The US Court of Appeals for the Ninth Circuit stated that Apple is a distributor of iPhone apps, selling them directly to purchasers through its monopolistic App Store. Because Apple is the distributor (which it denies), plaintiffs have standing to sue Apple under anti-trust legislation.
The Court opinion was that Apple’s iPhone (and, by inference, most of its products) is a “closed system” – often called a walled garden as purchasers are not able to buy and install apps (including ringtones etc.) direct from developers. Apple has also stated it is able to remove any app found to have alternate distribution, or that may conflict with its own apps, and will void iPhone warranties if a user installs apps from elsewhere (jailbroken).
Apple denied — during four appeals — that it was the distributor but said it was simply a facilitator for developers. The court opinion was that the user buys from Apple, pays Apple directly, and Apple, in turn, remits part of the purchase price (around 70%) to the developer. For all intents and purposes, Apple is the original seller (under Australian Consumer Law, Apple is regarded as the seller too). It went further, saying that developers could launch anti-trust suits against Apple as well.
The Court also said that monopolistic or anti-trust practices, especially those that led to a lack of competition and by inference higher pricing than a free market, were not legal.
If the plaint succeeds, “The obvious solution is to compel Apple to let people shop for applications wherever they want, which would open the market and help lower prices,” Mark C. Rifkin, an attorney with Wolf Haldenstein Adler Freeman & Herz representing the group of iPhone users, told Reuters in an interview. “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.”