Small Crack in the Garden Wall

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Article from Issue 224/2019
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A news story is breaking as we send this issue to press, and since this column is always the last thing I do, I find myself with a quiet moment to reflect.

Dear Reader,

A news story is breaking as we send this issue to press, and since this column is always the last thing I do, I find myself with a quiet moment to reflect.

In a preliminary ruling for the case known as Apple Inc. v. Pepper, the US Supreme Court has decided that iPhone owners have the standing to sue Apple for monopolistic practices with regard to the 30% commission the company charges for apps sold in the iOS app store. Apple argued that it does not have a direct relationship with app buyers and is only acting as an agent for the real seller, who is (according to Apple) the app developer.

The majority opinion for the court pointed out that Apple actually does have a direct business relationship with the buyer, since it owns the store, receives the money, and manages the transaction. As the opinion states, "Apple's line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits."

This preliminary decision does not pronounce Apple guilty of antitrust behavior; it merely confirms that Apple will be required to face the lawsuit and account for its behavior. Does this very high 30% commission, which exceeds industry standards, point to a kind of monopoly control?

Although the decision does not affect the Linux community directly, it is reason to celebrate for all who oppose walled gardens and hope for a freer and more open approach to software development. The decision basically affirms that US antitrust law is relevant to Apple's interactions with app store customers.

Perhaps the most significant outcome from the case is that Apple didn't succeed with their elaborate argument that an app store customer is not a customer of the app store. If they had succeeded with this highwire strategy, it could have provided a roadmap for other web companies with similarly monopolistic tendencies to avoid accountability (Amazon? Facebook? Google?).

What is a walled garden? What is a monopoly? I'm not the first to point out that the old definitions sometimes don't fit so well into new business models. Apple iPhones represent only around 18% of the smartphone market, but once you're inside the iPhone walled garden, Apple controls everything, using tactics that are strikingly similar to notorious monopolies of the past.

If you read down through the comments under the news stories, you'll see the remarks from Apple enthusiasts who believe the company's vigilant oversight of the app store leads to better quality control and less of the weird, malware-laden shovelware associated with Android. At this point, however, it isn't clear what the remedy would be should Apple eventually lose the case. At a minimum, they would need to pay back customers who could show that they were overcharged due to Apple's crushing 30% commission. It doesn't seem likely that they would have to let unapproved, untested software in their own app store, although it is possible that they might have to loosen their classic Apple grip in some other way in order to avoid future lawsuits.

One interesting development is that the deciding vote in the case was cast by Justice Brett Kavanaugh, the newest member of the US Supreme Court, who voted with the liberal judges and against the block that is typically described as "conservative."

In the US, the term conservative is often associated with a pro-business outlook, but, as many in the open source arena would quickly attest, pro-monopoly does not really qualify as pro-business. Kavanaugh writes, "Leaving consumers at the mercy of monopolistic retailers simply because upstream suppliers could also sue the retailers would directly contradict the longstanding goal of effective private enforcement in antitrust cases."

A final ruling on Apple v. Pepper could still be months or even years away, but in the meantime, this case should stir up a little dust in some of the Internet's most manicured walled gardens.

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