The company behind Cydia, an iPhone app store that was launched before Apple's own app store, has sued Apple, arguing that Apple has monopolized the market for iOS app stores and has violated antitrust law in the process.
When the iPhone was introduced in 2007, there was no mechanism to run third-party software natively. Instead, Steve Jobs encouraged developers to create web apps that run in the iPhone's Safari browser.
But people soon figured out how to jailbreak iPhone and started building iPhone apps without Apple's help. When software developer Jay Freeman saw an opportunity, he created a program called Cydia that made it easy for users to download and install native iPhone apps – an app store before the app store.
A few months later, Apple launched its own official app store. Since then, Apple has tried to force Cydia and other unauthorized app stores out of the market with technological and contractual restrictions. For example, anyone who wants to sell software through the official app store must agree not to sell the software in competing app stores such as Cydia.
In a lawsuit filed in California federal court on Thursday, the company behind Cydia argued that it was an apparent antitrust violation. "Apple wrongly acquired and maintained monopoly power in the market for the distribution of iOS apps and in the market for payment processing for iOS apps," the lawsuit said.
The lawsuit highlights a number of ways that have harmed consumers and the app industry. Most obviously, Apple charges 30 percent commission on most app purchases – down recently to 15 percent on apps that make less than $ 1 million. Cydia argues that Apple cannot get away with such high fees in a competitive market.
Cydia also argues that Apple takes a long time to approve apps and limits direct communication between developers and their users. Again, Cydia argues that more competition would force Apple to improve its game.
An Apple spokeswoman made no record comment on the lawsuit. However, we can get an idea of the company's likely response by looking at Apple's August filing in Epic's antitrust lawsuit. In this case, Apple argued that its App Store strategy did not violate antitrust laws because it "increased production exponentially, reduced prices and dramatically improved consumer choice".
Apple also argued in the Epic case that there was no separate "iOS App Distribution Market". Rather, in Apple's view, the iPhone and its App Store are two parts of a single product. In Apple's view, antitrust law gives Apple wide flexibility in deciding how to monetize this platform.
This is a recurring theme in cartel cases related to the technology sector. In the 1990s, the US government sued Microsoft for tying its operating system to its web browser. Microsoft insisted that Internet Explorer was not a separate product, but a new feature of Windows. A court dismissed Microsoft's arguments, but that judgment was partially overturned on appeal. The case was settled shortly after George W. Bush took office, and Microsoft agreed to make modest changes to its business model.
Since then, there have been few successful antitrust lawsuits challenging this type of integration between technology products. And Apple points out that it is nowhere near the only hardware manufacturer that tightly controls third-party software on its platform. For example, Apple argues that Cydia's argument implies that Sony, Microsoft, and Nintendo are also monopolists as they try to control who makes software for their game consoles.