Joe Hallman, MJLST Staffer
Apple Inc. is again under legal fire as allegations of antitrust violations against the tech giant have made it to the Supreme Court. The Court recently heard oral arguments in November of 2018 in Apple Inc. v. Pepper. Plaintiffs in the case are a class of iPhone users, and allege that Apple’s App Store, the only forum for iPhone users to download apps, creates an illegal monopoly. Apple collects 30% of all sales of apps made via its App Store; Plaintiffs argue that this is an overcharge made possible only by the unlawful monopoly. Apple claims in response that its App Store is not an illegal monopoly and that, even if it was, Apple is not a seller of goods but simply facilitates a marketplace.
The question before the Supreme Court is not whether Apple actually did violate antitrust laws, but whether iPhone users would even be able to recover damages from Apple if it did. The Court seeks to answer this question in light of Supreme Court precedent stemming from a 1977 decision in Illinois Brick Co. v. Illinois, in which the Court held that only direct, rather than indirect, purchasers can recover damages for antitrust violations. Here, plaintiffs argue that they directly purchase apps from Apple through its App Store, whereas Apple maintains that iPhone users are actually purchasing apps from the app developers. If the Court were to side with Apple, iPhone users would not be able to recover damages from them. Only app developers, as purchasers of the distribution service the App Store provides, could sue Apple for antitrust violations.
The Supreme Court is expected to decide the case by June of 2019. If the Court decides in favor of the plaintiffs, holding that iPhone users can recover damages from Apple, the case would be remanded to a lower court to determine whether antitrust violations actually occurred. In the future, if Apple is found to be operating an illegal monopoly it could have enormous implications. Large amounts of money are potentially at stake. It is estimated that Apple brought in $11 billion in revenue from its App Store in 2017 alone and antitrust laws permit plaintiffs to potentially recover triple damages. Beyond the dollars at stake, a decision that Apple is operating an illegal monopoly could completely change the industry. A decision of that nature could give rise to many different marketplaces that make apps available for iPhone users to download potentially lowering the price for the end users. The first step, however, is the decision to be handed down by the Supreme Court in Apple Inc. v. Pepper to determine whether iPhone users are able to sue Apple for damages.