As one of the biggest companies in the world, Apple has seemingly been a lightning rod for legal disputes. The company has faced multiple lawsuits for allegedly slowing down older devices, infringing on patents, and releasing MacBooks with defective keyboards, just to name a few. But it’s the Apple app store antitrust lawsuit that could have a major impact, not just for Apple, but for future antitrust cases.
The case in question is Apple v. Pepper, a decade-long case that alleges Apple maintains a monopoly on its app store that leads to higher prices due to the company’s 30 percent cut on all sales. Plaintiffs allege that because Apple users have no alternative sources for purchasing and installing apps (unlike Google’s Android operating system, which allows the installation of third-party app stores like Amazon) Apple’s market dominance drives up app prices.
The case was initially dismissed in 2013 after a California federal court cited Illinois Brick Co. v. Illinois, a pivotal 1977 Supreme Court case that held that indirect purchasers had no standing to sue for antitrust violations over raised prices. The Ninth Circuit Court of Appeals reversed the lower court’s decision in 2017, allowing the case to move forward.
On Apple’s petition, the Supreme Court has moved to review the case and seems skeptical of Apple’s defense that the company merely acts as a distributor for third-party sellers and cannot be sued under the precedent set by Illinois Brick.
“That was a case of a vertical monopoly,” said Justice Sonia Sotomayor. “This is not quite like that. This is dramatically different. This is a closed loop.”
Justice Elena Kagan noted that Apple’s app store appears to operate as a traditional merchant/purchaser transaction from the consumer’s perspective.
“I go to Apple’s App Store. I pay Apple directly with the credit card information that I’ve supplied to Apple. From my perspective, I’ve just engaged in a one-step transaction with Apple.”
Regardless of the outcome, Apple v. Pepper could have major implications on future litigation. Several states have already urged the Supreme Court to overturn its ruling on Illinois Brick, which would dramatically expand the limits on who can pursue damages under federal antitrust law. Should the Supreme Court rule against Apple, it could have a dramatic impact on the company’s digital marketplace, from paying damages to consumers to reworking their entire distribution model. It could even open the door for other tech companies operating digital marketplaces to face similar legal challenges.
Needless to say, this will be an interesting case to follow in the coming year.
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