Antitrust Update Blog

Supreme Court Grants Apple’s Petition To Take Major Antitrust Standing Case

The Supreme Court has granted certiorari and will hear, next term, an appeal from Ninth Circuit’s decision in In re Apple iPhone Antitrust Litigation, a case we previously reported on. In In re Apple iPhone, the Ninth Circuit held that because Apple sold iPhone apps directly to consumers, consumers are direct purchasers that have standing to sue Apple for alleged monopolization. Review of the decision could have the potential for major implications in the area of antitrust standing.

Background

In In re Apple iPhone, a class of consumer purchasers of iPhone apps alleged that Apple has monopolized the market for iPhone apps. The complaint alleges that Apple charged a 30 percent markup on all apps sold through the app store, and that the app store is the only place where iPhone apps can be sold. In the district court, Apple moved to dismiss the complaint on the ground that the consumers lacked antitrust standing. Apple argued that app developers—not Apple—were the ones selling the apps and that Apple merely collected money and “passed on” the allegedly supracompetitive price charged by the developers. According to Apple, the plaintiffs’ grievance is with the price set by the app developers, not with any action taken by Apple.

The consumers argued that they had standing because they directly purchased apps from Apple, not the app developers. Supporting plaintiffs’ argument were the facts that (1) they paid the full purchase price to Apple; (2) Apple sells the apps directly to customers; and (3) the app developers at no time directly sell the apps to customers or collect payments from customers. The Ninth Circuit agreed, and concluded the plaintiffs had standing.

The Cert Petition and Opposition

Last summer, Apple petitioned the Supreme Court to review the Ninth Circuit’s decision and the plaintiffs opposed.  Apple’s cert petition, and the consumers’ opposition, frame the case differently and dispute the policy implications of this case.

Factually, Apple and the consumers take very different views of who the victims are in this case.  As framed by Apple, the consumers do not have standing because the consumers allege that Apple charges excessive commissions to the developers, which only indirectly inflates the prices consumers pay. The consumers counter that they are the only ones who paid Apple, so they alone bore the supracompetitive prices and were directly harmed. The consumers highlight their allegations that the developers made no payment to the alleged monopolist, Apple (other than a one-time registration fee).

Apple and the consumers also disagree about the importance of this case.  Apple contends that the questions presented in this case are of national importance and that it is critical that the Supreme Court provide guidance on business models involving electronic marketplaces. The consumers, for their part, downplay both the novelty of this case and its importance.

The SG Weighs In and the Supreme Court Grants Certiorari

The Supreme Court called for the views of the Solicitor General and the SG’s brief encouraging the Court to take the case may have been the deciding factor in the Court’s decision to hear the case.

The SG agreed with Apple that the Ninth Circuit misapplied Illinois Brick and that this issue will grow in importance “as commerce continues to move online.” The SG contended that the consumers do not have standing to sue Apple, who is merely alleged to have passed on the prices set by the app developers.

Earlier this summer, the Supreme Court granted Apple’s cert petition.  While no grant of certiorari is guaranteed, this grant is not too surprising, as Apple and the SG framed the case as important and applicable to online marketplaces in general. Moreover, the Ninth Circuit recognized that its decision created a circuit split with the Eighth Circuit Ticketmaster case, which held that antitrust claims against the alleged monopolist, Ticketmaster, belonged to the concert venues, not to the consumers who purchased tickets.

The Supreme Court will hear arguments in the case no sooner than November and will issue a decision by next June.  The decision figures to add clarity to the Supreme Court’s 40-year-old Illinois Brick standing doctrine, as it applies to online sellers and distributors. We will continue to monitor the case and report on developments.