Hi, and welcome back to Legal Geek. This week, we review a Supreme Court decision from last week regarding a long term antitrust lawsuit between App Store consumers and Apple.
Back in 2011, some consumers sued Apple in federal court for antitrust violations in that the tech giant monopolizes the market for software apps by forcing developers to only sell through the Apple App Store, and then charging a 30% commission on those sales. The District Court initially dismissed the lawsuit in 2013 based on a 40-year old Supreme Court precedent case titled Illinois Brick, but the Ninth Circuit Court of Appeals reversed this decision and reinstated the lawsuit in 2017.
The Supreme Court took up the case and many thought they would be perhaps overturning the 40-year old Illinois Brick case. That prior case stood for the theory that only direct purchasers can sue for antitrust damages, not an indirect purchaser down the chain of supply. This case has been unpopular in many states, and about 25 states have active laws on the books that allow for indirect purchasers to sue for damages under state antitrust laws. However, this precedent was not directly addressed or overturned in this week's Supreme Court decision.
The newest justice Brett Kavanaugh joined the 4 more liberal justices and wrote the decision, which was a 5-4 split on the court. The majority deemed that for the purposes of this case, the consumers are direct purchasers because the software is purchased directly by these consumers from Apple, and there is no intermediary or levels of intermediary in the supply chain between these parties. Apple had hoped to stop this by arguing that only the software app developers are the direct purchasers of App Store services, but the majority rejected this argument.
Thus, the Illinois Brick precedent was applied rather than overturned thanks to the facts of this case, and Apple will now have to defend against this suit again in a District Court and possibly with a jury trial. It will be another very high-profile legal battle with millions of dollars at stake for Apple, as the whole controlled ecosystem of the App Store comes under scrutiny for potentially being an unfair monopoly. And yet another big 5-4 Supreme Court decision in the notable legal history of that little tech company started by Steve Jobs.
The Bottom Line is: while there may be plenty of good non-economic reasons Apple chose to fully control their devices and the software apps that can be downloaded onto them, there's no doubt Apple has also profited millions upon millions of dollars from owning that marketplace. Unlike other giants in commerce fields like Amazon and eBay, there is no legitimate option for end consumers to choose another seller of apps for their iPhones and Apple devices. These factors make this antitrust case very dangerous to Apple, despite the strong legal theory that Apple used to initially dismiss the case. We will monitor this case as it continues, now that the high-level antitrust law issue has been resolved at the highest court.
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