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The Ninth Circuit Court of Appeals said that Apple distributes third-party developers' applications directly from its App Store, giving purchasers standing to sue the company under anti-competition laws. Apple unsuccessfully argued that the plaintiffs did not have standing because they purchased the third party apps indirectly from Apple.
"Apple is a distributor of the iPhone apps, selling them directly to purchasers through its App Store," the appeals court said. The court then reversed a trial judge's dismissal of the case and remanded for further proceedings.
Backed Up at the App Store
The case has been winding through the courts since 2011, when the first plaintiffs filed their complaint. Through a series of motions, the case evolved into a class action and ended in the trial court when a judge concluded the plaintiffs did not have standing to sue.
The issue turned on whether Apple was a manufacturer, producer, or distributor. The court said that if Apple was a manufacturer or producer and the plaintiffs purchased apps indirectly from Apple, then they did not have standing. But if Apple was a distributor and the plaintiffs purchased directly, then they did have standing.
Apple analogized itself to the owner of a shopping mall that "leases physical space to various stores." But the court rejected the analogy, noting that Apple sells directly to customers and pays developers after deducting a 30% commission.
Is There a 30% App for That?
"In the case before us, third-party developers of iPhone apps do not have their own "stores," the appellate panel said. "Indeed, part of the anti-competitive behavior alleged by Plaintiffs is that, far from allowing iPhone app developers to sell through their own "stores," Apple specifically forbids them to do so, instead requiring them to sell iPhone apps only through Apple's App Store."
Mark C. Rifkin, an attorney with Wolf Haldenstein Adler Freeman & Herz representing the group of iPhone users, told Reuters in an interview that Apple needs to let people shop for applications wherever they want to open the market and help lower prices.
"The other alternative is for Apple to pay people damages for the higher than competitive prices they've had to pay historically because Apple has utilized its monopoly," he said.