On May 13, 2019, the Supreme Court issued a 5–4 decision holding that iPhone owners who purchased applications through Apple’s App Store were “direct purchasers” who could sue Apple for monopolization.
- Plaintiffs sued in 2011, arguing that Apple has monopolized the retail market for the sale of apps and unlawfully used its monopoly power to charge consumers supracompetitive prices.
- Apple contended that the iPhone owners were not proper plaintiffs because they were not “direct purchasers” from Apple under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), which held that indirect purchasers may not sue antitrust violators under federal law.
- The district court agreed with Apple, holding that the iPhone owners were not direct purchasers from Apple because the app developers—not Apple—set the consumers’ purchase price. The Ninth Circuit reversed, concluding that the iPhone owners were direct purchasers under Illinois Brick because they purchased apps directly from Apple.
- The Supreme Court affirmed. The Court was not persuaded by Apple’s argument that Illinois Brickallows consumers to sue only the party who sets the retail price, regardless of who sells the good or service to the consumer. The Court concluded that this theory would draw an arbitrary line among retailers based on their financial arrangements with their manufacturers, permitting consumers to sue a retailer who marks up retail prices based on prices paid to the manufacturer, but prohibiting suit when the manufacturer sets the retail price and the retailer takes a commission on the sale.
- The Supreme Court’s ruling raises new liability concerns for tech companies that tout themselves as neutral marketplaces as opposed to direct sellers.
Read the Supreme Court’s decision in Apple, Inc. v. Pepper et al. here.