* Reprinted with permission from Global Competition Review. The full version of GCR’s US Courts Annual Review, published in July 2020, is available here.
The United States Supreme Court’s single antitrust case of the 2019 term, Apple, Inc v. Pepper upheld the long-standing and often criticized direct purchaser rule in the realm of sales through iPhone apps and other online sales platforms. The direct purchaser rule, established through the Supreme Court’s decisions in Hanover Shoe v. United Shoe Machinery Co and Illinois Brick Co v. Illinois limited standing to “the overcharged direct purchaser, and not others in the chain of manufacture or distribution.” In Apple v. Pepper, the Court grappled with these concepts in the virtual retail space where the class plaintiffs alleged that Apple’s 30 percent fee on sales of iPhone applications through its App Store represents a monopoly overcharge that should be recoverable by purchasers of the apps. The Court considered whether the developers of iPhone applications, rather than the consumers were more directly harmed by Apple’s alleged monopoly.
The decision makes clear that the Court views the fundamental purpose of Illinois Brick and its progeny as promoting ease and efficacy of antitrust enforcement by private plaintiffs. The majority rejected Apple’s rationales for denying the iPhone owners’ standing on the basis that adopting Apple’s reasoning would enable retailers to avoid consumer claims by restructuring its contractual arrangements with suppliers without altering the nature of the harm visited upon downstream consumers. The majority went so far as to assert that any ambiguity in Illinois Brick concerning consumers’ standing to sue an antitrust violator should be resolved in favor of the inclusive language of Clayton Act section 4. Even the dissent embraces this goal, although taking issue with the majority’s application of economic reasoning in promoting private antitrust enforcement.
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