Lawyers Brand iTunes App Store A Monopoly

Apple will face a court hearing over claims its tight control of iPhone apps constitutes an unfair monopoly. The plaintiff claims Apple’s 30 percent revenue cut is effectively a “surcharge” on app buyers.

The people bringing the case say Apple effectively eliminates competition by making it difficult for app developers to sell directly to iPhone owners, both by threatening to bar developers from the iTunes store and by saying phone owners who get apps from other sources will void their warranty.

Apple told the court the claims don’t stand up because it doesn’t actually sell apps to customers. Instead it says it offers software distribution services to app developers.

A lower court had previously agreed with that argument and dismissed the case on the grounds that the plaintiffs – iPhone owners – hadn’t bought directly from Apple and thus couldn’t bring a case for damages against it.

An appeals court now says Apple’s argument isn’t strong enough to dismiss the case. In particular it questioned Apple’s analogy of being a mall owner that offers space to app developers, with the judges noting that would only stand up if the developers actually operated individual “stores.”

The ruling only means the case must be heard, not that the judges have decided on whether Apple is operating a monopoly unlawfully. They’ve also yet to grant the case a class-action status, which in theory could cover everyone who’s ever bought an app.

Even if the case appears to have a low chance of success, the sheer numbers involved may suggest why the lawyers are giving it a go. Anti-trust laws allow awards of up to triple the measurable financial damages, so with class action status the maximum awardable penalty would theoretically be 90 percent of all the money spent on iPhone apps.