U.S. Supreme Court, Apple Inc. v. Pepper, Docket No. 17-204, J. Kavanaugh

Consumer Law

Antitrust

Competition Law

Section 4 of the Clayton Act

Right to Sue

Direct Purchasers

Proximate Cause

Monop­sony Theory

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. The District Court agreed, but the Ninth Circuit reversed, concluding that the iPhone owners were di­rect purchasers because they purchased apps directly from Apple.

Held: Under Illinois Brick, the iPhone owners were direct purchasers who may sue Apple for alleged monopolization.

This straightforward conclusion follows from the text of the an­titrust laws and from this Court’s precedent. Section 4 of the Clayton Act provides that “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue.” 15 U. S. C. §15(a). That broad text readily covers consumers who purchase goods or services at higher-than-competitive prices from an allegedly monopolistic retailer. Applying §4, this Court has consistently stated that “the immediate buyers from the alleged anti­trust violators” may maintain a suit against the antitrust violators, Kansas v. UtiliCorp United Inc., 497 U. S. 199, 207, but has ruled that indirect purchasers who are two or more steps removed from the violator in a distribution chain may not sue. Unlike the consumer in Illinois Brick, the iPhone owners here are not consumers at the bot­tom of a vertical distribution chain who are attempting to sue manu­facturers at the top of the chain. The absence of an intermediary in the distribution chain between Apple and the consumer is dispositive.

(…) Longstanding goal of effective pri­vate enforcement and consumer protection in antitrust cases.

(…) Applying §4, we have consistently stated that “the immediate buyers from the alleged anti­trust violators” may maintain a suit against the antitrust violators. Kansas v. UtiliCorp United Inc., 497 U. S. 199, 207 (1990); see also Illinois Brick, 431 U. S., at 745–746. At the same time, incorporating principles of proximate cause into §4, we have ruled that indirect purchasers who are two or more steps removed from the violator in a distribution chain may not sue. Our decision in Illinois Brick established a bright-line rule that authorizes suits by direct purchasers but bars suits by indirect purchasers. Id., at 746.

(…) In this case, unlike in Illinois Brick, the iPhone owners are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain. There is no intermediary in the distribution chain between Apple and the consumer. The iPhone owners purchase apps directly from the retailer Apple, who is the alleged antitrust violator. The iPhone owners pay the alleged overcharge directly to Apple. The absence of an intermediary is dispositive.

(…) Thirty States and the District of Columbia filed an amicus brief supporting the plaintiffs, and they argue that C should be able to sue A in that hypothetical. They ask us to overrule Illinois Brick to allow such suits. In light of our ruling in favor of the plaintiffs in this case, we have no occasion to consider that argument for overruling Illinois Brick. (fn. 2).

(…) Consider a traditional supplier-retailer relationship, in which the retailer purchases a product from the supplier and sells the product with a markup to consumers. Under Apple’s proposed rule, a retailer, instead of buying the product from the supplier, could arrange to sell the prod­uct for the supplier without purchasing it from the supplier. In other words, rather than paying the supplier a certain price for the product and then marking up the price to sell the product to consumers, the retailer could collect the price of the product from consumers and remit only a fraction of that price to the supplier.

(…) Here, some downstream iPhone consumers have sued Apple on a monopoly theory. And it could be that some upstream app developers will also sue Apple on a monop­sony theory. In this instance, the two suits would rely on fundamentally different theories of harm and would not assert dueling claims to a “common fund,” as that term was used in Illinois Brick. The consumers seek damages based on the difference between the price they paid and the competitive price. The app developers would seek lost profits that they could have earned in a competitive retail market. Illinois Brick does not bar either category of suit.

(…) 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.” Areeda & Hovenkamp ¶345, at 179. The consumers here purchased apps directly from Apple, and they allege that Apple used its monopoly power over the retail apps market to charge higher-than-competitive prices. Our decision in Illinois Brick does not bar the consumers from suing Apple for Apple’s allegedly monopolistic conduct. We affirm the judgment of the U. S. Court of Appeals for the Ninth Circuit.

(U.S. Supreme Court, May 13, 2019, Apple Inc. v. Pepper, Docket No. 17-204, J. Kavanaugh)