SAN FRANCISCO (CN) — Finding fatal flaws in a lawsuit claiming Apple monopolizes iOS app distribution, a federal judge on Tuesday threw out a class action that sought to make the iPhone maker open up its App Store and stop charging annual fees to developers.
Lead plaintiff Coronavirus Reporter, an app designed to collect “biostatistical and epidemiological data,” joined with other app developers to sue the technology giant claiming antitrust violations this past July.
The developers claimed Apple used its monopoly power to exclude Coronavirus Reporter from the App Store to benefit its own “institutional partners.” Apple rejected the software under a policy that bans Covid-related apps unless they are submitted by a recognized health entity such as a government agency or medical institution. The developers said Apple used similar policies to exclude or suppress the rankings of other apps for anticompetitive reasons.
Coronavirus Reporter and its co-plaintiffs sought a preliminary injunction that would temporarily block Apple from keeping certain apps out of its App Store and charging developers a $99 yearly App Store submission fee.
In a 34-page ruling issued Tuesday, U.S. District Judge Edward Chen denied the motion for an injunction as moot after dismissing the lawsuit. Chen found the developers failed to adequately identify a market over which Apple exerts monopolistic control.
The developers described multiple markets in their complaint, including the “smartphone market,” “iOS institutional app market,” and the “national smartphone app distribution market.”
In subsequent briefs, the developers sought to clarify that Apple dominates two primary markets, defined as the “U.S. smartphone market” and “U.S. iOS smartphone market.” They also identified five downstream markets, including markets for wholesale app competition, iPhone apps, permission tokens to launch iOS apps, onboarding software and access to iOS users.
Chen concluded those market definitions were unclear and “failed to pass muster.”
“Missing from plaintiffs’ market definitions is the identification of any well-pleaded allegations that support the boundaries they seek to define,” Chen wrote.
Most of the markets identified are “single-brand markets” in which Apple is "inherently and necessarily" the only participant, Chen wrote. The judge said the developers offered no facts that would justify an “extremely rare” finding that a single-brand market gives rise to an antitrust claim.
“Plaintiffs fail to define that area of effective competition in which they compete,” Chen wrote. “They are not smartphone manufacturers. Nor do they provide any other basis for the court to find that the market of U.S. Smartphones is the ‘area of effective competition’ for plaintiffs’ claims.”
Chen compared the App Store to a newspaper that publishes advertisements. If a newspaper accepts some ads and refuses to print others, the rejected advertiser has not suffered an antitrust injury, the judge wrote. A true antitrust injury would look more like a newspaper barring advertisers to stop them from promoting a competing news service, he explained.
One of the plaintiffs in the case is Dr. Jeffery Isaacs, who created the apps “Caller-ID” and “WebCaller.” He claimed Apple lowered the ranking for his videoconferencing app WebCaller to suppress competition against its own FaceTime app, resulting in single-digit downloads for WebCaller, launched in 2019.
During a Nov. 4 hearing on the motion for an injunction, Isaacs, who represents himself, argued Apple is unlawfully controlling access to “180 million physical devices” that use iOS in the United States.
But Chen found Isaacs failed to show how App Store search rankings harm competition across the market since the “suppression” of one app necessarily raises the visibility of another.
On the claim that Apple rejected the Coronavirus Reporter app to benefit “large institutions and strategic partners” working to roll out their own Covid-related apps, Chen found the lawsuit lacked specific facts to back up that assertion.
“If Apple were to reject or suppress plaintiffs’ apps to diminish competition for Apple’s own apps or apps of other developers with whom Apple is conspiring, that might be deemed to inflict antitrust injury,” Chen wrote, adding the plaintiffs "fail to plausibly allege such conduct with any specificity.”
He said amending the complaint would be futile and ordered the case closed with judgment in favor of Apple.
In brief phone interviews, Isaacs and Coronavirus Reporter lawyer Keith Matthews said they were "baffled” by the ruling and intend to appeal to the Ninth Circuit.
“This is to us a clear case of the courts not enforcing the Sherman Act,” Isaacs said. “We view it as a very questionable decision that should not hold up on appeal.”
Matthews said the court should have at least allowed the case to move to the discovery phase so developers could dig up more evidence on Apple’s motives for rejecting his client’s app and others.
“That information lies with Apple,” Matthews said.
The New Hampshire-based attorney added that more than 30 countries have now introduced legislation seeking to rein in Apple’s allegedly anticompetitive rules for app developers.
“Most countries agree with us,” Matthews said. “The noose is tightening on Apple’s hold.”
Apple and its attorney Mark Perry of Gibson Dunn & Crutcher did not immediately return emails requesting comment Tuesday.
The ruling comes nearly three months after another federal judge in Oakland, California, ordered Apple to change its policies that prohibited developers from telling users how to sidestep the App Store and pay them directly for subscriptions and other services.
It also follows a settlement in another antitrust case in which Apple agreed to pay small developers $100 million and offer lower commission rates of 15% on App Store purchases for developers who make less than $1 million in annual revenue.
Follow @NicholasIovino
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