SUPREME COURT APPEARS SKEPTICAL OF APPLE'S DEFENSE IN APP STORE MONOPOLIZATION CASE

The Supreme Court heard argument on Monday in Apple Inc. v. Robert Pepper et al., in which Apple is accused of monopolizing the market for iPhone software applications by requiring app developers to market their apps exclusively through the company’s App Store. Apple contends that because Apple acts as a distributor for app developers, who set the prices for the apps, the plaintiffs (consumers who purchased apps through the app store) lack standing under the Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, in which the Court held that plaintiffs who incur overcharges that are passed through the supply chain, rather than in a transaction directly with the defendant, lack standing under federal antitrust laws.

Several Justices appeared skeptical of Apple’s argument, with Justice Sotomayor distinguishing Apple’s role from the vertical nature of the relationships in Illinois Brick and Justice Kagan calling consumers’ interactions in purchasing apps through the App Store “a one-step transaction with Apple.”

Justices Alito and Gorsuch questioned the very premise of Illinois Brick, with Justice Alito saying, “Illinois Brick was not about the economic theory. It's the Court's calculation of what makes for an effective and efficient litigation scheme. . . . I really wonder whether, in light of what has happened since then, the Court's evaluation stands up.” Similarly, Justice Gorsuch observed at several points that many states have rejected the Illinois Brick doctrine for purposes of their own competition laws and that 31 states signed on to an amicus brief in this case asking the Court to overturn Illinois Brick. “Shouldn't we question Illinois Brick, perhaps, given the fact that so many states have done so?” he asked.

Other Justices, however, appeared to side with Apple, with Justice Roberts expressing concern over the danger that Apple could be held liable to both consumers and app developers for the same overcharge.

Although the United States has sided with Apple in the proceedings before the Supreme Court, high-ranking officials in the Department of Justice’s Antitrust Division have recently indicated that the Division is considering advocating for reversal of Illinois Brick. In remarks delivered at a Heritage Foundation conference on January 23, 2018, Andrew Finch, the second in command at the DOJ’s Antitrust Division, reportedly stated that the DOJ Antitrust Division is “looking at whether or not it might be worthwhile” to recommend that the Supreme Court reverse its decision in Illinois Brick to bring “stability and continuity” to antitrust enforcement. Makan Delrahim, head of the DOJ’s Antitrust Division, has advocated for reversal of Illinois Brick for more than a decade.