US appeals court reopens lawsuit against Apple for alleged App Store monopoly

The 9th US Circuit Court of Appeals ruled that a group of iPhone owners may proceed with their class action suit, alleging anti-competitive behavior.

A US appeals court ruled Thursday that a group of iPhone owners can proceed with a class action lawsuit against Apple, which claims the Cupertino company has attempted to monopolize the market for iPhone apps.

The ruling, from the 9th US Circuit Court of Appeals, re-opens allegations first brought to court in late 2011. The plaintiffs argued Apple, which only allows iPhone users to purchase apps through its App Store, created an anticompetitive marketplace for apps.

A district court threw out the case, arguing the plaintiffs had no standing to sue. The case cites the 1977 Supreme Court Illinois Brick Co. v. Illinois, which limited who can sue for antitrust damages. The general rule is that only "the overcharged direct purchaser, and not others in the chain of manufacture or distribution" has standing.

"The question before us is whether Plaintiffs purchased their iPhone apps directly from the app developers, or directly from Apple," Judge William A. Fletcher wrote in the Appeals Court ruling issued Thursday. "Stated otherwise, the question is whether Apple is a manufacturer or producer, or whether it is a distributor. Under [legal precedent], if Apple is a manufacturer or producer from whom Plaintiffs purchased indirectly, Plaintiffs do not have standing. But if Apple is a distributor from whom Plaintiffs purchased directly, Plaintiffs do have standing."

Apple argued that consumers purchase apps indirectly through Apple. It compared its business to the owner of a shopping mall that "leases physical space to various stores." In other words, if the App Store is like a mall, app distributors are like stores that sell their goods directly to consumers.

Fletcher, however, wrote that Apple's analogy is "unconvincing."

"In the case before us, third-party developers of iPhone apps do not have their own 'stores," he wrote. "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."

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