U.S. Supreme Court rules App Store customers are direct purchasers, can sue Apple
The U.S. Supreme Court ruled against one of the world’s most well-known technology companies Monday. You might be reading this story on a device that the company made.
In a 5-4 decision, the court ruled in Apple v. Pepper that people who purchase apps through Apple's App Store are direct purchasers and are able to sue the company over antitrust claims. Justice Brett Kavanaugh delivered the majority opinion and was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan.
Robert Pepper and three other plaintiffs filed an antitrust lawsuit against Apple in 2011, alleging the company had monopolized the market for iPhone apps. Apple controls which apps can be sold through its App Store and charges third-party developers a 30% commission on sales. Apple also does not allow app developers to sell iPhone apps to consumers outside of the App Store.
A U.S. District Court dismissed the case. Citing the Supreme Court's 1977 decision in Illinois Brick Co. v. Illinois, the district court ruled App Store customers could not sue for antitrust violations because they are purchasing their apps directly from the developers, not Apple. According to Illinois Brick, "only the overcharged direct purchaser, and not others in the chain of manufacture or distribution" are able to sue for antitrust violations.
The United States Court of Appeals for the 9th Circuit reversed the dismissal, ruling that consumers are purchasing from Apple, not the app developers, and are not barred from filing an antitrust lawsuit under Illinois Brick. The Supreme Court’s decision affirmed that reversal.
Justice Kavanaugh, in his opinion, wrote, “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.”
In a dissent, Justice Gorsuch wrote, “More than 40 years ago, in Illinois Brick Co. v. Illinois, 431 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.” Chief Justice Roberts and Justices Thomas and Alito joined the dissent.
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