SACRAMENTO – California Attorney General Xavier Becerra has joined a bipartisan multistate amicus brief to the U.S. Supreme Court in Apple v. Pepper, supporting consumers who allege that Apple, Inc. (Apple) violated antitrust laws by monopolizing distribution of iPhone applications (apps).
In Apple v. Pepper, Apple is appealing a judgment in favor of consumers from the Ninth Circuit Court of Appeals. Apple argued that the appellate court’s ruling should be overturned based on a 1977 U.S. Supreme Court decision, Illinois Brick v. Illinois (Illinois Brick). The decision established that only a direct purchaser of goods could seek legal remedies for antitrust violations committed by a manufacturer or service provider.
Using this precedent, Apple contends that consumers who purchase apps are “indirect purchasers” because they must make purchases through Apple’s App Store rather than directly from app developers. Accordingly, Apple argues that consumers have no recourse to sue Apple for anti-competitive practices. The States’ brief challenges Apple’s argument and supports consumers by asking the Supreme Court to overturn the Illinois Brick rule.
“It is high time that the U.S. Supreme Court overturns its Illinois Brick decision. Illinois Brick has limited the ability of consumers and state agencies to seek full justice through antitrust law,” said Attorney General Becerra. “We stand with a bipartisan group of states calling on the Supreme Court to overturn this rule. This is a commonsense issue: when a company takes advantage of the public through price-fixing and anti-competitive practices, the courts should give consumers the opportunity to hold that company accountable under the law.”
Apple v. Pepper involves a nationwide class action case against Apple by consumers who had purchased applications from the Apple App Store. The consumers allege that Apple violated federal antitrust law by monopolizing the distribution of iPhone apps and excessively charging consumers a 30 percent commission on purchases through the store. The plaintiffs argue that consumers were unable to bypass purchasing the costlier apps without violating their iPhone warranties. Apple thereby stifles competition and forces customers to pay increased prices. The Ninth Circuit agreed with the plaintiffs. Apple has challenged this ruling on the basis that the lower court misinterpreted the Illinois Brick rule.
The Illinois Brick rule limits the ability of state attorneys general from bringing federal antitrust lawsuits on behalf of state agencies victimized by manufacturer price-fixing and limits consumers’ ability to bring these actions themselves, because consumers purchase most price-fixed goods indirectly. Congress partially addressed this issue for states by amending federal antitrust law to allow state attorneys general to bring actions on behalf of a state based on harm to their residents, but did not extend that authority to cover purchases by state agencies or to allow consumers to bring actions themselves. While California’s state antitrust laws contain provisions that allow indirect purchasers to file actions, many states do not. As a result, in nationwide settlements, consumers may receive different settlement amounts or terms according to their own state law. This creates inequity and inconsistencies in nationwide settlements. Overturning Illinois Brick would help to fix this discrepancy.
Attorney General Becerra joined the Attorneys General of Arkansas, Arizona, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Montana, Nebraska, North Dakota, New Mexico, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Virginia, and Washington, D.C., in filing the brief.
