Apple Inc. v. Pepper

With the introduction of the iPhone in 2007, Apple Inc. also provided the App Store marketplace that allows third-party developers to provide mobile apps to iPhone users. Apps can be provided for free or at a price, with Apple taking a 30% cut of any revenue. Apple's approach has been criticized, as its terms and conditions for developers to use the App Store prevent them from selling their apps on other marketplaces, and Apple's consumer warranties strongly discourage the use of installing apps in other ways.[lower-alpha 1] Some saw these conditions enabling Apple to effectively create a monopoly for app distribution, artificially forcing developers to raise costs of apps to cover Apple's fee. Apple has asserted that it has not violated antitrust laws as it considers itself a reseller of apps, its 30% fee a commission on the sale of those apps.[2]

Apple filed a petition for writ of certiorari to the Supreme Court in August 2017, posing the question "whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense". The US Government filed an amicus brief in support of Apple, arguing that the Ninth Circuit in reversing the District Court's ruling, went against the precedent established by the Supreme Court in Illinois Brick. The Court agreed to hear the case in June 2018.[9] Oral arguments were held on November 26.[10][11] Court observers stated that the four liberal Justices were joined by three of the conservative ones, Justices Alito, Gorsuch, and Kavanaugh, as to side with consumers on the question of standing.[12] Justice Sonia Sotomayor stated that Apple's practice creates a closed loop that impacts the price paid by consumers.[13] Justice Neil Gorsuch considered that the prior decision from Illinois Brick may need to be overturned at the federal level, as at least 30 states have rejected the Illinois Brick doctrine.[13]

The Court issued its 5–4 decision on May 13, 2019, affirming the Ninth Circuit's decision that consumers were "direct purchasers" of apps from Apple's store and had standing under Illinois Brick to sue Apple for antitrust practices.[14] Justice Brett Kavanaugh, writing for the majority, stated that under the test of Illinois Brick, consumers were directly affected by Apple's fee and were not secondary purchasers; that consumers could sue Apple directly since it was Apple's fee that affected the prices of the apps; and that while the structure for any damages that consumers may win in the continuing suit may be complicated, that is not a factor to determine the standing of the suit. The Court stated that Apple's interpretation of Illinois Brick "did not make a lot of sense" and served only to "gerrymander Apple out of this and similar lawsuits."[15] Disagreeing with Apple's reasoning, the Court explained that if adopted, it would "directly contradict the longstanding goal of effective private enforcement and consumer protection in antitrust cases." Kavanaugh was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan. The decision remanded the class-action case to continue in lower courts but did not rule on any of the antitrust factors otherwise at the center of the case.[15]

• Text of Apple Inc. v. Pepper, No. 17-204, 587 U.S. ___ (2019) is available from:  Justia  Oyez (oral argument audio)  Supreme Court (slip opinion)