There was big news out of the Supreme Court on Monday regarding apps.
Anyone who has used a smartphone app to, say, order an Uber or write a Yelp review, stands to be affected by this ruling.
Apple coined the phrase, “There’s an app for that.” And now they are being told by the Supreme Court that there is a lawsuit for that.
Supreme Court Rules That Antitrust Lawsuit Against Apple Can Proceed
A number of app-makers have joined together to file a class-action lawsuit against Apple. The app-makers are challenging the monopoly power of Apple’s App Store.
The Supreme Court ruled that the lawsuit could continue.
Justice Brett Kavanaugh joined the liberal justices on the court in the majority. The case was decided 5-4, upholding the right of app-makers to continue their lawsuit against the company.
It isn’t that surprising that Kavanaugh sided with the liberal justices. He has a record of being more of a moderate justice than President Trump’s other Supreme Court pick, Neil Gorsuch.
That is why it was bewildering to watch the liberals in Congress lose their minds and trot out liars to try to prevent his nomination. If they were going to flip out over anyone, it should have been Justice Gorsuch.
The New York Times reported:
“Apple argued that app developers set their own prices, meaning that consumers should not be able to sue the company. Justice Kavanaugh responded that the argument missed the economic reality of the relationship between Apple and app developers.”
“A ‘who sets the price’ rule,” he wrote, “would draw an arbitrary and unprincipled line among retailers based on retailers’ financial arrangements with their manufacturers or suppliers.
“Under Apple’s rule a consumer could sue a monopolistic retailer when the retailer set the retail price by marking up the price it had paid the manufacturer or supplier for the good or service. But a consumer could not sue a monopolistic retailer when the manufacturer or supplier set the retail price and the retailer took a commission on each sale.”
The justices in the majority cited a 1977 decision as their rationale.
Justice Gorsuch wrote the dissent for the minority. He wrote that “without any invitation or reason to revisit our precedent, and with so many grounds for caution, I would have thought the proper course today would have been to afford Illinois Brick full effect. … Not to begin whittling it away to a bare formalism.”
What the Apple Case Means for Big Business
This case will have ramifications for other large corporations. The case will determine the extent to which tech companies can hold market power. It is the age-old question of the lawfulness of monopolies: When is it illegal for a company to have too much market power?
There are antitrust laws on the book that are meant to prevent corporations from obtaining too much market power and keeping other companies from entering the market by creating “barriers to entry.”
This question has been debated since the times of the Rockefellers and Andrew Carnegie. Microsoft suffered a blow in the courts after it was determined they had too much market power.
Competition is good. The more of it, the better. However, should a company be punished for developing a product that consumers value?
Even if the company does have a monopoly, they must continue to produce high-quality goods and services to maintain the monopoly.
The only way the monopoly could afford to be complacent is if it were protected and supported by the government.
For example, if the government stepped in and wrote laws that protected companies such as Apple or Microsoft from facing competition, then they would be doing harm to consumers by preventing competitors from entering the market. The two companies would have no incentive to innovate, and consumers would suffer as a result.
However, that is not what is happening in this case. Apple has earned market power by inventing a product that has revolutionized our lives and helped bring the very companies that are suing it into existence. There is also a popular substitute: the Google Play Store.
The case is going to be an important one to follow because it will have a lot of say in how tech companies are treated under antitrust laws in the future.