Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Apple Traded Down on Monday

By Lou Whiteman – May 13, 2019 at 11:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Supreme Court is not going to allow Apple to avoid a lawsuit filed against its App Store.

What happened

Shares of Apple (AAPL -1.51%) traded down more than 5% on Monday as of noon EDT after the Supreme Court gave the green light for an antitrust suit against the company's App Store to proceed.

So what

Apple's App Store marketplace has long been a target of some consumers and developers because the company takes a commission of up to 30% on sales, the so-called "Apple Tax." A group of customers sued Apple in 2011, charging that the App Store is a monopoly, and in late November the case reached the U.S. Supreme Court to determine whether customers or app developers have standing in the suit.

App icons on and near a smartphone

Image source: Getty Images.

Apple had argued that only developers, and not users, should be able to bring a lawsuit, but the Supreme Court, in a 5-4 decision authored by Justice Brett Kavanaugh, ruled "Apple's line-drawing does not make a lot of sense, other than as a way to gerrymander Apple out of this and similar lawsuits."

Now what

It's worth noting that the Supreme Court did not rule Apple a monopoly, but rather allowed the suit to proceed. Larger app developers, including Netflix (NASDAQ: NFLX) and Spotify (NYSE: SPOT), are already taking steps to bypass the Apple Tax, but if the litigation is successful it could mean less revenue for Apple from smaller app developers as well.

Apple is putting a major emphasis on services to counter a slump in global smartphone shipments, and if the company is forced to lower that 30% commission that would be a step in the wrong direction. Given Apple's size and reach, it is well positioned to make a lot of money from its App Store regardless of how the litigation goes; however, following the Supreme Court ruling, the growth argument for Apple shares just became a little harder to make.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$150.43 (-1.51%) $-2.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.