Supreme Court Rules Against Apple in Antitrust Case to Determine if App Store is Monopoly

The Supreme Court has ruled against Apple in an antitrust case claiming that the App store has created a monopoly over the sale of apps and has used the monopoly to charge consumers higher than the majority price. Justice Kavanaugh delivered the opinion of the Court that the plaintiffs are not barred from suing Apple under antitrust laws under the direct purchaser rule set forth in Illinois Brick Co. v. Illinois, 431 U.S. 720, 745-746 (1977). To view the Supreme Court’s decision, click here.  

In this case, Apple had argued that the rule set by the Court in Illinois Brick allows consumers to sue only the party who sets the retail price, which in this case was the app developers rather than Apple. However, the Court found that Apple had misconstrued the rule and found compelling instead that consumers had to purchase the apps directly from Apple and “there is no intermediary in the distribution chain between Apple and the consumer.” In contrast, in the case of Illinois Brick, the company manufactured and distributed product, which was sold to masonry contractors, and those masonry contractors sold the products to general contractors, who then in turn sold them to consumers, so there was a multi-level distribution structure. The Court found that the brightline test stated by Illinois Brick was to allow direct purchasers to sue but to bar indirect purchasers from filing suit, in order to ensure an “effective and efficient litigation scheme in antitrust cases.”

The decision was 5-4 with Justice Kavanaugh having the deciding vote. Justice Gorsuch wrote the dissent, arguing that the majority has replaced “a rule of proximate cause and economic reality with an easily manipulated and formalistic rule of contractual privity.” According to the dissent, “[unless] Congress provides otherwise, this Court generally reads statutory causes of action as “limited to plaintiffs whose injuries are proximately caused by violations of the statute.” In this case, the dissent contends that the developers–and not the plaintiffs– are the parties who would be directly injured by any “monopolistic overcharge.”

The Supreme Court’s decision allows the antitrust case against Apple to progress and increases the likelihood of future App Store business changes on the horizon such as cutting the commission rate charged to developers, allowing developers to collect the fees, or other fundamental model changes.

However, the decision may have other implications that go beyond just the App Store.  According to The Washington Post, Silicon Valley tech giants and an industry group called The App Association are raising concerns that this lawsuit may put other platform services at risk. Wired speculates that “a ruling in the plaintiff’s favor could have serious implications for other tech companies with similar business models,” citing Amazon in particular.  In the end, The Verge predicts that perhaps the most significant impact that this case will have is to “affect how much power consumers have over digital platforms,” ultimately forcing online stores to be “more accountable toward their users.”

The Silicon Valley Software Law Blog will continue following this case as it moves forward.