Apple, Inc. v. Pepper
139 S. Ct. 1514
| SCOTUS | 2019Background
- Apple operates the exclusive App Store for iPhone apps; independent developers supply most apps but distribution to consumers occurs only through Apple.
- Developers pay a $99 annual fee, set retail prices (subject to a $0.99 terminal rule), and Apple takes a 30% commission on each sale.
- Four iPhone owners sued Apple alleging Apple monopolized the retail market for apps and caused consumers to pay supracompetitive prices.
- Apple moved to dismiss under Illinois Brick, arguing consumers are indirect purchasers because developers set prices, so only developers (or upstream parties) can sue for damages.
- The District Court dismissed; the Ninth Circuit reversed, holding consumers who bought directly from Apple are direct purchasers and may sue. The Supreme Court granted certiorari.
- The Supreme Court affirmed the Ninth Circuit, holding the consumers were direct purchasers under Illinois Brick and may sue Apple; the Court did not decide the merits of the monopoly claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consumers who bought apps through Apple are "direct purchasers" entitled to sue under Illinois Brick | Consumers bought apps directly from Apple and paid the alleged overcharge to Apple, so they are direct purchasers | Apple: Illinois Brick forbids suits by plaintiffs who did not set the retail price; developers set prices, so consumers are indirect purchasers | Consumers are direct purchasers because there is no intermediary between Apple (the alleged monopolist) and the consumers; Illinois Brick's direct-purchaser rule allows their suit |
| Whether Illinois Brick should be read to depend on who sets retail price (markup vs commission) | The form of upstream arrangements is immaterial; consumers who paid an overcharge to a monopolistic retailer can sue regardless of whether retailer keeps a markup or a commission | Apple: If developers set prices and Apple merely takes a commission, plaintiffs are indirect and Illinois Brick bars their suit | Rejected Apple’s "who sets the price" rule as contrary to statute, precedent, and common-sense economics; form over substance would enable evasion of antitrust enforcement |
| Whether Illinois Brick rationales (efficiency of enforcement, damages complexity, duplicate recovery) counsel against allowing consumers to sue here | Allowing consumer suits promotes private enforcement and consumer protection; the Illinois Brick rationales are not implicated because consumers paid the overcharge directly to Apple | Apple: Barring consumers avoids complex pass-on inquiries, duplicative claims, and promotes effective enforcement by upstream parties | Court: Illinois Brick’s bright-line rule already resolves the issue; the rationales do not justify barring direct purchasers here (no passed-through overcharge, and damages/duplication concerns are manageable) |
| Whether recognizing consumer suits will generate unmanageable damages apportionment or conflicting claims with developers | Consumers seek recovery for the overcharge they paid; developers (if they sue) would have different theories (monopsony) and not necessarily claim the same fund | Apple: Developers initially bore the commission; if consumers sue, apportionment and duplicative recovery problems will follow | Court: Overcharge was paid to Apple and not passed on; multiple suits may be based on different theories and do not necessarily create the conflicting-claims problem Illinois Brick feared |
Key Cases Cited
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (established the direct-purchaser rule barring pass-on damages claims by indirect purchasers)
- Kansas v. UtiliCorp United Inc., 497 U.S. 199 (1990) (reaffirmed that immediate buyers from alleged violators may sue)
- Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968) (rejected defendant's pass-on defense; discussed proximate-causation limits on damages)
- Associated Gen. Contractors of Cal. v. Carpenters, 459 U.S. 519 (1983) (discussed proximate-cause limitations when construing statutory causes of action)
- Loeb Industries, Inc. v. Sumitomo Corp., 306 F.3d 469 (7th Cir. 2002) (illustrative application of Illinois Brick’s rule in a two-step distribution chain)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (proximate-cause framework for determining who may sue under a statutory cause of action)