Apple challenged on app fees

Apple will head to the US Supreme Court on Monday to defend its practice of pricing for iPhone Apps – the Court will listen to arguments which state that Apple is using its market dominance to increase prices. The outcome of the hearing could mean that Apple’s 30% commission cost for app sales on the App Store is also brought further under the microscope. The App Store has already faced calls for its 30% commission fee to be re-examined.

According to a report by Bloomberg, the US Supreme Court Case all rests on how a transaction is viewed when a user makes a payment to the App Store to download an App. Apple says that the transaction isn’t as simple as it receiving the funds with its stance being that it is in effect a middleman, acting as a conduit linking app developer and the app user. The Federals Appeals court disagrees and permitted the case to move to the US Supreme Court. Apple’s commission is key because only direct purchases are eligible to collect damages if they have been overcharged.

The Computer & Communications Industry Association has thrown its backing behind Apple and says that if the case doesn’t go its way, all types of online marketplaces will be vulnerable. Those against Apple say its dominance makes it unique because it controls what can be sold on the App Store, gives developers little freedom on pricing and advises uses that it’s the only place they can get the app. When a purchase is made, Apple retains 30% of the sales fee as a commission and send the 70% balance to the developer.

According to Apple, the commission fee is paid by developers not the user, so it can’t be held responsible for over-charging and made to pay the damages to the consumer.

This is quite a significant case for Apple – and important to the app industry and app developers as a whole – because it challenges the commission payment structure. Apple’s dominance and operation of the App Store is also being put under a spotlight. The outcome could result in the commission being lowered – making App Store sales more lucrative for developers who would then end up pocketing more of the purchase price for their creations.

A total of 31 US states back the consumer right rather than Apple and want the Supreme Court to allow the case to go ahead.