May 14, 2019
Decided May 13, 2019
Apple, Inc. v. Pepper, No. 17-204
Yesterday, the Supreme Court held 5-4 that iPhone users are “direct purchasers” from Apple when they purchase apps on Apple’s App Store, and thus have standing to sue Apple for alleged monopolistic overcharges under Section 2 of the Sherman Act, even though third-party app developers pay for the allegedly monopolized app-distribution services and set the prices for apps charged to iPhone users.
A group of iPhone users sued Apple for damages under Section 2 of the Sherman Act, alleging that Apple monopolized the retail market for the sale of apps and unlawfully used its monopoly power to charge consumers higher-than-competitive prices. According to plaintiffs, Apple requires them to purchase iPhone apps from developers exclusively through Apple’s App Store. Although app developers independently set the retail price of each app, Apple charges developers a yearly fee to place their apps in the App Store, along with a commission on each sale. The iPhone users alleged that this arrangement caused them to pay inflated prices for apps and sought antitrust damages from Apple. Under Illinois Brick Co. v. Illinois, 431 U.S. 720, 729 (1977), only direct purchasers, “and not others in the chain of manufacture or distribution,” can sue for damages under federal antitrust law. The district court dismissed the action under Illinois Brick, reasoning that the app developers were the direct purchasers of Apple’s app-distribution services because they paid the annual fees and commissions charged by Apple. The Ninth Circuit reversed, holding that the iPhone users could sue Apple for allegedly monopolizing and attempting to monopolize the sale of iPhone apps.
“Whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.”
Yes. Illinois Brick does not bar plaintiffs’ claim for alleged monopoly overcharge damages because iPhone users are properly regarded as direct purchasers.
“The [plaintiffs] pay the alleged overcharge directly to [defendant]. The absence of an intermediary is dispositive. Under Illinois Brick, the [plaintiffs] are direct purchasers … and are proper plaintiffs to maintain this antitrust suit.”
Justice Kavanaugh, writing for the majority
What It Means:
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Appellate and Constitutional Law Practice
|Allyson N. Ho
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|Theodore J. Boutrous, Jr.
Related Practice: Antitrust and Competition
|Scott D. Hammond
|M. Sean Royall
|Daniel G. Swanson