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U.S. Court of Appeals Rules that iPhone users could Sue Apple for Restricting their App Purchases to their own App Store

17.2 Court Rulling


Reuters reports tonight that a U.S. appeals court ruled on Thursday that iPhone app purchasers may sue Apple over allegations that the company monopolized the market for iPhone apps by not allowing users to purchase them outside the App Store, leading to higher prices.


The report further noted that "The 9th U.S. Circuit Court of Appeals ruling revives a long-simmering legal challenge originally filed in 2012 taking aim at Apple's practice of only allowing iPhones to run apps purchased from its own App Store. A group of iPhone users sued saying the Cupertino, California, company's practice was anticompetitive.


Apple had argued that users did not have standing to sue because they purchased apps from developers, with Apple simply renting out space to those developers. Developers pay a cut of their revenues to Apple in exchange for the right to sell in the App Store."


A lower court sided with Apple, but Judge William A. Fletcher ruled that iPhone users purchase apps directly from Apple, which gives iPhone users the right to bring a legal challenge against Apple."


Reuters clarifies that "The courts have yet to address the substance of the iPhone users' allegations; up this point, the wrangling has been over whether they have the right to sue Apple in the first place."


On the flip side, it was reported by the Washington Post last July that more than half of Apple's app developers considered Apple's App Store restrictive and anticompetitive. Earlier in July Patently Apple posted a report titled "Spotify Complained and now the FTC is Considering an Investigation into Apple Music."


Between consumers and developers complaining, Apple has a royal legal battle ahead of them that could drag on for years.


During Apple's Q4 2016 Financial Conference Call Apple's CEO noted: "We had a record setting quarter for services with revenue growth accelerating by 24% reaching 6.3 billion. App store revenue continued to skyrocket where music revenue grew by 22% thanks to the growing popularity of Apple Music."


Apple's CEO has been pushing this relatively new angle with Wall Street. Cook told analysts in October that "We have almost doubled the size of our services revenue in the last four years, and as we've said before, we expect it to be the size of a fortune 100 company in fiscal 2017."


If Apple's services revenue comes under attack in any real way, where their 'Walled Garden' is an unsustainable business model, Wall Street may use that as yet another excuse to hit Apple's stock price in the new year.


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