Case brief

United States Supreme Court

APPLE INC. v. PEPPER ET AL.(2019)

No. 17-204

Argued: November 26, 2018Decided: 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 lawfully buy apps. Most of those apps are created
by independent developers 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. Respondents, 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 because
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
direct 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
antitrust 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 antitrust 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 bottom of a vertical distribution chain who are
attempting to sue manufacturers 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 Illinois Brick and to gut its longstanding bright-line
rule. Any ambiguity 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 persuasive economically or legally.
It would draw an arbitrary and unprincipled line among retailers
based on their financial arrangements with their manufacturers or
suppliers. And it would permit a consumer to sue a monopolistic
retailer when the retailer set the retail price by marking up the
price it had paid the manufacturer or supplier 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
retailers to structure transactions with manufacturers or suppliers
so as to evade antitrust claims by consumers and thereby thwart
effective 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’ favor. First, Apple posits that allowing
only the upstream app developers–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 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.
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.

     KAVANAUGH, J., delivered the opinion of the Court, in which
GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. GORSUCH,
J., filed a dissenting opinion, in which ROBERTS,
C. J., and THOMAS and ALITO, JJ., joined.

Opinion of the Court

 587 U. S. ____ (2019)

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.

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 market for the sale of apps
and has unlawfully used its monopolistic 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, 745-746 (1977). We disagree. The
plaintiffs purchased apps directly from Apple and therefore are
direct purchasers 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 developers 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% fee, even if” the iPhone
owners wish “to buy apps elsewhere or pay less.” Id., at 45a.
According to the complaint, that 30 percent commission is “pure
profit” for Apple and, in a competitive environment with other
retailers, “Apple would be under considerable pressure to
substantially 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 complaint. 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, Illinois 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).

II

A

     The plaintiffs’ allegations boil down to one straightforward
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
dissatisfied 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 undisputed 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 commerce 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 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 antitrust
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 contractors in turn sold their services

https://caselaw.findlaw.com/us-supreme-court/17-204.html#FNopinion1.1

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 ultimate consumer, who was the State of
Illinois.

     This Court ruled that the State could not bring an antitrust
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
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 retailer 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 accords with the economics of the transaction.
Here, Apple argues that the app developers, not Apple, set the

https://caselaw.findlaw.com/us-supreme-court/17-204.html#FNopinion1.2

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 consumers 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 purchaser 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  ¶346e, p. 194 (4th ed.
2014) (Areeda & Hovenkamp). Apple’s theory would require us 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 purchasers 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 economically
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 hypothetical 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
nothing to the manufacturer; agree with the manufacturer that the
retailer will sell the product for $10 and keep 40 percent 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 could sue a
monopolistic retailer when the retailer set the retail price by
marking up the price it had paid the manufacturer or supplier for
the good or service. But a consumer could not sue a
monopolistic retailer when the manufacturer 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 similar 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 consumer 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 percent 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 the same retail price regardless
of whether Apple’s commission was 10 percent or 30 percent,
then the consumers’ damages would presumably be zero. But
we cannot assume 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 downstream 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 transactions with
manufacturers or suppliers so as to evade antitrust 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 product for the supplier without
purchasing it from the supplier. 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 in
situations where a monopolistic retailer is using its monopoly to
charge higher-than-competitive prices to consumers. We decline
to green-light monopolistic retailers 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 complicated damages calculations; and (3) eliminating
duplicative 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 exercise 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 considered individually
or together–cut strongly in the plaintiffs’ favor here, not Apple’s.

     First, Apple argues that barring the iPhone owners from suing
Apple will better promote effective enforcement of the antitrust
laws. Apple posits that allowing only the upstream app
developers–and not the downstream consumers–to sue Apple
would mean more effective enforcement 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 monopolistic retailers to play any time that a
damages calculation 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 retailer markup case

as it is in a retailer commission case. Yet Apple apparently
accepts consumers suing monopolistic retailers in a retailer
markup case. If Apple accepts that kind of suit, then Apple
should also accept consumers …