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Apple v. Pepper

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Supreme Court of the United States
Apple v. Pepper
Term: 2018
Important Dates
Argument: November 26, 2018
Decided: May 13, 2019
Outcome
Affirmed
Vote
5-4
Majority
Kavanaugh
Concurring
Ginsburg, Breyer, Sotomayor, and Kagan
Dissenting
Roberts, Thomas, and Alito

Apple v. Pepper is a case that was decided by the Supreme Court of the United States on May 13, 2019. The case was argued before the court on November 26, 2018. It came came on a writ of certiorari to the United States Court of Appeals for the 9th Circuit.[1][2]

In a 5-4 opinion, the court ruled that those who purchase apps through Apple's App Store are direct purchasers and can therefore sue Apple for allegedly monopolizing the market and increasing prices.[3]

HIGHLIGHTS
  • The case: Robert Pepper and other plaintiffs filed an antitrust lawsuit against Apple Inc., alleging that Apple was monopolizing the market for iPhone apps. Apple controls which apps can be sold through its App Store and keeps 30 percent of sales from apps developed by third-party developers that are sold in the App Store. The district court dismissed the case, ruling that consumers of iPhone apps are purchasing directly from app developers, not Apple, and therefore could not sue for antitrust violations according to precedent from a 1977 U.S. Supreme Court ruling. The Ninth Circuit Court reversed the dismissal, ruling that consumers are purchasing from Apple, not the app developers.
  • The issue: Whether consumers may sue for antitrust damages anyone who delivers goods to them, even where they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.[4]
  • The outcome: Respondents, who purchased apps for their iPhones through Apple’s App Store, were direct purchasers from Apple under Illinois Brick Co. v. Illinois and may sue Apple for allegedly monopolizing the retail market for the sale of iPhone apps.[5]


    • You can review the lower court's opinion here.[5]

    Timeline

    The following timeline details key events in this case:

    • May 13, 2019: Case decided, affirmed in a 5-4 vote
    • November 26, 2018: Oral argument
    • June 18, 2018: U.S. Supreme Court agreed to hear case
    • August 2, 2017: Petition filed with U.S. Supreme Court
    • January 12, 2017: The Ninth Circuit Court reversed the district court's "dismissal for lack of statutory standing of an antitrust complaint alleging that Apple, Inc., monopolized and attempted to monopolize the market for iPhone apps."[5]

    Background

    Robert Pepper, Stephen H. Schwartz, Edward W. Hayter, and Eric Terrell filed an antitrust lawsuit against Apple Inc., alleging that Apple was monopolizing the market for iPhone apps. Apple controls which apps can be sold through its App Store and keeps 30 percent of sales from apps developed by third-party developers that are sold in the App Store. Apple also does not allow app developers to sell iPhone apps to consumers outside of the App Store.[5]

    The district court dismissed the case, ruling that consumers of iPhone apps are purchasing directly from app developers, not Apple, and therefore could not sue for antitrust violations according to precedent from the 1977 U.S. Supreme Court ruling in Illinois Brick Co. v. Illinois. According to Illinois Brick, "only the overcharged direct purchaser, and not others in the chain of manufacture or distribution" are able sue for antitrust violations.[6]

    The Ninth Circuit Court reversed the dismissal, ruling that consumers are purchasing from Apple, not the app developers, and therefore are not barred from filing an antitrust lawsuit under Illinois Brick.[5]

    Questions presented

    The petitioner presented the following questions to the court:[4]

    Questions presented:
    • Whether consumers may sue for antitrust damages anyone who delivers goods to them, even where they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.

    Outcome

    In a 5-4 opinion, the court held that people who purchase apps through Apple's App Store are direct consumers and can therefore sue Apple for having a monopoly in the market and increasing prices. Brett Kavanaugh delivered the majority opinion and was joined by Ruth Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

    Opinion

    In his opinion, Kavanaugh wrote,[3]

    “ A claim that a monopolistic retailer (here, Apple) has used its monopoly to overcharge consumers is a classic antitrust claim. But Apple asserts that the consumerplaintiffs in this case may not sue Apple because they supposedly were not “direct purchasers” from Apple under our decision in Illinois Brick Co. v. Illinois, 431 U. S. 720, 745–746 (1977). We disagree. The plaintiffs purchased apps directly from Apple and therefore are direct purchasers under Illinois Brick. At this early pleadings stage of the litigation, we do not assess the merits of the plaintiffs’ antitrust claims against Apple, nor do we consider any other defenses Apple might have. We merely hold that the Illinois Brick direct-purchaser rule does not bar these plaintiffs from suing Apple under the antitrust laws. We affirm the judgment of the U. S. Court of Appeals for the Ninth Circuit.[7] ”
    —Brett Kavanaugh (2019)[3]

    Dissenting opinion

    Neil Gorsuch authored the dissenting opinion and was joined by John Roberts, Clarence Thomas, and Samuel Alito.

    In his dissenting opinion, Gorsuch wrote,[3]

    “ More than 40 years ago, in Illinois Brick Co. v. Illinois,n431 U. S. 720 (1977), this Court held that an antitrust

    plaintiff can’t sue a defendant for overcharging someone else who might (or might not) have passed on all (or some) of the overcharge to him. Illinois Brick held that these convoluted “pass on” theories of damages violate traditional principles of proximate causation and that the right plaintiff to bring suit is the one on whom the overcharge immediately and surely fell. Yet today the Court lets a pass-on case proceed. It does so by recasting Illinois Brick as a rule forbidding only suits where the plaintiff does not contract directly with the defendant. This replaces a rule of proximate cause and economic reality with an easily manipulated and formalistic rule of contractual privity. That’s not how antitrust law is supposed to work, and it’s an uncharitable way of treating a precedent which— whatever its flaws—is far more sensible than the rule the Court installs in its place.[7]

    		”
    —Neil Gorsuch (2019)[3]

    Text of the opinion

    Read the full opinion here.

    Audio

    • Audio of oral argument:[8]

    Transcript

    • Read the oral argument transcript here.

    See also

    External links

    Footnotes

    1. ↑ The Verge, "Supreme Court says Apple will have to face App Store monopoly lawsuit," May 13, 2019
    2. ↑ Supreme Court of the United States, "17-204 Apple v. Pepper," accessed October 26, 2018
    3. ↑ 3.0 3.1 3.2 3.3 3.4 Supreme Court of the United States, "Apple Inc. v. Pepper," May 13, 2019
    4. ↑ 4.0 4.1 Supreme Court of the United States, "17-204 Apple v. Pepper QPReport," accessed October 26, 2018
    5. ↑ 5.0 5.1 5.2 5.3 5.4 SCOTUSblog, "Apple v. Pepper," accessed October 26, 2018
    6. ↑ Oyez, "Apple v. Pepper," accessed October 26, 2018
    7. ↑ 7.0 7.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    8. ↑ Supreme Court of the United States, Apple v. Pepper, argued November 26, 2018
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