Ius Omnibus v Apple
Ius Omnibus submitted on March 21st, 2022 to the Portuguese Competition, Regulation and Supervision Court, a popular action aimed at defending Portuguese consumers injured by Apple’s anticompetitive practices alleged in several lawsuits pending against Apple in other jurisdictions (including the United States of America, the United Kingdom and the Netherlands). Since July 10, 2008, Apple produces and markets devices that run exclusively on Apple’s operating system (iOS), specifically iPhones, iPads and iPods Touch. These devices are configured by Apple in such a way that consumers who purchase them have no choice but to use iOS and in-app applications (apps) and content for iOS. Apple has entered into contracts with third parties who develop apps and app content for iOS (“app developers” or “developers”) with anti-competitive terms and conditions, culminating in a 30% commission on each sale. The excessive value of this commission was passed on to consumers, including consumers residing in Portugal, who purchased applications and content within applications through the Apple App Store (passing on). This action aims to put an end to Apple’s anticompetitive practices that artificially preserve its monopoly on the provision of its services, which undermines the variety and quality of the applications and content available in these markets, and to compensate consumers for the increased prices they have paid through the Apple App Store.
Ius Omnibus is represented in this case by the law firm Sousa Ferro & Associados.
What is the object of this action?
It is a popular action for the defense of the diffuse and/or collective and homogeneous individual interests, filed by Ius Omnibus.
It is a claim to defend consumer rights, brought under the Popular Action Act (Law No. 83/95) and Article 19 of the Private Enforcement of Competition Act (Law No. 23/2018), for abuse of a dominant position, prohibited by Article 102 TFEU and Article 11 of the Competition Act, and for agreements restricting competition prohibited by Article 101 TFEU and Article 9 of the Competition Act.
What were the unlawful behaviors of Apple?
This is a mostly stand-alone private enforcement action under competition law, focused on anticompetitive behaviours alleged in several lawsuits pending against Apple in other jurisdictions, namely in the United States of America, the United Kingdom, and the Netherlands, where damages are sought for consumers and businesses.
Who is represented in this action?
Ius represents in this action all consumers, residents in Portugal, who downloaded (free or paid) iOS apps in the Portuguese Apple App Store and/or who have purchased iOS app content through Apple’s in-app payment mechanism, from July 10, 2008, unless they expressly indicate that they do not wish to be represented.
Consumers do not have to do anything to be represented and to be entitled to compensation if the action is successful. Any consumer who does not wish to be represented in this action may exercise the right to opt-out, communicating this intention to the Court. Consumers may also decide to intervene in the case in support of Ius Omnibus.
How were Portuguese consumers harmed by Apple’s unlawful practices?
Apple’s behaviour harmed Portuguese consumers in two ways:
i) compromising healthy competition and consumer protection in the Portuguese market, with multiple consequences on the quality, variety and innovation of products and services in these markets, and
ii) causing damage to consumers and causing an unjust enrichment at the expense of the unjustified impoverishment of the represented consumers.
What is being asked in this action?
Ius is asking the Court to:
a) declare Apple’s single and continuous infringement of the above-mentioned rules causing damages to the diffuse and/or collective interests of protection of the consumption of goods and services and competition (including a publication in national media);
b) order Apple to cease the anticompetitive practices in question;
iii) order Apple to pay a compensation to all Portuguese consumers who suffered damage.
How does the popular action and consumers compensation work?
The mass consumer compensation mechanism used here, provided for in the Portuguese rules of class action, has never been tested in practice until the very last step. However, according to the law, the following will happen if the court finds in favour of Ius Omnibus:
i) the Court will set the overall amount of damages to be paid by Apple to consumers, to be deposited in a compensation fund;
ii) the Court will designate an entity responsible for managing the compensation fund, including the receipt, management and payment of compensation to injured consumers;
iii) the Court will set a deadline for consumers to claim their share of the compensation and this information will be publicized in various ways;
iv) consumers will have to contact the entity that manages the compensation fund, as well as submit the court-decided evidence and the respective payment instructions, in order to receive their share of the compensation;
v) at the end of the legally established period, if a part remains of the global compensation that was not requested by consumers:
(i) that amount will be used to pay the expenses incurred by Ius Omnibus as a result of the action; and
(ii) what is left will be handed over to the Ministry of Justice, to be used to support access to law and justice, including the promotion of popular actions.
Do consumers need to contact the Court or Ius Omnibus?
Consumers do not need to contact the Court or Ius Omnibus, nonetheless it may in their interest to do so.
All consumers residing in Portugal, who, since 10 July 2008, have downloaded (free or paid) iOS apps from the Portuguese Apple App Store and/or who have purchased iOS app content through Apple’s in-app payments mechanism (i.e. whose Apple Play Store ID indicates as a country “Portugal”; and who have indicated in their Apple account history at least one download of iOS apps and/or one purchase of iOS app content).
If they want to be represented, they do not need to do anything else for now to be entitled to compensation if Ius Omnibus wins this claim. At the end of the process, if successful, they will have to contact the entity appointed by the Court to request compensation. However, if they wish to intervene in the action in support of Ius Omnibus they may do so, within the time limit established by the Court.
All consumers represented in this action are invited to contact Ius Omnibus at once, so that their data be registered and they be informed by Ius of all developments in this case, guaranteeing that they don’t miss the deadline to claim compensation, when that moment arrives.
How is this action funded?
Preparing an action of this nature in an adequate way, which allows for its success, is extremely costly, requiring the hiring of specialized lawyers and consultants. The action’s success is dependent on suitably handling very broad and technical facts and an extremely complex area of legal-economic knowledge, as well as reacting effectively to the vast financial and human resources which will be deployed by the other side, who benefits from profound information asymmetry.
The lack of financial resources by consumer protection associations is one of the, if not the main factor which accounts for why these legal mechanisms have not been more used so far. Indeed, in the absence of public funds which can be used to finance popular actions of this nature, it is impossible for an individual consumer or an association of consumers to take on the several hundreds of thousands of euros in costs which inevitably are required to pursue such an action.
The only way to pursue an action of this type it to resort to litigation funding. The practice of litigation funding is well established in other EU Member States and it is now beginning to be used in Portugal. As was noted by the UK’s Competition Appeal Tribunal in the Mastercard case, the action would have been impossible without funding, and so to refuse the possibility of such funding and the remuneration of the funder would be to deny access to justice and the exercise of the rights in question.
The present action is funded by Augusta, a litigation funder headquartered in the United Kingdom.
The funder assumes all costs of Ius Omnibus’ costs of the litigation and all its risks. It will only recoup its investment if the action is successful, if and to the extent the Court authorizes it, and if enough money remains in the global compensation fund, after distribution of compensations to consumers who request their share. Under these conditions, Ius Omnibus committed to returning to the funder the money it invested, plus a fair remuneration for the risk and time it was deprived of its capital, the proportionality of which will be assessed and controlled by the Court.
The funding agreement guarantees the prevention of money laundering and terrorism financing and the transparency of the source of funding before the Court.
This funding model ensures that consumers will not have to bear any of the costs of pursuing this action, and that any consumer who claims their share of the compensation at the end of the case will be entitled to 100% of his/her compensation.
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