In a surprising turn, Justice Brett Kavanaugh sided with the Supreme Court’s four liberal justices to allow Apple to be sued under anti-trust laws by users of their App Store.
Apple stock took a sharp hit following the Monday decision.
In the case, Apple v. Pepper, users of Apple’s iPhones argued that the 30% commission on sales Apple levies on app store purchases amounts to an unfair use of monopoly power that inflates prices. Since iPhone users must use Apple’s platform for purchases, this fee is unavoidable. Apple argued that iPhone users had no standing to sue — only app developers ought to be able to bring Apple to court over these fees.
In his majority opinion joined by the Court’s liberal justices, Kavanaugh declared the iPhone users to be “direct purchasers” and therefore eligible to file suit under Supreme Court precedent in Illinois Brick v. Illinois. Direct purchasers, the Court held, have the right to bring suit against companies violating anti-trust laws.
“The bright-line rule of Illinois Brick … 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,” Kavanaugh wrote.
That isn’t to say the iPhone users will win. Kavanaugh was careful to make it clear that the only question was if there would be a court battle at all.
“The sole question presented at this early stage of the case is whether these consumers are proper plaintiffs for this kind of antitrust suit.”
Kavanaugh squared off against Trump’s other high court appointee Neil Gorsuch, who wrote a dissent arguing Kavanaugh’s interpretation of Illinois Brick and expressing a lock-step opinion with the tech giant.
Gorsuch argued Illinois Brick “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.”
“Yet today,” added Gorsuch, “the court lets a pass-on case proceed.”
This isn’t the only arena where Apple is fighting over its use of its App Store. Music streaming service Spotify has filed a complaint with European regulators arguing that Apple uses its platform to harm rivals. Spotify, Netflix, Amazon and others also seek to dodge the 30% fee at issue in Pepper by directing customers to subscribe outside the App Store framework altogether.
But the Pepper decision could reach farther than just Apple.
“We got an unexpected boost to antitrust enforcement from Justice Kavanaugh,” said law professor John Kirkwood of Seattle University. “There’s more chance of future antitrust enforcement victories.”
Kirkwood said Kavanaugh has “shaken things up” by not reliably siding with the other conservatives on this issue, which might pave the way for more anti-trust litigation. After all, lower courts often take cues from how the Supreme Court is expected to act.
This isn’t the first surprise from Kavanaugh, either. In 2018, Justice Brett Kavanaugh stood as the deciding vote to prevent a challenge to the funding of Planned Parenthood from even being considered by the Supreme Court.
“We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.,” Apple said in a statement. “We’re proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world.”
Katelyn Kivel is a contributing editor and senior legal reporter for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.
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