Apple Sued for Allegedly Monopolizing App Store Marketplace

On Thursday, in the Northern District of California, SaurikIT filed a complaint against Apple Inc. alleging the tech giant has monopolized the markets for iOS app distribution and iOS app payment processing through anticompetitive conduct that shut out the competition, including the plaintiff, who had created an app store of their own.  

Apple’s App Store is “on all new iPhones and is the distribution channel through which users locate, download, and pay for applications (‘apps’) for their phone,” the plaintiff stated. According to the complaint, “Apple has wielded the power the App Store gives it over iOS app distribution ruthlessly.” The plaintiff noted that Apple’s App Store “is a huge business that generates over $50 billion annually, of which Apple generally takes a 30% cut.” SaurikIT contended that this is not the case with other app stores on other devices and device platforms.

The plaintiff claimed that “(h)istorically, distribution of apps for a specific operating system (‘OS’) occurred in a separate and robustly competitive market.” However, SaurikIT averred that Apple “began coercing users” to solely utilize its App Store for iOS apps and their distribution. Allegedly, Apple engaged in this endeavor for the economic opportunity that it provided after seeing the “economic promise that iOS app distribution represented” for other entities with their own iOS app distribution product or service, such as the plaintiff. Subsequently, Apple moved into this market and also entered the iOS app payment processing market.

SaurikIT’s Cydia, which was developed in 2008, was a once-popular iOS app distribution marketplace platform, allowing iOS users a place to discover and obtain a wide range of third-party iOS apps, such as games, productivity apps, and audiovisual apps like a video recorder because the original iPhone’s camera could only capture still photographs, the complaint said.

However, the plaintiff claimed that afterward, Apple incorporated these third-party app innovations directly into the iPhone or via apps. Moreover, the plaintiff added that Apple developed its App Store after Cydia was developed. Additionally, Apple allegedly “also recognized that it could reap enormous profits if it cornered this fledgling market for iOS app distribution, because that would give Apple complete power over iOS apps, regardless of the developer.”

Apple purportedly engaged in a campaign to eliminate iOS app distribution competition, which “has been successful and continues to this day.” According to the plaintiff, Apple was able to accomplish this by “tying the App Store app to iPhone purchases by preinstalling it on all iOS devices and then requiring it as the default method to obtain iOS apps, regardless of user preference for other alternatives.” The plaintiff added that iPhone users are contractually obligated to use its App Store and iOS app developers are required to use it as their only option for app payment processing.

Apple is accused of violating Section 2 of the Sherman Act for monopolization, attempted monopolization; Section 1 of the Sherman Act for unreasonable restraint of trade; and unfair competition.

The plaintiff has sought an award for damages and treble damages, an award for costs and fees, pre and post judgment interest, an injunction, declaratory and other relief.

SaurikIT is represented by Quinn Emanuel Urquhart & Sullivan, LLP.