United States: Supreme Court Holds App Store Buyers Are Direct Purchasers Under Long-Standing Antitrust Doctrine

In federal antitrust law, the Illinois Brick doctrine holds that only the direct purchaser of goods may bring an antitrust claim for damages against a producer or manufacturer of the goods.

On May 13, 2019, a divided U.S. Supreme Court reaffirmed the application of the Illinois Brick doctrine in Apple Inc. v. Pepper. The case involves claims that Apple monopolizes the market for iPhone apps via its App Store under the federal antitrust laws. The majority, delivered by Justice Kavanaugh and joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, held that iPhone owners were direct purchasers who may sue Apple for alleged monopolization under a straightforward application of Illinois Brick v. Illinois. Justice Gorsuch, joined by Chief Justice Roberts and Justices Thomas and Alito, dissented by arguing that iPhone owners are indirect purchasers. Read together, the majority and the dissent suggest that Illinois Brick is alive and well, despite recent skepticism and vigorous debate over its continued viability.

In federal antitrust law, the Illinois Brick doctrine holds that only the direct purchaser of goods may bring an antitrust claim for damages against a producer or manufacturer of the goods. Indirect purchasers, those further down the distribution chain, have no standing to bring a federal antitrust claim under the doctrine. Plaintiffs, iPhone owners, argued that they were direct purchasers of apps from Apple, while Apple argued that iPhone owners were indirect purchasers because the app developers—not Apple—set the prices for the apps. The divided Court sided with the plaintiffs.

In Illinois Brick, the state of Illinois had brought a price-fixing suit against concrete block manufacturers over the costs the state incurred in contracts for building construction. The state did not buy the concrete block directly from the manufacturers, but rather from general contractors, who in turn had purchased the block from masonry contractors. The Supreme Court ruled that only the direct purchasers of the concrete block, the masonry contractors, could sue for the overcharge caused by the price fixing, because indirect purchasers (such as the state) had no standing to sue.

According to the allegations in the underlying complaint, Apple monopolizes the market for the sale of apps to iPhone owners through its App Store. Apple allegedly charges app developers an annual membership fee, requires that developers set a retail price of at least $0.99 (and always ending in 99 cents) for an app sold through the App Store, and charges a 30 percent commission on every app sale. The plaintiffs claim that the prices they pay Apple for apps is inflated because of Apple's monopoly of this market. The Court's rationale for determining that iPhone owners are direct purchasers of apps via Apple's App Store was threefold.

First, the Court concluded that a plain reading of Section 4 of the Clayton Act, Section 2 of the Sherman Act and Illinois Brick suggests that iPhone owners are not consumers at the bottom of a vertical distribution chain because there is no intermediary in between them and Apple in the distribution chain. Second, the Court rejected Apple's argument that the app developer was an intermediary simply because it set the prices for the apps because application of Illinois Brick should not depend on retailers' financial arrangements with their manufacturers or suppliers. Third, the Court found that Apple's argument would undermine the long-standing goal of Illinois Brick—effective private enforcement and consumer protection in antitrust cases.

The dissent argued that the majority opinion was not a straightforward application of Illinois Brick but rather an effort to "begin whittling away" Illinois Brick "to a bare formalism." Justice Gorsuch criticized the majority's so-called straightforward application of Illinois Brick and claimed that iPhone owners rely "on just the sort of pass-on theory that Illinois Brick forbids."

Apple v. Pepper highlights the difficulties of applying well-aged antitrust doctrines to the electronic markets where it is sometimes unclear whether consumers purchase goods directly from a retailer or from a manufacturer. These markets are more often not a traditional vertical chain but a "closed loop" where one party sets the price and is charged a commission but another party actually sells the product. The decision in Apple v. Pepper may not signal a shift in how courts apply long-standing antitrust rules to today's economy, but rather an assurance from the Court that that the U.S. antitrust laws can adequately regulate the current economy.

For Further Information

If you have any questions about this Alert, please contact Sean P. McConnell, William Shotzbarger, any of the attorneys in our Antitrust and Competition Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions