Apple’s US Supreme Court case: why it may set a precedent for tech industry

Apple has gone before the US Supreme Court to defend the 30% commission that the company takes on iPhone app sales.

At an hour-long hearing in California on Monday, the tech giant’s lawyers denied accusations that the firm had exploited its “market dominance market dominance to inflate the price of iPhone apps”, The Daily Telegraph reports.

The case, launched in 2011, centres on whether Apple should be forced to pay damages to customers who claim that the company’s App Store is a “monopoly” and that the commission it takes from software sales is “unlawful”.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Apple’s defence is that the price of these apps is actually set by the software developers, says The Washington Post.

The company argues that customers who object to the high cost of apps should “take it up with individual developers”, as the firm is “simply acting as a middleman between app developers and users”, adds Gizmodo.

But the lawyers behind the suit argue that buyers have a direct relationship with Apple, since they spend money on the firm’s marketplace, and that as such, there is an anti-trust case to be made, reports Engadget.

What happens it Apple loses?

Apple is by no means the only company that takes high commissions on app sales - which means a ruling against the company could have major implications for other tech giants.

According to the BBC, both Microsoft and Google also take a 30% commission on app sales.

Jack Kent, research director at UK-based information provider IHS Markit, told the broadcaster that software marketplaces such as Apple’s App Store are becoming a vital part of tech companies’ business.

“The services category - which includes App Store commissions, alongside other media, content and services - is now Apple’s second-biggest driver of revenue after iPhone sales and has been its fastest growing source of revenues,” he said.

According to Bloomberg, the App Store generated $38.5bn (£30bn) in revenue in 2017, a year-on-year increase of about a third. Developers reportedly pocketed about $26.5bn (£27.8bn) of those earnings, with Apple taking the remaining $12bn (£9.4bn).

A date for the ruling has yet to be set, but the Telegraph says it could be as late as next June.