By Peter Cruice
The Supreme Court is debating whether to hear Apple’s appeal of a lower court ruling in a class action lawsuit which found that Apple violated federal antitrust law under the Sherman Act. Apple charges developers 30% of the commissions grossed on the sales of Apple’s App Store content. Apple argued that the case should have been dismissed because the consumers are not charged the fee, since the developers pay the 30%. The Supreme Court has reached out to the Trump Administration for advice on the lawsuit. The Court generally does this in cases which can implicate significant federal interests. The Solicitor General, at the Court’s request, chooses whether to recommend granting or denying certiorari. The Supreme Court is more likely to grant review when they have reached out to the federal government for assessment.
Apple will only approve applications by developers if they agree to be distributed exclusively through the App Store, and also requires a 30% commission fee. This in turn makes the developers charge 30% more for the app than they normally would have to in order to offset the costs.
The federal antitrust suit originated in 2011, which was filed by several iPhone buyers in the California federal court. The suit alleges that Apple has created a monopoly on the sale of applications for the iPhone, and thus has magnified the prices. Apple believes that the plaintiffs do not have the requisite standing to proceed with the lawsuit and it should therefore be dismissed. The plaintiff’s claim that because they purchased the content at the higher prices which already includes the commission, they paid a surcharge. The U.S. Court of Appeals for the Ninth Circuit allowed for the class-action suit to go forward. They found that Apple is serving as the distributor, and sells directly to their consumers through their exclusive App Store, and thus receives a portion of each application sold.
In 1977, the Supreme Court in Illinois Brick Co. v. Illinois, said that only direct purchasers of goods and services, and not those who buy a product further downstream, may sue under federal antitrust law. The Ninth Circuit found for the plaintiffs since they purchased the content through Apple’s App store and thus were entitled to sue. The issue that the Supreme Court must address in this case is “whether consumers may sue anyone who delivers goods to them for antitrust damages, even where they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.” The Solicitor General has been invited to file a brief in which they would express the views of the United States.
I would expect certiorari to be granted in this case, Apple Inc., v. Pepper, and for the Supreme Court to find that Apple violated antitrust laws under the Sherman Act. It would set a poor public policy precedent if companies could monopolize and have the consumers bear the burden of unnecessary extra costs.
Student Bio: Peter Cruice is a 3L at Suffolk University Law School. He is currently a staff member of The Journal of High Technology. Peter holds a B.A. from Hobart College.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.