Term: 2018
Docket: 17-204
Apple Inc. v. Pepper
- Pro
17-204 APPLE INC. V. PEPPER DECISION BELOW: 846 F.3d 313 CERT. GRANTED 6/18/2018 QUESTION PRESENTED: Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) and its progeny hold that the damages remedy in antitrust disputes belongs only to the immediate victims of the anticompetitive conduct ("direct purchasers"), and not to downstream parties claiming "pass-through" damages ("indirect purchasers"). Electronic marketplaces such as Apple's App Store present a new wrinkle on this doctrine, because the marketplace sponsor (e.g., Apple) interacts with and delivers goods "directly" to consumers, but as an agent on behalf of third party sellers. The district court dismissed this action under Illinois Brick, holding that consumer plaintiffs alleging monopolization of distribution services Apple provides to app developers were necessarily seeking pass-through damages. The Ninth Circuit reversed, holding-in an acknowledged split with the Eighth Circuit-that consumers can sue whoever delivers goods to them, even if they seek pass-through damages. The question presented is: Whether consumers may sue for antitrust damages anyone who delivers goods to them, even where they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense. LOWER COURT CASE NUMBER: 14-15000
In the case of Apple Inc. v. Pepper, iPhone users sued Apple for monopolizing the market for iPhone apps, leading to inflated prices. The plaintiffs claimed that they were direct purchasers from Apple and thus had standing under Section 4 of the Clayton Act to sue for damages caused by antitrust violations. However, Apple argued that only app developers - not consumers - could bring such a suit because it was these developers who paid commission fees directly to them while setting their own retail prices on App Store. In May 2019, in a 5-4 decision led by Justice Kavanaugh, the Supreme Court ruled against Apple stating that consumers did have standing as direct purchasers since they bought apps directly from App Store managed by them and not from third-party app developers.
In the dissenting opinion for the case of Apple Inc. v. Pepper, Justice Neil Gorsuch, joined by Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito, argued that the majority misapplied precedent from Illinois Brick Co. v. Illinois (1977). According to this precedent, only direct purchasers can sue a company for antitrust damages; indirect purchasers who have passed on an overcharge cannot do so because it would lead to complicated damages calculations and risk multiple recoveries against defendants for the same violation. Gorsuch contended that iPhone users are not direct customers of Apple's App Store but rather of app developers who set their own prices independently of Apple's commission fee structure. He further stated that allowing these consumers to sue as if they were direct customers could result in duplicative damage awards since both app developers (as actual direct customers) and iPhone users could potentially claim harm from alleged overcharges related to apps sold through Apple’s platform. The dissent also criticized the majority's attempt at distinguishing between a "monopolistic retailer" scenario versus a "two-sided transaction platform," arguing such distinction is irrelevant under existing precedents like Illinois Brick which focus solely on whether plaintiffs directly purchased goods or services from an alleged monopolist.
