Apple Faces Antitrust Suit for Monopolization iOS App Distribution

A complaint filed last Friday in the Northern District of California asserts that Apple Inc. has violated federal and state competition laws by cornering the worldwide distribution market for Apple operating system (iOS) applications. The filing alleges that Apple has charged supracompetitive prices to consumers who have made purchases, including in-app purchases, on iPhones, iPads, and iPod Touches (iOS devices) on the iTunes site or in the App Store.

The lawsuit explains that unbeknownst to consumers, Apple engaged in the anticompetitive scheme from the iPhone 2G’s inception 13 years ago when the only apps available came pre-installed on the phone. “Apple took advantage of the heavy demand for its novel product to equip it with an operating system that foreclosed iPhone consumers from buying software from any source other than Apple,” the filing says. The complaint also alleges that Apple has succeeded in wholly eliminating competition.

In addition, Apple’s iOS allegedly prohibits iOS device users from buying software applications from anyone other than Apple. The complaint contrasts the company’s phones to computers it manufactures that permit users to buy software from any provider and to pay the software manufacturer or distributor directly, without having to pay Apple anything additional.

The complaint argues that Apple dually failed to obtain iOS device users’ “contractual consent” to Apple’s monopolization of the iOS applications aftermarket and to having their iOS devices “locked,” prohibiting them from using any app that was not approved or sold by Apple.

As a result, consumers were forced to pay Apple’s price and prevented from downloading or using third-party apps found outside the App Store.

The lawsuit seeks to hold Apple responsible for violations of Section 2 of the Sherman Act and California’s Unfair Competition Law, prohibiting any unfair or deceptive business practice. The plaintiffs, on behalf of themselves and the putative class, seek declaratory and injunctive relief, treble and exemplary damages or, in the alternative, restitution, costs, and their attorneys’ fees. 

The consumers are represented by Wolf Haldenstein Adler Freeman & Herz LLP.