Apple has managed to attract a class-action lawsuit for allegedly overcharging consumers for its iCloud storage plans and for “rigging the competitive playing field” so that iCloud could be the dominant cloud storage option for Apple users by creating “surgical technological restraints,” according to the lawsuit obtained by Bloomberg Law.
“Apple device holders are given 5GB of free iCloud storage space, but as Apple’s iCloud revenues attest, most users find this insufficient for their storage needs and purchase a supplemental iCloud storage plan,” reads the lawsuit.
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Apple offers six storage plans with prices that range from 99 cents a month to $59.99 a month, depending on how much more storage a customer needs to back up their files.
According to the lawsuit, which was filed on March 1, “Apple nevertheless arbitrarily requires that its mobile device holders use iCloud to back up certain file types—mainly, device settings as well as apps and apps data (“Restricted Files”).”
It claims that backing up restricted files are “significant” because it gives users the ability to “restore the look and feel” of their device when they either reset it or purchase a new one.
“Apple imposes what economists refer to as a 'requirements' tie,” reads the lawsuit. “That is, if iPhone or iPad holders wish to use cloud storage for Restricted Files—and most do— iCloud is their only option for fulfilling that requirement. And for anyone requiring more than 5GB of storage, which is to say most Apple customers, they must pay for it.”
The lawsuit also labels Apple’s alleged practices as “anticompetitive,” and claims that because it restricts competition in the cloud storage market, it is able to mark up its iCloud prices which it alleges is “grossly above marginal costs.”
“Apple has marked up its iCloud prices to the point where the service is generating almost pure profit,” reads the lawsuit.
According to analysts from Wedbush Securities, 20% of Apple’s services revenue, which makes the company about $80 billion a year, comes from iCloud, which brings in roughly $16 billion in annual revenues.
The plaintiff in the lawsuit is seeking “damages, restitution, injunctive relief, and all other relief available to end Apple’s anticompetitive practices.”
This is not the first time Apple has landed in hot water over its alleged “anti-competitive” practices. The lawsuit was filed right before Apple was issued a fine of €1.84 billion from the European Commission on March 4 for “abusing its dominant position on the market for the distribution of music streaming apps” through its App Store.
The commission claims that Apple banned music streaming app developers from making users fully aware of cheaper and alternative music subscription services outside of the App Store leading to users paying “significantly higher prices” for music streaming services.
Apple plans to appeal the Commission's fine.
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