinois Brick assumes that you’ve got an antitrust violator, and that violator sells to some innocent retailer or distributor, or someone in the middle, and then that innocent retailer sells to someone who then sues,” Hovenkamp said. But, in this case, it’s different: Apple, the alleged violator, is the one in the middle, he said.

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Apple to tell Supreme Court it can’t be sued in App Store dispute.

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