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Ruling opens Apple to customer lawsuits

Publish date: 15 May 2019
Issue Number: 1781
Diary: Legalbrief eLaw
Category: Litigation

While Apple stocks continue to be battered by the US-China trade war, the US Supreme Court has dealt it a further blow by ruling that it can be sued by customers who claim it has too much control over the App Store. Legalbrief reports that the dispute revolved around how the justices would apply a decision the same court made in 1977 to the claims against Apple. In that case, it limited damages for anti-competitive conduct to those directly overcharged. Monday’s decision will allow the lawsuit from consumers who argue that the company has given itself a monopoly over apps on the iPhone. That forced them to pay too much for the apps, they argued. The Independent reports that Apple had tried to stop the case, arguing that it could prove a problem for online sales. The justices, in a 5-4 ruling, upheld a lower court's decision to allow the proposed class action lawsuit to proceed. The plaintiffs said the technology company required apps to be sold through its App Store and extracted an excessive 30% commission on purchases.

Full report in The Independent

Conservative Justice Brett Kavanaugh joined the court's four liberal justices to rule against Apple and wrote the decision. ‘It is undisputed that the iPhone owners bought the apps directly from Apple,’ Kavanaugh wrote, splitting with a district court that previously held the app developers responsible for pricing. A National Review report notes that Kavanaugh took issue with Apple’s defence that it does not have a monopoly because it doesn’t set the retail price for individual apps, pointing out that the fee the company charges developers significantly affects retail pricing. ‘In the retail context, the price charged by a retailer to a consumer is often a result (at least in part) of the price charged by the manufacturer or supplier to the retailer, or of negotiations between the manufacturer or supplier and the retailer,’ Kavanaugh wrote. Justice Neil Gorsuch, writing for the Court’s conservative dissenters, argued that the majority relied on ‘convoluted pass-on theories’ in which damages to the consumer that are actually inflicted by the app developers can be passed on to a third party, namely Apple. The report notes that the ruling simply allows the original lawsuit, brought by a group of iPhone users, to proceed; it does not represent a ruling on the merits of the case.

Full National Review report

An ocean away, a widow who wanted access to her late husband’s photographs has won a three-year legal battle against Apple. UK national Rachel Thompson spent thousands of pounds forcing Apple to open the account so she could help her daughter remember her father through images he stored online. A report on the IoL site notes that Thompson’s initial attempts to access her late husband Matt’s account after he took his own life in July 2015 were rebuffed by the company. It said it would only release the 4 500 photos and 900 videos under a court order as Thompson had not specified what access others should or should not have to his account after his death. Thompson said this contrasted with the easy transfer of all her husband’s other assets and ‘dragged out’ the grieving process. Under UK law, the loved ones of people who pass away have no legal right to access information held in the deceased’s online accounts.

Full report on the IoL site

In further bad news for Apple, the escalating trade dispute between the US and China could prove damaging to the company and its customers by pushing up the cost of iPhones and driving down the share price. According to a report by Morgan Stanley, the new Trump-imposed tariff of 25% on $200bn of Chinese-made goods could add about $160 to the cost of a Chinese-made iPhone XS, which starts at $999. Apple could shield consumers from the price hike, but on Monday concern over the trade dispute pushed shares down close to 6% to $186, the sharpest decline in its share price since 2013. The Guardian reports that Apple stock is down 11% since the start of the month, placing it officially in what market analysts term ‘correction’ territory. Shipments of iPhones to North America, Apple’s largest market, fell 19% to 14.6m units in the first three months of the year. Tariffs could also affect iPhone sales in China, where Apple commands 7.4% of the market and where it has seen sales drop 25% in the past six months. CNN reports that Apple has been trying to regain its footing in China. In its most recent earnings, released April 30, the company posted revenue of $10.2bn in the country for the first three months of the year, down 21% from a year earlier. On a call to discuss the results, CEO Tim Cook signalled that the worst may be over for sales of the iPhone, its biggest profit generator, as Apple saw 'improved trade dialogue' between China and the US and 'very positive customer response to the pricing actions we've taken in that market'.

Full report in The Guardian

Full CNN report