The iPhone users argued that there is no alternative place to buy an iPhone app, but that Apple takes a 30% commission on every sale, so therefore they are being overcharged.<doc-sep>Apple is being accused of using facial recognition software in its Apple Stores to arrest the wrong person for theft — a New York student who’s now suing Apple for $1 billion. And while Apple tells The Verge it doesn’t use facial recognition technology in its stores, the case is weird enough, and there’s enough wiggle room, that it’s not clear if that’s the whole truth. Ousmane Bah, 18, claims in a lawsuit that he was incorrectly identified as the robber in several Apple Store thefts across multiple states, but denies that he’s the person in the photo that accompanied the warrant for his arrest. Backed by surveillance footage and the testimony of a detective, district attorneys in New York and Boston have already dropped the charges against Bah, the lawsuit states. (He is still being accused of larceny in New Jersey in a pending case, according to the document.) An NYPD detective first noticed Bah “looked nothing like” the video suspect According to the lawsuit, NYPD detective John Reinhold first noticed that Bah “looked nothing like” the suspect in the surveillance video of a Manhattan Apple Store that was robbed. According to the lawsuit, the detective then explained that Apple’s security technology identifies suspects of theft using facial recognition technology. When we reached Reinhold on the phone for comment, he agreed that Apple doesn’t technically have facial recognition in its stores, but also that his statements as described in the lawsuit were correct. He declined to answer further questions, but it’s worth noting that the second defendant on the lawsuit, Security Industry Specialists, might explain the contradiction — it could have been that company which used facial recognition to analyze security footage after the fact, and possibly outside of Apple’s facilities. SIS Security doesn’t explicitly mention Apple as a client on its public website, but the third-party firm seems to have a long working relationship with Apple, and a 2016 employee handbook hosted at its website specifies Apple as a client. The lawsuit states that Bah was presented with a police report which claimed a SIS loss prevention employee caught him stealing Apple Pencils on security video from a Boston Apple Store. Allegedly, Apple initially claimed it didn’t have surveillance video, but eventually produced the footage, according to the lawsuit. Bah claims that he couldn’t have attempted the Boston theft because he’d been attending his senior prom in Manhattan at the time, but speculates the real thief could have stolen his information from a learner’s permit he’d previously lost — one which didn’t have a photo. The lawsuit tries to justify the $1 billion claim by alleging that Apple and SIS caused harm to Bah by their wrongful actions, including causing him to be arrested by the NYPD at his home in four in the morning, forcing him to miss school and a midterm exam, which then hurt his grades. The suit claims Apple was negligent, intentionally inflicted emotional distress, and defamed and slandered Bah, among other charges.<doc-sep>WASHINGTON—Consumers can sue Apple Inc. AAPL 0.34% for forcing them to buy apps exclusively from the tech giant, the Supreme Court ruled Monday, threatening billions of dollars in revenue that the company is counting on to make up for slowing iPhone sales. The antitrust suit alleges consumers pay inflated prices because Apple requires that all phone software be sold and purchased through the company’s App Store. Apps would be cheaper if software developers could sell them directly and bypass Apple as a middleman, the lawsuit alleges. Apple typically takes a 30% cut of every app it sells, and a 15% cut of subscriptions sold through the app store after subscribers’ first year. The consumer lawsuit also complains about other App Store rules that affect pricing, such as Apple’s requirement that every app price point end in “99 cents,” meaning developers can only set prices in one-dollar increments like $1.99, $2.99 and so forth. The Supreme Court’s decision focused on a preliminary issue in the case: whether consumers had a right to sue Apple over these practices. The court, in a 5-4 opinion by Justice Brett Kavanaugh, said they did. The court rejected Apple’s arguments that consumers can’t sue because it is the app developers, not the company, that set app prices. “If accepted, Apple’s theory would provide a road map for monopolistic retailers to structure transactions with manufacturers or suppliers so as to evade antitrust claims by consumers and thereby thwart effective antitrust enforcement,” Justice Kavanaugh wrote in a 14-page opinion. The case marked the first 5-4 decision written by Justice Kavanaugh, a Trump appointee who joined the court in October after a bitter confirmation battle. It also came with a twist. During the confirmation process, liberal critics accused Justice Kavanaugh of holding a cramped view of antitrust law, but Monday’s opinion was joined by four liberal justices—Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan—and articulated a view of the law that was more expansive than what Justice Kavanaugh’s four other conservative colleagues could accept. Justice Neil Gorsuch, President Trump’s other appointee, led the dissenters, saying the decision created a “senseless” rule that would be complicated to apply in practice, including in the Apple case, where lower courts would now have to probe how the iPhone maker’s rules might have affected the pricing decisions of app developers. Joining him in dissent were Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito. The high court didn’t address the merits of the plaintiffs’ claims. If they ultimately win, the case could change the way apps are sold and make Apple liable for significant monetary damages. The case could take one to two years, if not longer, to resolve, and several important legal issues must still be settled. An Apple spokeswoman said the company is confident it will prevail in the lawsuit. “The App Store is not a monopoly by any metric,” the spokeswoman said, adding that the company marketplace was “the safest, most secure and trusted platform for customers.” Newsletter Sign-up Technology A weekly digest of tech reviews, headlines, columns and your questions answered by WSJ's Personal Tech gurus. PREVIEW Mark Rifkin, a lawyer for the plaintiffs, said his clients were gratified the Supreme Court affirmed consumers could sue alleged monopolists. “No doubt the anticompetitive profit is a significant part of the price for iPhone apps,” he said. “The injury will surely be in the billions of dollars.” The court’s decision came on a day when Apple shares already were trading sharply lower because of rising U.S.-China trade tensions. Apple assembles most of its devices in China and counts on China for about one-fifth of its sales. Apple‘s stock fell 5.8% Monday to $185.72, while the broader market declined 2.4%. Monday’s ruling is the latest headache in Washington for Big Tech. President Trump and some lawmakers, including some who are running for the Democratic presidential nomination, have been vocal in criticizing dominant Silicon Valley firms, while the Federal Trade Commission recently launched a task force to take a closer look at potential anticompetitive behavior in the tech sector. The decision also signaled that online platforms can’t necessarily escape legal liability by arguing they are neutral middlemen between buyers and sellers. “The court is not just taking as dogma the traditional notion that these platforms have no direct sales relationship with consumers,” said Gene Kimmelman, president of Public Knowledge, a consumer advocacy group. App-store sales account for about 35% of Apple’s ballooning services business. Apple has pointed to that business as a bright spot in the face of declines in the number of iPhones sold. The services business grew by about 30% during the last fiscal year, to $39.75 billion. “Apple doesn’t have to all of a sudden change, but it’s another pressure point,” said Ben Schachter, an analyst with Macquarie Group. A final consumer victory in the lawsuit against Apple could force the company to reduce its commission on app sales and decrease its pretax earnings by as much as 15%, he said. The App Store offers developers access to 900 million iPhones world-wide and generally reaches a more affluent audience than rivals. Users of iPhones and iPads spent an estimated $46.6 billion on apps in 2018, almost double what was spent for apps from rival service Google Play, according to Sensor Tower, a market research firm. Apple has said it is entitled to take a share of app sales because it built the store and employs staff who review 100,000 submissions weekly for compliance with its rules around privacy and content. Apple’s rules differ somewhat from those of Alphabet Inc.’s Google, which developed the Android phone operating system. Google also takes a 30% cut of apps sold in its Google Play store, but Android phone users can buy apps elsewhere, including directly from the software maker in some cases. Apple’s practice of vetting apps and developers, as well as its prohibition of third-party app stores, has resulted in it having about one-tenth the amount of malware on its iOS operating system as Google does on the Android operating system, said JT Keating, vice president of product strategy at Zimperium, a mobile security company. Dow Jones & Co., publisher of The Wall Street Journal, has a commercial agreement to supply news through Apple services. Write to Brent Kendall at brent.kendall@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com<doc-sep>
The fallout from the U.S. Supreme Court's decision to allow an antitrust lawsuit against Apple over an alleged monopoly on iOS apps via the App Store won't immediately affect the company, suggests Morgan Stanley, but the legal threat could affect the stock value for years. On Monday, the U.S. Supreme Court voted 5 to 4 to permit a 2011 case arguing the App Store was a monopoly that led to artificially inflated prices to continue, and to sue Apple over perceived antitrust issues. As to be expected analysts are starting to offer their reactions to the news, with Morgan Stanley suggesting it could have far-reaching consequences for the rest of the tech industry, not just Apple. For the near term, there will be "no fundamental change to how Apple operates the App Store, nor is there any impact to Apple's profit and loss," writes Morgan Stanley in a note to investors seen by AppleInsider. The decision however will mean that Apple will face antitrust lawsuits from consumers and "potentially app developers," along with the added threat from complaints by Spotify to the European Commission, requiring Apple to plead its case in court. Referencing how Apple management and other storefronts, including Google for the Google Play Store, have "vigorously argued that their App Store business model has solid justification," the analysts point out the 30% fee Apple applies to most one-time App Store transactions is on a par with traditional retail and commercial IT distribution markets, which operate at a margin of 20% to 30%. The firm also points to how Netflix is pushing consumers to download the app for free but handle the signup and payment process itself, avoiding the fee. "It's highly likely that these eventual lawsuits take years to make their way through the US legal system, thus leaving a regulatory/legal overhang for the stock that first gained momentum when SCOTUS heard the case in late 2018," states Morgan Stanley. Analysts see a "range of potential outcomes" for the situation, but stresses that a final outcome won't be expected for years. A best-case scenario is for any antitrust lawsuits to be quashed in the court, maintaining the status quo and validating Apple's arguments. On a "bad but not the worst case" scenario, Apple loses lawsuits and pays monetary damages equivalent to the different between the price paid by consumers and the price determined by the courts to have been payable in a competitive market. The note references Apple's Supreme Court ruling for eBook pricing that involved a refund to consumers, of around $400 million, though uses it as an example of Apple paying a fine but retaining the business model. The last worst-case scenario would "entail Apple modifying the App Store business model, either by lowering the 30% take rate they charge or opening up the iOS platform to include other, competing App stores." The ruling would have far-reaching effects, with the Google Play Store likely to be equally affected by a decision, potentially opening Google up to lawsuits alleging anticompetitive practices, though the relatively small amount of revenue that Google earns from the store means there will be fewer stock implications if that happens. For game developers and publishers, there could be an upside, as a forced reduction of the 30% fee could help make apps more attractive, or simply provide more revenue.