NZ Herald
  • Home
  • Latest news
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather forecasts

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
    • The Great NZ Road Trip
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
    • Cooking the Books
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • What the Actual
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business

Apple grilled on App Store pricing

By Robert Barnes
Washington Post·
27 Nov, 2018 03:52 AM5 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

Analysts estimate Apple made more than US$22 billion ($32.5b) from the App Store worldwide in the first half of 2018. Photo / 123RF

Analysts estimate Apple made more than US$22 billion ($32.5b) from the App Store worldwide in the first half of 2018. Photo / 123RF

On Cyber Monday, things at the Supreme Court did not go particularly well for Apple.

More: How dumb is Donald Trump's iPhone tariff? Let me count the ways

During arguments in a case that could have enormous consequences for the tech giant, justices across the ideological spectrum seemed to think consumers had the right to move forward with a fledgling class-action lawsuit saying Apple's App Store has an unfair monopoly that is raising the price of iPhone apps.

If the justices permit the suit to go forward, a decision against Apple would almost certainly be a blow to its business. Analysts estimate that the company made more than US$22 billion ($32.5b) from the App Store worldwide in the first half of 2018.

Apple has a hand in dictating the price software developers can charge for their apps - the price must end in US$0.99 - and it charges the developers a 30 per cent commission on their products, which must be sold exclusively through the App Store.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

Apple lawyer Daniel Wall of San Francisco described the company as a "pipeline" that connects consumers with app developers and that it is app developers, not Apple, making the sale.

That's an important distinction because Supreme Court precedent says charges of unfair monopoly pricing must be brought by the "first buyers" in a chain of transactions.

But it didn't seem to satisfy liberal members of the court.

Advertisement
Advertise with NZME.

"The first sale is from Apple to the customer," said Justice Sonia Sotomayor, describing Apple's system as a "closed loop."

Wall countered that the first sale was between the app creator and Apple, when making pricing decisions.

Justice Elena Kagan was also unconvinced.

"When you're looking at the relationship between the consumer and Apple . . . there is only one step," she said.

Discover more

Airlines

Air NZ cuts spending by $30m, looking for more savings

27 Nov 01:03 AM
Business

Fonterra's Lukas Paravicini to step down

27 Nov 12:54 AM
Airlines

Passenger left stranded at Queenstown airport after cancellation

27 Nov 05:15 AM
Business

'Pretty gutted': FMA steps in as Kiwi investors fret over frozen funds

27 Nov 02:50 AM

"I mean, I pick up my iPhone. I go to Apple's App Store. I pay Apple directly with the credit card information that I've supplied to Apple. From my perspective, I've just engaged in a one-step transaction with Apple."

Justice Stephen Breyer, who taught antitrust law, said it was a simple and long-standing principle that those with a complaint sued the monopoly. But it was not just the court's liberals who seemed skeptical of Apple's argument.

Two conservatives, Justices Samuel Alito and Neil Gorsuch, questioned whether the court's 1977 ruling that established that only direct purchasers of a product can bring federal antitrust suits for overpricing has been superseded by the changing economy.

"I really wonder whether, in light of what has happened since then, the court's evaluation stands up," Alito said.

Justice Brett Kavanaugh said any ambiguity on the question of who should be able to sue should be settled by the broad language of the statute, which refers to "any person injured."

"That's broad," he said.

Advertisement
Advertise with NZME.

The Justice Department is supporting Apple, although Solicitor General Noel Francisco acknowledged that Apple exploits its powerful position in the market by imposing the 30 percent commission.

But, he said, "the only reason consumers are harmed here in the form of paying higher prices is because the app-makers decide to increase their prices in order to recoup that commission."

A ruling against Apple could add to pressure the company already is feeling because of disappointing iPhone sales. The company is emphasising services, so apps are critical for its future.

The company was briefly overtaken recently by Microsoft as the nation's most valuable company, something referred to by Washington lawyer David Frederick, who represented the consumers who want to sue.

"They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their App Store," said Frederick.

He is representing a group of consumers, led by Chicagoan Robert Pepper, that wants to show app prices would be lower if not for Apple's actions. Under federal law, proving such an allegation could be worth millions of dollars, because awards are tripled for antitrust violations.

Advertisement
Advertise with NZME.

"Apple directed anticompetitive restraints at iPhone owners to prevent them from buying apps anywhere other than Apple's monopoly App Store," Frederick said.

"As a result, iPhone owners paid Apple more for apps than they would have paid in a competitive retail market."

Chief Justice John Roberts was the most supportive of Apple in his questioning. Under Frederick's theory, he said, consumers are hurt by higher prices and app developers are hurt by having to agree to Apple's 30 per cent commissions.

In other words, "they're subject to suit on both sides of the market for a single antitrust price increase that they're alleged to have imposed," Roberts said.

Frederick agreed that "Apple is able to distort the market at the supply chain and at the retail chain for consumers."

But consumers, he said, "are suing only for the damages that we incur. That is the higher than what a competitive market price would be for apps."

Advertisement
Advertise with NZME.

When Alito asked if damages would be triple the 30 per cent commission Apple charges for each app sale, Frederick said he did not know and that a trial would be necessary to establish how consumers were harmed.

"What we know is what the price is in a noncompetitive market, and we will have to have experts that will assess what the damages would be in a competitive market," he said.

The case is Apple Inc. v. Pepper, and it will be decided sometime in 2019.

Save

    Share this article

Latest from Business

Premium
Property

Epsom's ex-Mercy Hospital vastly expanded in $150m project

13 May 02:00 AM
Business

Z to sell retail electricity brand Flick

13 May 12:09 AM
Premium
Opinion

Opinion: Nicola Willis should challenge the RBNZ on prudential rules

13 May 12:00 AM

“Not an invisible footprint”: Why technology supply chains need optimising

sponsored
Advertisement
Advertise with NZME.

Latest from Business

Premium
Epsom's ex-Mercy Hospital vastly expanded in $150m project

Epsom's ex-Mercy Hospital vastly expanded in $150m project

13 May 02:00 AM

It will be NZ's only private hospital with both intensive care and high-dependency units.

Z to sell retail electricity brand Flick

Z to sell retail electricity brand Flick

13 May 12:09 AM
Premium
Opinion: Nicola Willis should challenge the RBNZ on prudential rules

Opinion: Nicola Willis should challenge the RBNZ on prudential rules

13 May 12:00 AM
'Inspire the next generation': Boeing's new push in Kiwi schools

'Inspire the next generation': Boeing's new push in Kiwi schools

12 May 11:43 PM
Deposit scheme reduces risk, boosts trust – General Finance
sponsored

Deposit scheme reduces risk, boosts trust – General Finance

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • What the Actual
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven CarGuide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP