Antitrust attorney K. Todd
Wallace comments on the latest development in Apple, Inc. v. Pepper, a case involving
the issue of standing in antitrust cases
The Case of Apple Inc. v.
Pepper is currently pending in the United
States Supreme Court. At issue is whether consumers may sue anyone who delivers
goods to them for antitrust damages, even when they seek damages based on
prices set by third parties who would be the immediate victims of the alleged
offense. Oral argument is set in this case for November 26, 2018. The case centers
on Apple Inc.'s App Store,
and whether consumers of apps offered through the store have Article III standing under federal
antitrust laws to bring a class-action against Apple for alleged improper
regulation of its App Store. The case centers on the applicability of the
‘Illinois Brick doctrine’ established by the Supreme Court in 1977 in Illinois Brick Co. v. Illinois,
which determined that indirect consumers of products lack Article III standing
to bring antitrust charges against producers of those products.
The Solicitor General
has already weighed in favor of the Supreme Court granting cert, arguing that
the Ninth Circuit decision was wrongly decided.
Specifically, Solicitor General’s brief argued that the Ninth Circuit
misapplied Supreme Court’s precedent in Illinois
Brick by focusing on Apple’s functional role. The central issue, according to the Solicitor
General, should have been whether the plaintiffs are pursuing a “pass-on
theory”, that is “that the defendant unlawfully overcharged a third party and
that the third party passed on all or part of the overcharge to the
plaintiff.” Such claims are barred by Illinois Brick, the Solicitor General argued. Unsurprisingly, the Solicitor General has filed
a brief arguing for reversal and the motion to participate in oral argument has
been granted.
Presenting a
different perspective, thirty-one states have joined in filing an amicus brief
in support of the purchasers. Drawing
support from states across the political spectrum, the amicus brief argues that
Illinois Brick should be overturned,
a position advocated by a number of antitrust commentators since the 1980’s. The amicus brief argued that Illinois Brick was based on policy
concerns, not legislative text. “The [Illinois Brick] Court relied on a policy
concern that the extent of passing-on is ‘virtually unascertainable,’ making
proof of that injury unreliable and burdensome to courts and to potential
plaintiffs. The Court also reasoned that
a serious risk of duplicative liability for the same conduct justified allowing
direct purchasers to recover 100% of the violator’s overcharges, even if passed
on, and disallowing any recovery by indirect purchasers for their injury.
Finally, the Court believed that allowing all victims to recover for their
actual injuries (trebled, plus attorney’s fees) would insufficiently encourage
private suit, as compared to Illinois
Brick’s rule allowing only a subset of victims to recover for a larger but
presumed injury.” The brief goes on to
note that states have since overwhelmingly refused to apply the Illinois Brick rule in state antitrust
law. “As a result, state courts (and
federal courts hearing state-law antitrust claims) now have decades of
experience assessing proof that indirect-purchaser consumers were injured by
illegal overcharges that distributors passed on from manufacturers. Illinois Brick’s predictions and policy
judgments have not withstood that test of time.”
The amicus brief further
notes that “[s]ince Illinois Brick,
economists serving as experts in indirect-purchaser cases have reliably used
previously unavailable tools and methodologies to assess that harm.” “Second, courts have shown themselves capable
of applying gatekeeping rules of evidence to this type of expert
analysis.” The brief goes on to note
that there has been no reported case of multiple liability and that excluding indirect
purchasers can actually serve to disincentivize private suit because
aggregation of claims can serve as an incentive to private suit. Therefore, the states argue Illinois Brick should be
overturned. In what is building up to be
a seminal case on antitrust standing, the federal government and majority of
states have taken up opposing positions on the appropriate outcome.
The docket of the
case Apple Inc. v. Pepper is at
http://www.scotusblog.com/case-files/cases/apple-v-pepper/
K Todd Wallace is
an attorney and founding partner of the law firm Wallace Meyaski LLC. He has
nearly 20 years of experience in the legal and business professions with
established excellence in trial advocacy, negotiation, strategic and initiative
planning, employment law compliance, government relations, mergers and
acquisitions, and team building.
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*** K. Todd Wallace is an attorney at Wallace Meyaski in New Orleans. He has nearly 20 years of experience in the legal and business professions with established excellence in trial advocacy, negotiation, strategic and initiative planning, government relations, mergers and acquisitions, and team building. See http://www.walmey.com/our-attorneys/k-todd-wallace/
