November 12, 2019 Articles

Apple v. Pepper—A Straightforward Decision Raising Complicated Issues

The decision removes an important barrier to redress through the courts.

By Matthew Hans and Phillip Zeeck

Since the Supreme Court’s decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), only “direct purchasers,” those who purchase goods directly from alleged monopolizers, have standing to bring an antitrust claim. For proximate cause reasons, indirect purchasers could not sue antitrust violators who were more than one step away in the chain of distribution. The distinction between direct and indirect purchasers is clear when the product is a physical commodity, whose movement from manufacturer to distributors to retailers to consumers is easily traced. But that distinction is less sharp when the product is not physically distributed, but rather is just downloaded code from an online platform.

In Apple Inc. v. Pepper, 139 S. Ct. 1514 (2019), the Supreme Court was asked to update Illinois Brick to be compatible with the e-commerce of smartphone applications. But the five-justice majority opinion, written by Justice Kavanagh, declined to make any changes to the bright-line direct purchaser rule and applied it in a straightforward fashion. The dissenting opinion, written by Justice Gorsuch, however, questioned whether the rule’s straightforward application complicated the calculation of damages, and hinted that the direct purchaser rule may need to be reconsidered.

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