Apple, Inc. v. Pepper , 203 L. Ed. 2d 802 ( 2019 )

(Slip Opinion) OCTOBER TERM, 2018 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
APPLE INC. v. PEPPER ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
No. 17–204. Argued November 26, 2018—Decided May 13, 2019
Apple Inc. sells iPhone applications, or apps, directly to iPhone owners
through its App Store—the only place where iPhone owners may law-
fully buy apps. Most of those apps are created by independent devel-
opers under contracts with Apple. Apple charges the developers a
$99 annual membership fee, allows them to set the retail price of the
apps, and charges a 30% commission on every app sale. Respond-
ents, four iPhone owners, sued Apple, alleging that the company has
unlawfully monopolized the aftermarket for iPhone apps. Apple
moved to dismiss, arguing that the iPhone owners could not sue be-
cause they were not direct purchasers from Apple under Illinois Brick
Co. v. Illinois, 431 U.S. 720. The District Court agreed, but the
Ninth Circuit reversed, concluding that the iPhone owners were di-
rect purchasers because they purchased apps directly from Apple.
Held: Under Illinois Brick, the iPhone owners were direct purchasers
who may sue Apple for alleged monopolization. Pp. 4–14.
(a) This straightforward conclusion follows from the text of the an-
titrust laws and from this Court’s precedent. Section 4 of the Clayton
Act provides that “any person who shall be injured in his business or
property by reason of anything forbidden in the antitrust laws may
sue.” 15 U.S. C. §15(a). That broad text readily covers consumers
who purchase goods or services at higher-than-competitive prices
from an allegedly monopolistic retailer. Applying §4, this Court has
consistently stated that “the immediate buyers from the alleged anti-
trust violators” may maintain a suit against the antitrust violators,
Kansas v. UtiliCorp United Inc., 497 U.S. 199, 207, but has ruled
that indirect purchasers who are two or more steps removed from the
violator in a distribution chain may not sue. Unlike the consumer in
Illinois Brick, the iPhone owners here are not consumers at the bot-
2 APPLE INC. v. PEPPER
Syllabus
tom of a vertical distribution chain who are attempting to sue manu-
facturers at the top of the chain. The absence of an intermediary in
the distribution chain between Apple and the consumer is dispositive.
Pp. 4–7.
(b) Apple argues that Illinois Brick allows consumers to sue only
the party who sets the retail price, whether or not the party sells the
good or service directly to the complaining party. But that theory
suffers from three main problems. First, it contradicts statutory text
and precedent by requiring the Court to rewrite the rationale of Illi-
nois Brick and to gut its longstanding bright-line rule. Any ambigui-
ty in Illinois Brick should be resolved in the direction of the statutory
text, which states that “any person” injured by an antitrust violation
may sue to recover damages. Second, Apple’s theory is not persua-
sive economically or legally. It would draw an arbitrary and unprin-
cipled line among retailers based on their financial arrangements
with their manufacturers or suppliers. And it would permit a con-
sumer to sue a monopolistic retailer when the retailer set the retail
price by marking up the price it had paid the manufacturer or suppli-
er for the good or service but not when the manufacturer or supplier
set the retail price and the retailer took a commission on each sale.
Third, Apple’s theory would provide a roadmap for monopolistic re-
tailers to structure transactions with manufacturers or suppliers so
as to evade antitrust claims by consumers and thereby thwart effec-
tive antitrust enforcement. Pp. 7–11.
(c) Contrary to Apple’s argument, the three Illinois Brick rationales
for adopting the direct-purchaser rule cut strongly in respondents’ fa-
vor. First, Apple posits that allowing only the upstream app develop-
ers—and not the downstream consumers—to sue Apple would mean
more effective antitrust enforcement. But that makes little sense,
and it would directly contradict the longstanding goal of effective pri-
vate enforcement and consumer protection in antitrust cases. Sec-
ond, Apple warns that calculating the damages in successful consum-
er antitrust suits against monopolistic retailers might be
complicated. But Illinois Brick is not a get-out-of-court-free card for
monopolistic retailers to play any time that a damages calculation
might be complicated. Third, Apple claims that allowing consumers
to sue will result in “conflicting claims to a common fund—the
amount of the alleged overcharge.” Illinois Brick, 431 U.S., at 737.
But this is not a case where multiple parties at different levels of a
distribution chain are trying to recover the same passed-through
overcharge initially levied by the manufacturer at the top of the
chain, cf. id., at 726–727. Pp. 11–14.
846 F.3d 313, affirmed.
Cite as: 587 U. S. ____ (2019) 3
Syllabus
KAVANAUGH, J., delivered the opinion of the Court, in which GINS-
BURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GORSUCH, J., filed a
dissenting opinion, in which ROBERTS, C. J., and THOMAS and ALITO, JJ.,
joined.
Cite as: 587 U. S. ____ (2019) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports. Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 17–204
_________________
APPLE INC., PETITIONER v. ROBERT PEPPER, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[May 13, 2019]
JUSTICE KAVANAUGH delivered the opinion of the Court.
In 2007, Apple started selling iPhones. The next year,
Apple launched the retail App Store, an electronic store
where iPhone owners can purchase iPhone applications
from Apple. Those “apps” enable iPhone owners to send
messages, take photos, watch videos, buy clothes, order
food, arrange transportation, purchase concert tickets,
donate to charities, and the list goes on. “There’s an app
for that” has become part of the 21st-century American
lexicon.
In this case, however, several consumers contend that
Apple charges too much for apps. The consumers argue,
in particular, that Apple has monopolized the retail mar-
ket for the sale of apps and has unlawfully used its mo-
nopolistic power to charge consumers higher-than-
competitive prices.
A claim that a monopolistic retailer (here, Apple) has
used its monopoly to overcharge consumers is a classic
antitrust claim. But Apple asserts that the consumer-
plaintiffs in this case may not sue Apple because they
supposedly were not “direct purchasers” from Apple under
our decision in Illinois Brick Co. v. Illinois, 431 U.S. 720,
2 APPLE INC. v. PEPPER
Opinion of the Court
745–746 (1977). We disagree. The plaintiffs purchased
apps directly from Apple and therefore are direct purchas-
ers under Illinois Brick. At this early pleadings stage of
the litigation, we do not assess the merits of the plaintiffs’
antitrust claims against Apple, nor do we consider any
other defenses Apple might have. We merely hold that the
Illinois Brick direct-purchaser rule does not bar these
plaintiffs from suing Apple under the antitrust laws. We
affirm the judgment of the U. S. Court of Appeals for the
Ninth Circuit.
I
In 2007, Apple began selling iPhones. In July 2008,
Apple started the App Store. The App Store now contains
about 2 million apps that iPhone owners can download.
By contract and through technological limitations, the App
Store is the only place where iPhone owners may lawfully
buy apps.
For the most part, Apple does not itself create apps.
Rather, independent app developers create apps. Those
independent app developers then contract with Apple to
make the apps available to iPhone owners in the App
Store.
Through the App Store, Apple sells the apps directly to
iPhone owners. To sell an app in the App Store, app de-
velopers must pay Apple a $99 annual membership fee.
Apple requires that the retail sales price end in $0.99, but
otherwise allows the app developers to set the retail price.
Apple keeps 30 percent of the sales price, no matter what
the sales price might be. In other words, Apple pockets a
30 percent commission on every app sale.
In 2011, four iPhone owners sued Apple. They allege
that Apple has unlawfully monopolized “the iPhone apps
aftermarket.” App. to Pet. for Cert. 53a. The plaintiffs
allege that, via the App Store, Apple locks iPhone owners
“into buying apps only from Apple and paying Apple’s 30%
Cite as: 587 U. S. ____ (2019) 3
Opinion of the Court
fee, even if ” the iPhone owners wish “to buy apps else-
where or pay less.” Id., at 45a. According to the com-
plaint, that 30 percent commission is “pure profit” for
Apple and, in a competitive environment with other retail-
ers, “Apple would be under considerable pressure to sub-
stantially lower its 30% profit margin.” Id., at 54a–55a.
The plaintiffs allege that in a competitive market, they
would be able to “choose between Apple’s high-priced App
Store and less costly alternatives.” Id., at 55a. And they
allege that they have “paid more for their iPhone apps
than they would have paid in a competitive market.” Id.,
at 53a.
Apple moved to dismiss the complaint, arguing that the
iPhone owners were not direct purchasers from Apple and
therefore may not sue. In Illinois Brick, this Court held
that direct purchasers may sue antitrust violators, but
also ruled that indirect purchasers may not sue. The
District Court agreed with Apple and dismissed the com-
plaint. According to the District Court, the iPhone owners
were not direct purchasers from Apple because the app
developers, not Apple, set the consumers’ purchase price.
The Ninth Circuit reversed. The Ninth Circuit concluded
that the iPhone owners were direct purchasers under
Illinois Brick because the iPhone owners purchased apps
directly from Apple. According to the Ninth Circuit, Illi-
nois Brick means that a consumer may not sue an alleged
monopolist who is two or more steps removed from the
consumer in a vertical distribution chain. See In re Apple
iPhone Antitrust Litig., 846 F.3d 313, 323 (2017). Here,
however, the consumers purchased directly from Apple,
the alleged monopolist. Therefore, the Ninth Circuit held
that the iPhone owners could sue Apple for allegedly
monopolizing the sale of iPhone apps and charging higher-
than-competitive prices. Id., at 324. We granted certiorari.
585 U. S. ___ (2018).
4 APPLE INC. v. PEPPER
Opinion of the Court
II
A
The plaintiffs’ allegations boil down to one straightfor-
ward claim: that Apple exercises monopoly power in the
retail market for the sale of apps and has unlawfully used
its monopoly power to force iPhone owners to pay Apple
higher-than-competitive prices for apps. According to the
plaintiffs, when iPhone owners want to purchase an app,
they have only two options: (1) buy the app from Apple’s
App Store at a higher-than-competitive price or (2) do not
buy the app at all. Any iPhone owners who are dissatis-
fied with the selection of apps available in the App Store
or with the price of the apps available in the App Store are
out of luck, or so the plaintiffs allege.
The sole question presented at this early stage of the
case is whether these consumers are proper plaintiffs for
this kind of antitrust suit—in particular, our precedents
ask, whether the consumers were “direct purchasers” from
Apple. Illinois Brick, 431 U.S., at 745–746. It is undis-
puted that the iPhone owners bought the apps directly
from Apple. Therefore, under Illinois Brick, the iPhone
owners were direct purchasers who may sue Apple for
alleged monopolization.
That straightforward conclusion follows from the text of
the antitrust laws and from our precedents.
First is text: Section 2 of the Sherman Act makes it
unlawful for any person to “monopolize, or attempt to
monopolize, or combine or conspire with any other person
or persons, to monopolize any part of the trade or com-
merce among the several States, or with foreign nations.”
26 Stat. 209, 15 U.S. C. §2. Section 4 of the Clayton Act
in turn provides that “any person who shall be injured in
his business or property by reason of anything forbidden in
the antitrust laws may sue . . . the defendant . . . and shall
recover threefold the damages by him sustained, and the
cost of suit, including a reasonable attorney’s fee.” 38
Cite as: 587 U. S. ____ (2019) 5
Opinion of the Court
Stat. 731, 15 U.S. C. §15(a) (emphasis added). The broad
text of §4—“any person” who has been “injured” by an
antitrust violator may sue—readily covers consumers who
purchase goods or services at higher-than-competitive
prices from an allegedly monopolistic retailer.
Second is precedent: Applying §4, we have consistently
stated that “the immediate buyers from the alleged anti-
trust violators” may maintain a suit against the antitrust
violators. Kansas v. UtiliCorp United Inc., 497 U.S. 199,
207 (1990); see also Illinois Brick, 431 U.S., at 745–746.
At the same time, incorporating principles of proximate
cause into §4, we have ruled that indirect purchasers who
are two or more steps removed from the violator in a
distribution chain may not sue. Our decision in Illinois
Brick established a bright-line rule that authorizes suits
by direct purchasers but bars suits by indirect purchasers.
Id., at 746.1
The facts of Illinois Brick illustrate the rule. Illinois
Brick Company manufactured and distributed concrete
blocks. Illinois Brick sold the blocks primarily to masonry
contractors, and those contractors in turn sold masonry
structures to general contractors. Those general contrac-
tors in turn sold their services for larger construction
projects to the State of Illinois, the ultimate consumer of
the blocks.
The consumer State of Illinois sued the manufacturer
Illinois Brick. The State alleged that Illinois Brick had
engaged in a conspiracy to fix the price of concrete blocks.
According to the complaint, the State paid more for the
concrete blocks than it would have paid absent the price-
fixing conspiracy. The monopoly overcharge allegedly
flowed all the way down the distribution chain to the
——————
1 Illinois Brick held that the direct-purchaser requirement applies to
claims for damages. Illinois Brick did not address injunctive relief, and
we likewise do not address injunctive relief in this case.
6 APPLE INC. v. PEPPER
Opinion of the Court
ultimate consumer, who was the State of Illinois.
This Court ruled that the State could not bring an anti-
trust action against Illinois Brick, the alleged violator,
because the State had not purchased concrete blocks
directly from Illinois Brick. The proper plaintiff to bring
that claim against Illinois Brick, the Court stated, would
be an entity that had purchased directly from Illinois
Brick. Ibid.
The bright-line rule of Illinois Brick, as articulated in
that case and as we reiterated in UtiliCorp, means that
indirect purchasers who are two or more steps removed
from the antitrust violator in a distribution chain may not
sue. By contrast, direct purchasers—that is, those who
are “the immediate buyers from the alleged antitrust
violators”—may sue. UtiliCorp, 497 U.S., at 207.
For example, if manufacturer A sells to retailer B, and
retailer B sells to consumer C, then C may not sue A. But
B may sue A if A is an antitrust violator. And C may sue
B if B is an antitrust violator. That is the straightforward
rule of Illinois Brick. See Loeb Industries, Inc. v. Sumi-
tomo Corp., 306 F.3d 469, 481–482 (CA7 2002) (Wood, J.).2
In this case, unlike in Illinois Brick, the iPhone owners
are not consumers at the bottom of a vertical distribution
chain who are attempting to sue manufacturers at the top
of the chain. There is no intermediary in the distribution
chain between Apple and the consumer. The iPhone
owners purchase apps directly from the retailer Apple,
who is the alleged antitrust violator. The iPhone owners
pay the alleged overcharge directly to Apple. The absence
of an intermediary is dispositive. Under Illinois Brick, the
——————
2 Thirty States and the District of Columbia filed an amicus brief
supporting the plaintiffs, and they argue that C should be able to sue A
in that hypothetical. They ask us to overrule Illinois Brick to allow
such suits. In light of our ruling in favor of the plaintiffs in this case,
we have no occasion to consider that argument for overruling Illinois
Brick.
Cite as: 587 U. S. ____ (2019) 7
Opinion of the Court
iPhone owners are direct purchasers from Apple and are
proper plaintiffs to maintain this antitrust suit.
B
All of that seems simple enough. But Apple argues
strenuously against that seemingly simple conclusion, and
we address its arguments carefully. For this kind of re-
tailer case, Apple’s theory is that Illinois Brick allows
consumers to sue only the party who sets the retail price,
whether or not that party sells the good or service directly
to the complaining party. Apple says that its theory ac-
cords with the economics of the transaction. Here, Apple
argues that the app developers, not Apple, set the retail
price charged to consumers, which according to Apple
means that the consumers may not sue Apple.
We see three main problems with Apple’s “who sets the
price” theory.
First, Apple’s theory contradicts statutory text and
precedent. As we explained above, the text of §4 broadly
affords injured parties a right to sue under the antitrust
laws. And our precedent in Illinois Brick established a
bright-line rule where direct purchasers such as the con-
sumers here may sue antitrust violators from whom they
purchased a good or service. Illinois Brick, as we read the
opinion, was not based on an economic theory about who
set the price. Rather, Illinois Brick sought to ensure an
effective and efficient litigation scheme in antitrust cases.
To do so, the Court drew a bright line that allowed direct
purchasers to sue but barred indirect purchasers from
suing. When there is no intermediary between the pur-
chaser and the antitrust violator, the purchaser may sue.
The Illinois Brick bright-line rule is grounded on the
“belief that simplified administration improves antitrust
enforcement.” 2A P. Areeda, H. Hovenkamp, R. Blair, &
C. Durrance, Antitrust Law ¶346e, p. 194 (4th ed. 2014)
(Areeda & Hovenkamp). Apple’s theory would require us
8 APPLE INC. v. PEPPER
Opinion of the Court
to rewrite the rationale of Illinois Brick and to gut the
longstanding bright-line rule.
To the extent that Illinois Brick leaves any ambiguity
about whether a direct purchaser may sue an antitrust
violator, we should resolve that ambiguity in the direction
of the statutory text. And under the text, direct purchas-
ers from monopolistic retailers are proper plaintiffs to sue
those retailers.
Second, in addition to deviating from statutory text and
precedent, Apple’s proposed rule is not persuasive econom-
ically or legally. Apple’s effort to transform Illinois Brick
from a direct-purchaser rule to a “who sets the price” rule
would draw an arbitrary and unprincipled line among
retailers based on retailers’ financial arrangements with
their manufacturers or suppliers.
In the retail context, the price charged by a retailer to a
consumer is often a result (at least in part) of the price
charged by the manufacturer or supplier to the retailer, or
of negotiations between the manufacturer or supplier and
the retailer. Those agreements between manufacturer or
supplier and retailer may take myriad forms, including for
example a markup pricing model or a commission pricing
model. In a traditional markup pricing model, a hypothet-
ical monopolistic retailer might pay $6 to the manufacturer
and then sell the product for $10, keeping $4 for itself. In
a commission pricing model, the retailer might pay noth-
ing to the manufacturer; agree with the manufacturer that
the retailer will sell the product for $10 and keep 40 per-
cent of the sales price; and then sell the product for $10,
send $6 back to the manufacturer, and keep $4. In those
two different pricing scenarios, everything turns out to be
economically the same for the manufacturer, retailer, and
consumer.
Yet Apple’s proposed rule would allow a consumer to sue
the monopolistic retailer in the former situation but not
the latter. In other words, under Apple’s rule a consumer
Cite as: 587 U. S. ____ (2019) 9
Opinion of the Court
could sue a monopolistic retailer when the retailer set the
retail price by marking up the price it had paid the manu-
facturer or supplier for the good or service. But a consumer
could not sue a monopolistic retailer when the manufac-
turer or supplier set the retail price and the retailer took a
commission on each sale.
Apple’s line-drawing does not make a lot of sense, other
than as a way to gerrymander Apple out of this and simi-
lar lawsuits. In particular, we fail to see why the form of
the upstream arrangement between the manufacturer or
supplier and the retailer should determine whether a
monopolistic retailer can be sued by a downstream con-
sumer who has purchased a good or service directly from
the retailer and has paid a higher-than-competitive price
because of the retailer’s unlawful monopolistic conduct.
As the Court of Appeals aptly stated, “the distinction
between a markup and a commission is immaterial.” 846
F.3d, at 324. A leading antitrust treatise likewise states:
“Denying standing because ‘title’ never passes to a broker
is an overly lawyered approach that ignores the reality
that a distribution system that relies on brokerage is
economically indistinguishable from one that relies on
purchaser-resellers.” 2A Areeda & Hovenkamp ¶345, at
183. If a retailer has engaged in unlawful monopolistic
conduct that has caused consumers to pay higher-than-
competitive prices, it does not matter how the retailer
structured its relationship with an upstream manufacturer
or supplier—whether, for example, the retailer employed a
markup or kept a commission.
To be sure, if the monopolistic retailer’s conduct has not
caused the consumer to pay a higher-than-competitive
price, then the plaintiff ’s damages will be zero. Here, for
example, if the competitive commission rate were 10 per-
cent rather than 30 percent but Apple could prove that
app developers in a 10 percent commission system would
always set a higher price such that consumers would pay
10 APPLE INC. v. PEPPER
Opinion of the Court
the same retail price regardless of whether Apple’s com-
mission was 10 percent or 30 percent, then the consumers’
damages would presumably be zero. But we cannot as-
sume in all cases—as Apple would necessarily have us
do—that a monopolistic retailer who keeps a commission
does not ever cause the consumer to pay a higher-than-
competitive price. We find no persuasive legal or economic
basis for such a blanket assertion.
In short, we do not understand the relevance of the
upstream market structure in deciding whether a down-
stream consumer may sue a monopolistic retailer. Apple’s
rule would elevate form (what is the precise arrangement
between manufacturers or suppliers and retailers?) over
substance (is the consumer paying a higher price because
of the monopolistic retailer’s actions?). If the retailer’s
unlawful monopolistic conduct caused a consumer to pay
the retailer a higher-than-competitive price, the consumer
is entitled to sue the retailer under the antitrust laws.
Third, if accepted, Apple’s theory would provide a
roadmap for monopolistic retailers to structure transac-
tions with manufacturers or suppliers so as to evade anti-
trust claims by consumers and thereby thwart effective
antitrust enforcement.
Consider a traditional supplier-retailer relationship, in
which the retailer purchases a product from the supplier
and sells the product with a markup to consumers. Under
Apple’s proposed rule, a retailer, instead of buying the
product from the supplier, could arrange to sell the prod-
uct for the supplier without purchasing it from the sup-
plier. In other words, rather than paying the supplier a
certain price for the product and then marking up the
price to sell the product to consumers, the retailer could
collect the price of the product from consumers and remit
only a fraction of that price to the supplier.
That restructuring would allow a monopolistic retailer
to insulate itself from antitrust suits by consumers, even
Cite as: 587 U. S. ____ (2019) 11
Opinion of the Court
in situations where a monopolistic retailer is using its
monopoly to charge higher-than-competitive prices to
consumers. We decline to green-light monopolistic retail-
ers to exploit their market position in that way. We refuse
to rubber-stamp such a blatant evasion of statutory text
and judicial precedent.
In sum, Apple’s theory would disregard statutory text
and precedent, create an unprincipled and economically
senseless distinction among monopolistic retailers, and
furnish monopolistic retailers with a how-to guide for
evasion of the antitrust laws.
C
In arguing that the Court should transform the direct-
purchaser rule into a “who sets the price” rule, Apple
insists that the three reasons that the Court identified in
Illinois Brick for adopting the direct-purchaser rule apply
to this case—even though the consumers here (unlike in
Illinois Brick) were direct purchasers from the alleged
monopolist. The Illinois Brick Court listed three reasons
for barring indirect-purchaser suits: (1) facilitating more
effective enforcement of antitrust laws; (2) avoiding com-
plicated damages calculations; and (3) eliminating dupli-
cative damages against antitrust defendants.
As we said in UtiliCorp, however, the bright-line rule of
Illinois Brick means that there is no reason to ask whether
the rationales of Illinois Brick “apply with equal force” in
every individual case. 497 U.S., at 216. We should not
engage in “an unwarranted and counterproductive exer-
cise to litigate a series of exceptions.” Id., at 217.
But even if we engage with this argument, we conclude
that the three Illinois Brick rationales—whether consid-
ered individually or together—cut strongly in the plain-
tiffs’ favor here, not Apple’s.
First, Apple argues that barring the iPhone owners from
suing Apple will better promote effective enforcement of
12 APPLE INC. v. PEPPER
Opinion of the Court
the antitrust laws. Apple posits that allowing only the
upstream app developers—and not the downstream con-
sumers—to sue Apple would mean more effective enforce-
ment of the antitrust laws. We do not agree. Leaving
consumers at the mercy of monopolistic retailers simply
because upstream suppliers could also sue the retailers
makes little sense and would directly contradict the
longstanding goal of effective private enforcement and
consumer protection in antitrust cases.
Second, Apple warns that calculating the damages in
successful consumer antitrust suits against monopolistic
retailers might be complicated. It is true that it may be
hard to determine what the retailer would have charged in
a competitive market. Expert testimony will often be
necessary. But that is hardly unusual in antitrust cases.
Illinois Brick is not a get-out-of-court-free card for monop-
olistic retailers to play any time that a damages calcula-
tion might be complicated. Illinois Brick surely did not
wipe out consumer antitrust suits against monopolistic
retailers from whom the consumers purchased goods or
services at higher-than-competitive prices. Moreover, the
damages calculation may be just as complicated in a re-
tailer markup case as it is in a retailer commission case.
Yet Apple apparently accepts consumers suing monopolis-
tic retailers in a retailer markup case. If Apple accepts
that kind of suit, then Apple should also accept consumers
suing monopolistic retailers in a retailer commission case.
Third, Apple claims that allowing consumers to sue will
result in “conflicting claims to a common fund—the
amount of the alleged overcharge.” Illinois Brick, 431
U.S., at 737. Apple is incorrect. This is not a case where
multiple parties at different levels of a distribution chain
are trying to all recover the same passed-through
overcharge initially levied by the manufacturer at the top
of the chain. Cf. id., at 726–727; Hanover Shoe, Inc. v.
United Shoe Machinery Corp., 392 U.S. 481, 483–484
Cite as: 587 U. S. ____ (2019) 13
Opinion of the Court
(1968). If the iPhone owners prevail, they will be entitled
to the full amount of the unlawful overcharge that they
paid to Apple. The overcharge has not been passed on by
anyone to anyone. Unlike in Illinois Brick, there will be
no need to “trace the effect of the overcharge through each
step in the distribution chain.” 431 U.S., at 741.
It is true that Apple’s alleged anticompetitive conduct
may leave Apple subject to multiple suits by different
plaintiffs. But Illinois Brick did not purport to bar
multiple liability that is unrelated to passing an
overcharge down a chain of distribution. Basic antitrust
law tells us that the “mere fact that an antitrust violation
produces two different classes of victims hardly entails
that their injuries are duplicative of one another.” 2A
Areeda & Hovenkamp ¶339d, at 136. Multiple suits are
not atypical when the intermediary in a distribution chain
is a bottleneck monopolist or monopsonist (or both)
between the manufacturer on the one end and the
consumer on the other end. A retailer who is both a
monopolist and a monopsonist may be liable to different
classes of plaintiffs—both to downstream consumers and
to upstream suppliers—when the retailer’s unlawful
conduct affects both the downstream and upstream
markets.
Here, some downstream iPhone consumers have sued
Apple on a monopoly theory. And it could be that some
upstream app developers will also sue Apple on a monop-
sony theory. In this instance, the two suits would rely on
fundamentally different theories of harm and would not
assert dueling claims to a “common fund,” as that term
was used in Illinois Brick. The consumers seek damages
based on the difference between the price they paid and
the competitive price. The app developers would seek lost
profits that they could have earned in a competitive retail
market. Illinois Brick does not bar either category of suit.
In short, the three Illinois Brick rationales do not per-
14 APPLE INC. v. PEPPER
Opinion of the Court
suade us to remake Illinois Brick and to bar direct-
purchaser suits against monopolistic retailers who employ
commissions rather than markups. The plaintiffs seek to
hold retailers to account if the retailers engage in unlaw-
ful anticompetitive conduct that harms consumers who
purchase from those retailers. That is why we have anti-
trust law.
* * *
Ever since Congress overwhelmingly passed and Presi-
dent Benjamin Harrison signed the Sherman Act in 1890,
“protecting consumers from monopoly prices” has been
“the central concern of antitrust.” 2A Areeda &
Hovenkamp ¶345, at 179. The consumers here purchased
apps directly from Apple, and they allege that Apple used
its monopoly power over the retail apps market to charge
higher-than-competitive prices. Our decision in Illinois
Brick does not bar the consumers from suing Apple for
Apple’s allegedly monopolistic conduct. We affirm the
judgment of the U. S. Court of Appeals for the Ninth
Circuit.
It is so ordered.
Cite as: 587 U. S. ____ (2019) 1
GORSUCH, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 17–204
_________________
APPLE INC., PETITIONER v. ROBERT PEPPER, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[May 13, 2019]
JUSTICE GORSUCH, with whom THE CHIEF JUSTICE,
JUSTICE THOMAS, and JUSTICE ALITO join, dissenting.
More than 40 years ago, in Illinois Brick Co. v. Illinois,
431 U.S. 720 (1977), this Court held that an antitrust
plaintiff can’t sue a defendant for overcharging someone
else who might (or might not) have passed on all (or some)
of the overcharge to him. Illinois Brick held that these
convoluted “pass on” theories of damages violate tradi-
tional principles of proximate causation and that the right
plaintiff to bring suit is the one on whom the overcharge
immediately and surely fell. Yet today the Court lets a
pass-on case proceed. It does so by recasting Illinois Brick
as a rule forbidding only suits where the plaintiff does not
contract directly with the defendant. This replaces a rule
of proximate cause and economic reality with an easily
manipulated and formalistic rule of contractual privity.
That’s not how antitrust law is supposed to work, and it’s
an uncharitable way of treating a precedent which—
whatever its flaws—is far more sensible than the rule the
Court installs in its place.
I
To understand Illinois Brick, it helps to start with the
case that paved the way for that decision: Hanover Shoe,
Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968).
Hanover sued United, a company that supplied machinery
2 APPLE INC. v. PEPPER
GORSUCH, J., dissenting
Hanover used to make shoes. Hanover alleged that
United’s illegal monopoly in the shoe-making-machinery
market had allowed it to charge supracompetitive prices. As
damages, Hanover sought to recover the amount it had
overpaid United for machinery. United replied that Han-
over hadn’t been damaged at all because, United asserted,
Hanover had not absorbed the supposedly “illegal over-
charge” but had “passed the cost on to its customers” by
raising the prices it charged for shoes. Id., at 487–488,
and n. 6. This Court called United’s argument a “ ‘passing-
on’ defense” because it suggested that a court should
consider whether an antitrust plaintiff had “passed on”
the defendant’s overcharge to its own customers when
assessing if and to what degree the plaintiff was injured
by the defendant’s anticompetitive conduct. Id., at 488.
This Court rejected that defense. While §4 of the Clay-
ton Act allows private suits for those injured by antitrust
violations, we have long interpreted this language against
the backdrop of the common law. See, e.g., Associated
Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519,
529–531 (1983). And under ancient rules of proximate
causation, the “ ‘general tendency of the law, in regard to
damages at least, is not to go beyond the first step.’ ”
Hanover Shoe, 392 U.S., at 490, n. 8 (quoting Southern
Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U.S. 531,
533 (1918)). In Hanover Shoe, the first step was United’s
overcharging of Hanover. To proceed beyond that and
inquire whether Hanover had passed on the overcharge to
its customers, the Court held, would risk the sort of prob-
lems traditional principles of proximate cause were de-
signed to avoid. “[N]early insuperable” questions would
follow about whether Hanover had the capacity and incen-
tive to pass on to its customers in the shoe-making market
United’s alleged monopoly rent from the separate shoe-
making-machinery market. 392 U.S., at 493. Resolving
those questions would, in turn, necessitate a trial within a
Cite as: 587 U. S. ____ (2019) 3
GORSUCH, J., dissenting
trial about Hanover’s power and conduct in its own mar-
ket, with the attendant risk that proceedings would be-
come “long and complicated” and would “involv[e] massive
evidence and complicated theories.” Ibid.
Illinois Brick was just the other side of the coin. With
Hanover Shoe having held that an antitrust defendant
could not rely on a pass-on theory to avoid damages, Illi-
nois Brick addressed whether an antitrust plaintiff could
rely on a pass-on theory to recover damages. The State of
Illinois had sued several manufacturers of concrete blocks,
alleging that the defendants’ price-fixing conspiracy had
enabled them to overcharge building contractors, who in
turn had passed on those charges to their customers,
including the State. Recognizing that Hanover Shoe had
already prohibited antitrust violators from using a “pass-
on theory” defensively, the Court declined to “permit
offensive use of a pass-on theory against an alleged viola-
tor that could not use the same theory as a defense.” 431
U.S., at 735. “Permitting the use of pass-on theories
under §4,” the Court reasoned, would require determining
how much of the manufacturer’s monopoly rent was ab-
sorbed by intermediary building contractors and how
much they were able and chose to pass on to their custom-
ers like the State. Id., at 737. Allowing pass-on theories
would, as well, allow “plaintiffs at each level in the distri-
bution chain” to “assert conflicting claims to a common
fund,” which would require “massive efforts to apportion
the recovery among all potential plaintiffs that could have
absorbed part of the overcharge—from direct purchasers
to middlemen to ultimate consumers.” Ibid. Better again,
the Court decided, to adhere to traditional rules of proxi-
mate causation and allow only the first affected custom-
ers—the building contractors—to sue for the monopoly
rents they had directly paid.
There is nothing surprising in any of this. Unless Con-
gress provides otherwise, this Court generally reads statu-
4 APPLE INC. v. PEPPER
GORSUCH, J., dissenting
tory causes of action as “limited to plaintiffs whose inju-
ries are proximately caused by violations of the statute.”
Lexmark Int’l, Inc. v. Static Control Components, Inc., 572
U.S. 118, 132 (2014). That proximate cause requirement
typically bars suits for injuries that are “derivative of
misfortunes visited upon a third person by the defendant’s
acts.” Id., at 133 (internal quotation marks omitted). So,
for example, if a defendant’s false advertising causes harm
to one of its competitors, the competitor can sue the false
advertiser under the Lanham Act. But if the competitor is
unable to pay its rent as a result, the competitor’s landlord
can’t sue the false advertiser, because the landlord’s harm
derives from the harm to the competitor. Id., at 134; see
also, e.g., Bank of America Corp. v. Miami, 581 U. S. ___,
___–___ (2017) (slip op., at 10–11); Dura Pharmaceuticals,
Inc. v. Broudo, 544 U.S. 336, 346 (2005); Holmes v. Secu-
rities Investor Protection Corporation, 503 U.S. 258, 268–
270 (1992). This Court has long understood Illinois Brick
as simply applying these traditional proximate cause
principles in the antitrust context. See Associated Gen.
Contractors, 459 U.S., at 532–535, 544–545.1
II
The lawsuit before us depends on just the sort of pass-on
theory that Illinois Brick forbids. The plaintiffs bought
apps from third-party app developers (or manufacturers)
in Apple’s retail Internet App Store, at prices set by the
developers. The lawsuit alleges that Apple is a monopolist
——————
1 For this reason, it’s hard to make sense of the suggestion that Illi-
nois Brick may not apply to claims for injunctive relief, ante, at 5, n. 1.
Under our normal rule of construction, a plaintiff who’s not proximately
harmed by a defendant’s unlawful conduct has no cause of action to sue
the defendant for any type of relief. Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118, 135 (2014) (although a plaintiff that
“cannot quantify its losses with sufficient certainty to recover damages
. . . may still be entitled to injunctive relief,” the requirement of proxi-
mate causation “must be met in every case”).
Cite as: 587 U. S. ____ (2019) 5
GORSUCH, J., dissenting
retailer and that the 30% commission it charges develop-
ers for the right to sell through its platform represents an
anticompetitive price. The problem is that the 30% com-
mission falls initially on the developers. So if the commis-
sion is in fact a monopolistic overcharge, the developers
are the parties who are directly injured by it. Plaintiffs
can be injured only if the developers are able and choose to
pass on the overcharge to them in the form of higher app
prices that the developers alone control. Plaintiffs admit-
ted as much in the district court, where they described
their theory of injury this way: “[I]f Apple tells the devel-
oper . . . we’re going to take this 30 percent commission . . .
what’s the developer going to do? The developer is going
to increase its price to cover Apple’s . . . demanded profit.”
App. 143.
Because this is exactly the kind of “pass-on theory”
Illinois Brick rejected, it should come as no surprise that
the concerns animating that decision are also implicated.
Like other pass-on theories, plaintiffs’ theory will necessi-
tate a complex inquiry into how Apple’s conduct affected
third-party pricing decisions. And it will raise difficult
questions about apportionment of damages between app
developers and their customers, along with the risk of
duplicative damages awards. If anything, plaintiffs’
claims present these difficulties even more starkly than
did the claims at issue in Illinois Brick.
Consider first the question of causation. To determine if
Apple’s conduct damaged plaintiffs at all (and if so, the
magnitude of their damages), a court will first have to
explore whether and to what extent each individual app
developer was able—and then opted—to pass on the 30%
commission to its consumers in the form of higher app
prices. Sorting this out, if it can be done at all, will entail
wrestling with “ ‘complicated theories’ ” about “how the
relevant market variables would have behaved had there
been no overcharge.” Illinois Brick, 431 U.S., at 741–743.
6 APPLE INC. v. PEPPER
GORSUCH, J., dissenting
Will the court hear testimony to determine the market
power of each app developer, how each set its prices, and
what it might have charged consumers for apps if Apple’s
commission had been lower? Will the court also consider
expert testimony analyzing how market factors might
have influenced developers’ capacity and willingness to
pass on Apple’s alleged monopoly overcharge? And will
the court then somehow extrapolate its findings to all of
the tens of thousands of developers who sold apps through
the App Store at different prices and times over the course
of years?
This causation inquiry will be complicated further by
Apple’s requirement that all app prices end in $0.99. As
plaintiffs acknowledge, this rule has caused prices for the
“vast majority” of apps to “cluster” at exactly $0.99. Brief
for Respondents 44. And a developer charging $0.99 for
its app can’t raise its price by just enough to recover the
30-cent commission. Instead, if the developer wants to
pass on the commission to consumers, it has to more than
double its price to $1.99 (doubling the commission in the
process), which could significantly affect its sales. In
short, because Apple’s 99-cent rule creates a strong disin-
centive for developers to raise their prices, it makes plain-
tiffs’ pass-on theory of injury even harder to prove. Yet
the court will have to consider all of this when determin-
ing what damages, if any, plaintiffs suffered as a result of
Apple’s allegedly excessive 30% commission.2
Plaintiffs’ claims will also necessitate “massive efforts to
apportion the recovery among all potential plaintiffs that
——————
2 Plaintiffs haven’t argued (and so have forfeited in this Court any
argument) that Apple’s imposition of the 99-cent rule was itself an
antitrust violation that injured consumers by raising the price of apps
above competitive levels. They didn’t mention the 99-cent rule in their
complaint in district court or in their briefs to the court of appeals.
And, as I’ve noted, they concede that they are seeking damages “based
solely on” the 30% commission. Brief in Opposition 5.
Cite as: 587 U. S. ____ (2019) 7
GORSUCH, J., dissenting
could have absorbed part of the overcharge,” including
both consumers and app developers. Illinois Brick, 431
U.S., at 737. If, as plaintiffs contend, Apple’s 30% com-
mission is a monopolistic overcharge, then the app devel-
opers have a claim against Apple to recover whatever
portion of the commission they did not pass on to consum-
ers. Before today, Hanover Shoe would have prevented
Apple from reducing its liability to the developers by
arguing that they had passed on the overcharge to con-
sumers. But the Court’s holding that Illinois Brick doesn’t
govern this situation surely must mean Hanover Shoe
doesn’t either. So courts will have to divvy up the com-
missions Apple collected between the developers and the
consumers. To do that, they’ll have to figure out which
party bore what portion of the overcharge in every pur-
chase. And if the developers bring suit separately from
the consumers, Apple might be at risk of duplicative dam-
ages awards totaling more than the full amount it col-
lected in commissions. To avoid that possibility, it may
turn out that the developers are necessary parties who will
have to be joined in the plaintiffs’ lawsuit. See Fed. Rule
Civ. Proc. 19(a)(1)(B); Illinois Brick, 431 U.S., at 739
(explaining that “[t]hese absent potential claimants would
seem to fit the classic definition of ‘necessary parties,’ for
purposes of compulsory joinder”).3
——————
3 The Court denies that allowing both consumers and developers to
sue over the same allegedly unlawful commission will “result in ‘con-
flicting claims to a common fund’ ” as Illinois Brick feared. Ante, at 12.
But Apple charged only one commission on each sale. So even assum-
ing for argument’s sake that the 30% commission was entirely illegal,
Apple can only be required to pay out in damages, at most, the full
amount it received in commissions. To their credit, even plaintiffs have
conceded as much, acknowledging that because “there is only one 30%
markup,” any claim by the developers against Apple would necessarily
be seeking “a piece of the same 30% pie.” Brief in Opposition 12. It’s a
mystery why the Court refuses to accept that sensible concession.
8 APPLE INC. v. PEPPER
GORSUCH, J., dissenting
III
The United States and its antitrust regulators agree
with all of this, so how does the Court reach such a differ-
ent conclusion? Seizing on Illinois Brick’s use of the
shorthand phrase “direct purchasers” to describe the
parties immediately injured by the monopoly overcharge
in that case, the Court (re)characterizes Illinois Brick as a
rule that anyone who purchases goods directly from an
alleged antitrust violator can sue, while anyone who
doesn’t, can’t. Under this revisionist version of Illinois
Brick, the dispositive question becomes whether an “in-
termediary in the distribution chain” stands between the
plaintiff and the defendant. Ante, at 6. And because the
plaintiff app purchasers in this case happen to have pur-
chased apps directly from Apple, the Court reasons, they
may sue.
This exalts form over substance. Instead of focusing on
the traditional proximate cause question where the al-
leged overcharge is first (and thus surely) felt, the Court’s
test turns on who happens to be in privity of contract with
whom. But we’ve long recognized that antitrust law
should look at “the economic reality of the relevant trans-
actions” rather than “formal conceptions of contract law.”
United States v. Concentrated Phosphate Export Assn.,
Inc., 393 U.S. 199, 208 (1968). And this case illustrates
why. To evade the Court’s test, all Apple must do is
amend its contracts. Instead of collecting payments for
apps sold in the App Store and remitting the balance (less
its commission) to developers, Apple can simply specify
that consumers’ payments will flow the other way: directly
to the developers, who will then remit commissions to
Apple. No antitrust reason exists to treat these contrac-
tual arrangements differently, and doing so will only
induce firms to abandon their preferred—and presumably
more efficient—distribution arrangements in favor of less
efficient ones, all so they might avoid an arbitrary legal
Cite as: 587 U. S. ____ (2019) 9
GORSUCH, J., dissenting
rule. See Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752, 763, 772–774 (1984) (rejecting an “ ‘artificial
distinction’ ” that “serves no valid antitrust goals but
merely deprives consumers and producers of the benefits”
of a particular business model).
Nor does Illinois Brick come close to endorsing such a
blind formalism. Yes, as the Court notes, the plaintiff in
Illinois Brick did contract directly with an intermediary
rather than with the putative antitrust violator. But
Illinois Brick’s rejection of pass-on claims, and its explana-
tion of the difficulties those claims present, had nothing to
do with privity of contract. Instead and as we have seen,
its rule and reasoning grew from the “general tendency of
the law . . . not to go beyond” the party that first felt the
sting of the alleged overcharge, and from the complica-
tions that can arise when courts attempt to discern
whether and to what degree damages were passed on to
others. Supra, at 2–3. The Court today risks replacing a
cogent rule about proximate cause with a pointless and
easily evaded imposter. We do not usually read our own
precedents so uncharitably.
Maybe the Court proceeds as it does today because it
just disagrees with Illinois Brick. After all, the Court not
only displaces a sensible rule in favor of a senseless one; it
also proceeds to question each of Illinois Brick’s ration-
ales—doubting that those directly injured are always the
best plaintiffs to bring suit, that calculating damages for
pass-on plaintiffs will often be unduly complicated, and
that conflicting claims to a common fund justify limiting
who may sue. Ante, at 11–13. The Court even tells us
that any “ambiguity” about the permissibility of pass-on
damages should be resolved “in the direction of the statu-
tory text,” ante, at 8—ignoring that Illinois Brick followed
the well-trodden path of construing the statutory text in
light of background common law principles of proximate
cause. Last but not least, the Court suggests that the
10 APPLE INC. v. PEPPER
GORSUCH, J., dissenting
traditional understanding of Illinois Brick leads to “arbi-
trary and unprincipled” results. Ante, at 8. It asks us to
consider two hypothetical scenarios that, it says, prove the
point. The first is a “markup” scenario in which a monopo-
listic retailer buys a product from a manufacturer for $6
and then decides to sell the product to a consumer for $10,
applying a supracompetitive $4 markup. The second is a
“commission” scenario in which a manufacturer directs a
monopolistic retailer to sell the manufacturer’s product to
a consumer for $10 and the retailer keeps a supracompeti-
tive 40% commission, sending $6 back to the manufac-
turer. The two scenarios are economically the same, the
Court asserts, and forbidding recovery in the second for
lack of proximate cause makes no sense.
But there is nothing arbitrary or unprincipled about
Illinois Brick’s rule or results. The notion that the causal
chain must stop somewhere is an ancient and venerable
one. As with most any rule of proximate cause, reasonable
people can debate whether Illinois Brick drew exactly the
right line in cutting off claims where it did. But the line it
drew is intelligible, principled, administrable, and far
more reasonable than the Court’s artificial rule of contrac-
tual privity. Nor do the Court’s hypotheticals come close
to proving otherwise. In the first scenario, the markup
falls initially on the consumer, so there’s no doubt that the
retailer’s anticompetitive conduct proximately caused the
consumer’s injury. Meanwhile, in the second scenario the
commission falls initially on the manufacturer, and the
consumer won’t feel the pain unless the manufacturer can
and does recoup some or all of the elevated commission by
raising its own prices. In that situation, the manufacturer
is the directly injured party, and the difficulty of disaggre-
gating damages between those directly and indirectly
harmed means that the consumer can’t establish proxi-
mate cause under traditional principles.
Some amici share the Court’s skepticism of Illinois
Cite as: 587 U. S. ____ (2019) 11
GORSUCH, J., dissenting
Brick. They even urge us to overrule Illinois Brick, assur-
ing us that “modern economic techniques” can now miti-
gate any problems that arise in allocating damages be-
tween those who suffer them directly and those who suffer
them indirectly. Brief for State of Texas et al. as Amici
Curiae 25. Maybe there is something to these arguments;
maybe not. But there’s plenty of reason to decline any
invitation to take even a small step away from Illinois
Brick today. The plaintiffs have not asked us to overrule
our precedent—in fact, they’ve disavowed any such re-
quest. Tr. of Oral Arg. 40. So we lack the benefit of the
adversarial process in a complex area involving a 40-year-
old precedent and many hard questions. For example, if
we are really inclined to overrule Illinois Brick, doesn’t
that mean we must do the same to Hanover Shoe? If the
proximate cause line is no longer to be drawn at the first
injured party, how far down the causal chain can a plain-
tiff be and still recoup damages? Must all potential claim-
ants to the single monopoly rent be gathered in a single
lawsuit as necessary parties (and if not, why not)? With-
out any invitation or reason to revisit our precedent, and
with so many grounds for caution, I would have thought
the proper course today would have been to afford Illinois
Brick full effect, not to begin whittling it away to a bare
formalism. I respectfully dissent.