Law School Case Brief
Apple Inc. v. Pepper - 139 S. Ct. 1514 (2019)
The U.S. Supreme Court's precedent in Illinois Brick established a bright-line rule where direct purchasers may sue antitrust violators from whom they purchased a good or service. Illinois Brick was not based on an economic theory about who set the price. Rather, Illinois Brick sought to ensure an effective and efficient litigation scheme in antitrust cases. To do so, the Court drew a bright line that allowed direct purchasers to sue but barred indirect purchasers from suing. When there is no intermediary between the purchaser and the antitrust violator, the purchaser may sue. The Illinois Brick bright-line rule is grounded on the belief that simplified administration improves antitrust enforcement. To the extent that Illinois Brick leaves any ambiguity about whether a direct purchaser may sue an antitrust violator, the court should resolve that ambiguity in the direction of the statutory text. And under the text, direct purchasers from monopolistic retailers are proper plaintiffs to sue those retailers.
Apple Inc. sells iPhone applications, or apps, directly to iPhone owners through its App Store--the only place where iPhone owners may lawfully buy apps. Most of those apps are created by independent developers under contracts with Apple. Apple charges the developers a $99 annual membership fee, allows them to set the retail price of the apps, and charges a 30% commission on every app sale. Respondents, four iPhone owners, sued Apple, alleging that the company has unlawfully monopolized the aftermarket for iPhone apps. Apple moved to dismiss, arguing that the iPhone owners could not sue because they were not direct purchasers from Apple under Illinois Brick Co. v. Illinois, 431 U. S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707. The district court agreed, but the United States Court of Appeals for the Ninth Circuit reversed, concluding that the iPhone owners were direct purchasers because they purchased apps directly from Apple.
Were the plaintiffs direct consumers to be proper plaintiffs in an antitrust suit?
The cellphone owners were proper plaintiffs for an antitrust suit, which alleged that the corporation exercised monopoly power in the retail market for the sale of applications (hereinafter, apps) and had unlawfully used its monopoly power to force cellphone owners to pay the corporation higher-than-competitive prices for the apps, because, under Illinois Brick, the owners were direct purchasers who might have sued the corporation for alleged monopolization since the owners bought the apps directly from the corporation. Ever since Congress overwhelmingly passed and President Benjamin Harrison signed the Sherman Act in 1890, “protecting consumers from monopoly prices” has been “the central concern of antitrust.” The consumers here purchased apps directly from Apple, and they alleged that Apple used its monopoly power over the retail apps market to charge higher-than-competitive prices.
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