The Supreme Court held on Monday that antitrust plaintiffs may sue Apple for allegedly using its monopoly over iPhone app sales to jack up prices. The decision itself is a minor one, as it largely turns on who is allowed to sue the tech giant for its alleged antitrust violations, not whether Apple broke the law.
Nevertheless, Apple Inc. v. Pepper is significant for an unexpected reason. It is the first case where Trump judge Brett Kavanaugh crossed over to vote with his four liberal colleagues in a 5-4 decision.
The iPhone’s app store, as Kavanaugh notes in his opinion, “is the only place where iPhone owners may lawfully buy apps” for their phone. Apple permits developers to set the prices of these apps, but it also takes a 30% commission on all app sales, regardless of what price the developer sets.
The theory of the plaintiffs’ case is that, were iPhone apps sold in a competitive market with multiple sellers, Apple would have to lower its 30% commission in order to compete with those other sellers. Thus, Apple effectively uses its monopoly on app sales to drive up prices and jack up its own profits.
So it’s a fairly straightforward antitrust case, but there is one hitch. More than four decades ago, in Illinois Brick Co. v. Illinois, the Supreme Court held that only “direct purchasers” may bring antitrust suits against an alleged monopolist.
Illinois Brick involved an alleged price-fixing scheme by a brick company that sold those bricks to masonry contractors, who in turn sold pre-assembled structures to general contractors, who in turn sold construction services to the state of Illinois. Illinois sued the brick company, alleging that it paid higher construction costs because of the price fixing scheme. The Supreme Court held that Illinois could not sue the brick company because, in Kavanaugh’s words, “the State had not purchased concrete blocks directly from Illinois Brick.”
But, as Kavanaugh explains in his Apple opinion, this more recent case is not Illinois Brick. That is, Apple is not a case where a company sold a product to a contractor, who sold it to another contractor, who sold it to an antitrust plaintiff. Apple is a case where a tech company sold a product directly to consumers. Thus, under Illinois Brick, Apple may be sued by those consumers.
Indeed, Apple is such a straightforward case that the most surprising aspect of Monday’s decision is that it produced a dissent — much less a four person dissent. Had Apple prevailed, that decision could have had negative consequences for consumers. As Kavanaugh explains, “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.”
Nevertheless, the most important question arising from Apple is what we should make of Kavanaugh’s apostasy. As I wrote last January, Kavanaugh is not Neil Gorsuch — the nihilist conservative that President Donald Trump placed on the Supreme Court after Senate Republicans held a seat on that court open for more than a year. While Gorsuch embraces “a will-to-power approach to judging” which demands that he seize as much power as he can, and as fast as he can, Kavanaugh and Chief Justice John Roberts “appear to prefer a slower, more incremental approach.”