Supreme Court

Antitrust standing and Kavanaugh-versus-Gorsuch textualism

The Supreme Court's dueling opinions in Apple, Inc. v. Pepper raise interesting questions about textualist statutory interpretation.

|The Volokh Conspiracy |

As Jonathan has noted, the Supreme Court recently released an interesting antitrust opinion in Apple, Inc. v. Pepper. The majority opinion was written by Kavanaugh and joined by the liberals; the dissent was written by Gorsuch and joined by the remaining conservatives.

In this post, I'll explore how the Kavanaugh-Gorsuch disagreement relates to textualism. Later, I'll talk about how this relates to the theory of the firm.

I. The Illinois Brick rule and the basic debate in this case

First, you need to know the basic debate, which is how to characterize the antitrust standing rule of Illinois Brick Co. v. Illinois (1977). (This is statutory standing, not constitutional standing—what in administrative law we call "zone of interests" standing.) Just so you understand the issues involved, let me give a brief overview: Suppose Firms A1, A2, etc. make concrete blocks and sell them to general contractors B1, B2, etc. Then you hire those general contractors for your construction projects. You have a theory that the concrete block manufacturers A1, A2, etc. have violated the antitrust laws (for instance, by conspiring to fix prices); as a result, general contractors B1, B2, etc. have paid excessive prices, and in turn you've paid excessive prices for your construction projects. Can you sue the concrete block manufacturers A1, A2, etc.?

Those are essentially the facts of Illinois Brick. The Illinois Brick rule says No. The general contractors B1, B2, etc. are the direct purchasers who directly pay the alleged price surcharge, and they have statutory standing to sue. You, on the other hand, are not a direct purchaser, and your damages are indirect: whether you pay the alleged price surcharge depends on the extent to which B1, B2, etc. have been able to pass on that price increase. So you can't sue. Remember that this is a rule about standing, i.e. about access to court—you can't sue even if A1, A2, etc. have really violated antitrust law.

Now Apple, Inc. v. Pepper presents a particular twist on the Illinois Brick facts. In the fact pattern above, there was a clear vertical hierarchy. The A firms sold to the B firms, which in turn sold to you. You had no contact with the A firms: you neither bought from them directly nor paid their allegedly inflated prices.

But what if the firms had a less clear-cut vertical relationship? In Apple, it was apps being sold through Apple's App Store. When you buy an app, the price is set by the app developer. But you pay the price to Apple directly; Apple passes the money on to the app developers, retaining a 30% commission. The claim was that Apple was improperly using its monopoly power, which made the 30% commission too high. So this disaggregates two aspects of Illinois Brick:

  • Who buys directly from Apple? You do.
  • Who directly pays the alleged inflated fees? The app developers do. (You may indirectly pay more for the apps, but that depends on the extent to which the app developers can pass on the higher commissions.)

If you think the Illinois Brick rule was "Direct purchasers from the alleged violator may sue," then you'll probably think the end consumers can sue. That's the Kavanaugh majority. But if you think the Illinois Brick rule was "Those who directly pay the alleged inflated prices may sue," then you'll probably think standing is reserved for the app developers, not the end consumers. That's the Gorsuch dissent.

I'm not going to resolve that debate here, but I want to raise a number of interesting points. Today's points relate to how the antitrust statutes relate to textualism.

II. Textualism and the Sherman Antitrust Act

The first point has to do with textualism. Kavanaugh is thought of as a textualist, and so is Gorsuch. How, then, are we to understand their disagreement on the meaning of the Sherman Antitrust Act in this case?

In the first place, the Sherman Act is very short and very old, and for a long time has been understood as a delegation to the judicial branch to develop (common-law-style) workable rules. (The Supreme Court suggested, in National Society of Professional Engineers (1978), that this common-law-style policy development was part of the intent of the original Congress. For my views on such delegations, see my Emory Law Journal article on federal common law and judicial non-delegation, and in particular pp. 1453-56 for the section on the Sherman Act.) A lot of antitrust law, these days, is fairly far removed from any actual text, though one can certainly imagine a more textualist approach.

But this isn't the whole story, since both Kavanaugh and Gorsuch claim that their respective interpretation has greater textual bona fides.

Kavanaugh (p. 4) points to particular text in the Clayton Act of 1914 (emphasis added):

any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue . . . and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

"The broad text" of this statute, Kavanaugh wrote, "readily covers consumers who purchase goods or services at higher-than-competitive prices from an allegedly monopolistic retailer."

Now this isn't exactly right, because if any person who's injured can sue the alleged antitrust violator, then we'd have virtually no statutory standing requirements at all (other than the requirement of injury, which is already taken care of by the constitutional standing requirement of injury-in-fact, and the "in his business or property" requirement, which is similar to what we have in RICO standing).

Still, even if pointing to this text doesn't inexorably lead here to overruling Illinois Brick, at least, in Kavanaugh's view, it cuts against any attempt to read statutory standing narrowly.

How does Gorsuch get around this? By writing (dissent, p. 9):

The Court even tells us that any "ambiguity" about the permissibility of pass-on damages should be resolved "in the direction of the statutory text"—ignoring that Illinois Brick followed the well-trodden path of construing the statutory text in light of background common law principles of proximate cause.

In other words, the statutory text doesn't stand alone; you need to interpret statutory text in light of the rest of the legal system that existed at the time of enactment, including "background common law principles."

How does Gorsuch's approach square with his textualism? Answer: perfectly well. Eugene writes (in the context of the Hyatt decision) that:

none of the Justices on the Court is a pure textualist. They all consider at least the text, the original meaning, and "historical practice." And that is in large part because the Constitution is widely understood as having been enacted against a backdrop of established law and practice, and therefore in some measure implicitly adopting aspects of that law and practice, rather than being limited to what is within the four corners of the document.

I agree, except insofar as considering the "backdrop of established law and practice" is labeled a departure from "pure textualis[m]." Thomas in Hyatt (quoting Kennedy in Alden v. Maine) criticizes "ahistorical literalism," and I'd stick with that formulation. Ahistorical literalism isn't pure textualism; it's usually an anti-textualist's caricature of what textualism requires. The idea that background principles of proximate causation should be read into statutes like the antitrust laws (or RICO, or others) is perfectly good textualism.

Of course, it's not like Kavanaugh disagrees with the idea that proximate causation is part of the statute. They actually both agree on this score: Kavanaugh says (p. 5) that the statutory text counsels against reading standing narrowly, and that proximate-cause considerations prevent suits by indirect purchasers. Gorsuch says (dissent, p. 2) that proximate-cause considerations prevent going "the next step" after "the overcharging," which would prevent suits by those who didn't pay the alleged overcharge. So they agree on proximate cause but disagree on how to characterize the causal chain that eventually needs to be cut—which is the ultimate disagreement in the case. Either way, nobody's approach here is necessarily inconsistent with textualism (though other approaches play a role here, including precedent and free-floating antitrust policy); someone's presumably wrong and someone's right, but these are valid disagreements among textualists.

III. Contraction traction, what's your fraction?

Finally, please note that Gorsuch is all about using contractions. Scalia was very much against contractions, in his day (not just in his own opinions, but also in others'). Gorsuch embraces them. I'm glad to see this catch on. Bryan Garner approves too, and notes that Kagan has also been using them but only in separate opinions.

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  1. Illinois Brick followed the well-trodden path

    Gorsuch chose to follow the Illinois Brick road?

  2. While I much more often than not find myself on the so-called “conservative” side when Supreme Court cases are decided by an ideologically split Court, just as a matter of legal interpretation (and setting aside the economic issues of whether antitrust law is good policy) I found myself more than a little puzzled by the Gorsuch dissent in the Apple case. To me, the Kavanaugh opinion was much more straightforward and logical – Apple was the retail seller, the plaintiffs purchased directly from Apple, and the plaintiffs alleged that they were injured by Apple’s monopolistic price-fixing in the commission paid to developers. If, as Gorsuch contended, that was not enough to satisfy the Illinois Brick test, it would allow all manner of mischief that could never be challenged (or, as a practical matter, would never be challenged) as long as the monopolist was clever enough to devise a distribution chain that insulated it from the suckers. And if attaching antitrust liability to the conduct that Apple stands accused of is economically inefficient, that is an argument for Congress, not the courts, to resolve.

    1. “If, as Gorsuch contended, that was not enough to satisfy the Illinois Brick test, it would allow all manner of mischief that could never be challenged (or, as a practical matter, would never be challenged) as long as the monopolist was clever enough to devise a distribution chain that insulated it from the suckers.”

      Some people regard that as the ideal; those people tend to be avid consumers of big-firm legal services (large firms engage in most antitrust battling) and sponsors of think tanks and judicial retreats.

    2. I agree that the Gorsuch approach would lead to gaming and gutting consumer anti-trust protection by structuring entities so that the one nominally responsible for pricing isn’t the one nominally selling to consumers. The fact that this was of no concern to the dissenters – the entire history and purpose of the anti-trust laws simply didn’t matter – is a problem.

      1. That’s not at all what the Gorsuch dissent does. That is what Illinois Brick does.

        1. I think both Kavanaugh and Gorsuch claim to be applying Illinois Brick, they disagree on what it means.

        2. If that’s the case, then Illinois Brick was inconsistent with the statutory intent, making reading it narrowly the more correct reading. It is after all the statute, not just their own prior decisions in a vacuum, that the Court is supposed to be construing.

    3. The argument is that is form over substance. For instance They can maintain the same 30% commission, the app developer would still charge the same amount, but if the way to buy was instead to go to the app developer directly then there is no standing. But the alleged violation and cause of injury is exactly the same.

      Another way to think of this is a market place (say a flea market) where each vendor pays the organizer of the market a commission. The market can be set up to pay the organizers directly at an exit point teller or for customers paying the vendors directly at the booth. Do we really think that rules should be any different there? But that is what the majority said. Pay the vendor there is no standing. Pay the organizer there is.

      But again that is purely form. Not substance.

      1. But your flea market scenario omits the part where the flea market has somehow arranged for it to be impossible for you to make the purchase anywhere outside the flea market.

        THAT is the locus of the problem: Apple locks down their products so that you can only purchase apps through the Apple store. The Apple store isn’t a convenience for Apple product owners, it’s an aggressively enforced bottleneck designed to give Apple monopoly powers.

        1. I agree, Brett.

        2. Ok but posit you have to go through the app store but the money is still going directly to the developer. The store is merely a convenient way to track sales for commission purposes. Again no different in any meaningful way but no standing. This is form over substance.

          The gravamen of Illinois Bank is that if the alleged anti trust violation causes someone to raise the price to pass it on to you, you can’t sue. That is exactly what this case is regardless of the form it took.

          1. The store is merely a convenient way to track sales for commission purposes.

            No. It’s more than that. It’s the only outlet through which the app developer can sell.

            If the developer were allowed to sell directly to the consumer there would be no commission to track.

            Or, other sites might spring up that sell apps for a smaller commission.

            1. 1. I was talking about my hypo.
              2. You are confusing whether there is an anti-trust violation to whether the consumer has standing to sue. That is what Illinois Bank was all about. Saying the consumer can’t sue, is not saying there is no anti-trust violation. The app developers can still sue.

              1. Illinois Brick is about who proximately caused the antitrust violation, not about “who can sue” in the abstract. That’s what the proximate cause analysis is about. When the retailer is a monopolist, the retailer is proximately causing the antitrust violation. When the retailer isn’t a monopolist, there is no antitrust violation to cause. That’s why it matters.

                Because the retailers get the price they want – they don’t get affected by the excess commission – they aren’t the ones harmed by the antitrust violation. The consumers are.

            2. Bernard, those are arguments that would be made on the merits, but they have to pass the standing hurdle first.

              1. I think I agree with Kavanaugh on the standing hurdle: You ARE buying from Apple, and Apple has gone out of their way to deny you any alternatives. That makes the developers more like Apple contractors rather than independent vendors.

                If it weren’t for the locked in nature of the Apple store, I’d agree the purchasers wouldn’t have standing, but they wouldn’t face a monopoly, either.

                1. I agree with Brett.

                  You are buying from Apple. You find the app you want at the Apple app store. You pay Apple. You download from Apple. You can’t buy unless you have an Apple ID. The charge shows up on your credit card as being from Apple. You can’t buy from the developer or at another web site.

                  Maybe one analogy is a consignment store.

            3. “No. It’s more than that. It’s the only outlet through which the app developer can sell.”

              This is false. From the amicus brief of The App Association (which represents app developers):

              “In reality, [Apple] is only entitled to the agreed upon percentage of the app developers’ app fee. Aside from this fee, [Apple] has no ownership rights to the app. In addition, app developers can offer their apps on platforms not owned by [Apple], unencumbered by [Apple]. All creative rights solely belong to the app developer and are uninhibited by [Apple].”

              App developers are “allowed to sell directly to the consumer”. That they choose not to suggests that there are pro-competitive reasons for the app store, including its exclusivity features (for IOS devices).

    4. If, as Gorsuch contended, that was not enough to satisfy the Illinois Brick test, it would allow all manner of mischief that could never be challenged (or, as a practical matter, would never be challenged)

      I don’t understand why you think that. If Illinois Brick applies, then the app developers can challenge Apple’s policies.

      I think Gorsuch explained why Illinois Brick should apply, and The Other Volokh summarized it clearly: although the money was handed by consumers to Apple, the sales were really being made by the developers; they were just being processed by Apple.

      1. the app developers can challenge Apple’s policies.

        They really can’t. Not if they want to keep selling their apps while the case wends its way to the Supreme Court. This lawsuit was originally filed in 2011.

        1. Plus, that’s not including all the various agreements between the developer and Apple involved in creating an App. It’s not just the final agreement to host the app on the store, there’s a ton of other agreements about the tools to create the app, and even license to use iPhones for testing the app before distribution. It’s a very convoluted nest. Also, I would wonder about if there were clauses in the contracts that would make it extraordinarily difficult for the developers to sue. Arbitration Clauses, NDAs etc. Not that it could completely (I believe) deny access especially on anti-trust principles, but certainly enough to make the fight just to get a case decided on the merits excruciating, not to mention the appeals.

    5. I agree. I was with the liberals on this one.

  3. I don’t think the difference is about textual I am. I think the difference is about what is form and what is substance.

    To Kavanaugh legal entities and their relationships are form, fungible and artificial. Economic consequences are substance. Since a mark-up system can be replaced with a commission system without altering anything externally, they are mere interchangeable forms, without economic substance. Hence they can’t be causes. If a monopolist can restructure the relationship without economic consequence, the alternative structures are equivalent for antitrust purposes.

    To Gorsuch, legal entities and their relationships are the fundamental reality and source of cause. Change a markup system to a commission system, and the entity who is causing the price increase changes, which necessarily changes antitrust standing. Because the structure is the reality, the fact that a monopolist can avoid antitrust liability by restructuring the relationship simply doesn’t matter.

    1. Really? I read it opposite when looked at with Illinois Brick. The difference between that and this is form, not consequence. Gorsuch is saying the consequense/substance is what is relevant. Kavanaugh is the one relying on the a change of form to make the change in result.

      1. I’m not convinced the change Gorsuch talks about would change matters much. He says,

        To evade the Court’s test, all Apple must do is amend its contracts. Instead of collecting payments for apps sold in the App Store and remitting the balance (less its commission) to developers, Apple can simply specify that consumers’ payments will flow the other way: directly to the developers, who will then remit commissions to Apple.

        But it’s not so simple. How is Apple going to do this? How can they collect the commission? Only by continuing to maintain the app store as the exclusive place to sell apps, with all that entails.

        It’s really no different than the current arrangement.

    2. To me this situation has close parallels to consignment sales, an arrangement not present in Illinois Brick but where there is considerable antitrust law developed. In Simpson v. Union Oil 377 U.S. 13 (1964) the Court held that

      Consignments perform an important function in trade and commerce, and their integrity has been recognized by many courts, including this one. […] Yet consignments, though useful in allocating risks between the parties and determining their rights inter se, do not necessarily control the rights of others, whether they be creditors or sovereigns. […] Here we have an antitrust policy expressed in Acts of Congress. Accordingly, a consignment, no matter how lawful it might be as a matter of private contract law, must give way before the federal antitrust policy. Thus a consignment is not allowed to be used as a cloak to avoid § 3 of the Clayton Act.

      1. Okay, but the issue here has nothing do with “avoiding” the Clayton Act; the issue is just who has standing.

        1. Right, and so Simpson isn’t directly applicable, but it or similar cases might provide some direction how to deal with consignment and form vs. substance in an antitrust action.

  4. Yes, these opinions raise some interesting questions regarding the competency of Kavanaugh given his inability to grasp the rationale underlying Illinois Brick and apply the precedent intelligently in the case.

    1. the competency of Kavanaugh

      Not merely incorrect, incompetent!

      1. Incompetent, but able to persuade four justices to join his opinion?

        1. Pares Cum Paribus

        2. How do you know he convinced them? Maybe they convinced him (RBG would have been the one to assign him to write the opinion)

          1. That is a reasonable point.

      2. Not his first judicial embarrassment. The clown doesn’t know the difference between a tax and a penalty.

        1. Disagreeing with a Justice is all in good smart fun, but it’s the height of ego to assume that when you disagree it’s because your legal skill so overwhelms his.

          1. I defer to your knowledge of ego. No shortage of that on the left. Or the Court. But your comment is particularly idiotic. I do not disagree with him because I believe my legal skill so overwhelms his. I disagree with his gross misinterpretation of the controlling precedent. And frankly, I never personally liked the guy, but that’s beside the point. My opinion that your comments are substantively idiotic has nothing to do with the fact that I don’t particularly like you.

            1. “I defer to your knowledge of ego. No shortage of that on the left. ”

              After more than a half-century of stomping on conservatives’ preferences in the American culture war, the liberal-libertarian alliance might be tempted toward a bit of self-esteem, particularly in the context of comparisons with right-wingers they have been smacking around.

  5. This discussion seems somewhat abstruse.

    I’m a spice things up a little.

    Trump sucks!

    1. “Trump sucks!”

      Yes, yes he does. But only about 40% of the time. Which makes him about 20% better than most politicians and at least 50% better than the Democratic Socialist wing of the Democratic Party.

      1. Thank goodness it will be the liberal-libertarian mainstream, rather than the Democratic Socialist wing of the Democratic Party or whatever the Trump electoral coalition should be called (now or after Trump departs the stage), that will continue to shape American progress throughout our lifetimes and likely beyond.

        1. So you agree with President Trump that America will never be a socialist country?

          You and the President share quite a bit of optimism.

          1. Plenty of right-wingers consider much of today’s America, and will consider more of tomorrow’s America, socialist.

            Pres. Trump probably couldn’t define “socialist” if the prize were another adultery session with Stormy Daniels or the chance to sell an overpriced condominium to a Russian criminal.

            I expect America to continue improve along the liberal-libertarian trajectory established by our progress throughout my lifetime. The likelihood that America will begin to adopt conservative preferences resembles the likelihood that Mexico will pay for a wall, Hillary Clinton will be incarcerated, and unskilled, educated rural males will begin to prosper at the expense of skilled, educated “elites” residing in modern, successful communities.

            1. So what’s the difference between actual socialism and the totally non-socialist future which bitter clingers will falsely call socialist?

              1. Providing school lunches to children, or arranging health care for citizens, or maintaining Social Security — and a hundred other sound government activities that right-wingers whine about — have little to do with public ownership of production assets.

                Those who won’t like a continuation of the general arc of American progress during the past six or seven decades are not going to like the next half-century any more. It’s a free country, though, so they can continue to whine about it and try to persuade others to become backward, bigoted, superstitious, frightened, and selfish.

                1. Social Security will persist through the next half-century?

                2. Yeah, and who’s going to pay for all this? The hordes of illiterate migrants from Honduras? Or maybe Somali Muslims?

  6. I’m with Scalia: no contractions!

    1. Shouldn’t that be “I am not…” I mean, should not that be?

  7. I am with a previous commenter who said the locus of the issue is the monopolistic behavior of Apple. It IS a monopoly, in the purest sense. With Android one can install apps from sources other than the Play Store. With Apple, while hobbyists and hackers can, the vast majority of iPhone owners cannot. I say bust the monopoly, require that users may exercise consumer choice. This has gone on long enough!

  8. It IS a monopoly, in the purest sense.

    In the most simplistic sense. McDonalds is a monopoly seller of Big Macs, too.

    (Difference is, McDonalds sets the price of Big Macs, while Apple doesn’t set the price of apps.)

    1. In the most simplistic sense. McDonalds is a monopoly seller of Big Macs, too.

      But we are not in an alternative-universe Demolition Man, where all restaurants are McDonalds. However, for the iUniverse, all app stores are Apple.

      1. But we are not in an alternative-universe Demolition Man, where all restaurants are McDonalds. However, for the iUniverse, all app stores are Apple.

        We don’t live in the iUniverse. We live in the universe, where — just like there are lots of non-McDonalds restaurants (though none of them offer Big Macs) — there are at least a half dozen other prominent smartphone manufacturers, the use of none of which require you to buy stuff from Apple’s app store.

        1. “there are at least a half dozen other prominent smartphone manufacturers, the use of none of which require you to buy stuff from Apple’s app store.”

          No, they don’t, rather if you buy a smartphone from one of those other manufactures, Apple prohibits you from buying from the Apple store.

      2. “However, for the iUniverse, all app stores are Apple.”

        For the McDonaldsverse, all big mac stores are McDonalds.

        1. Right, but under the Microsoft Anti-trust case, macs are a separate market for anti-trust analysis. Which is a state of affairs that rather neatly translates to this situation. Your purchases and software don’t carry over, there’s a high friction barrier for user movement between product families etc.

          1. Your response is gibberish to me.

    2. I don’t think the McDonalds analogy applies.

      With an Android device, you can download and install apps with the web browser, you don’t have to go through the Google Play Store.

      With an iPhone, you can’t get apps of any kind from any source other than the Apple Store.

      It you want a restaurant analogy this is more akin to the situation in the movie “Demolition Man” where all restaurants are Taco Bell.

      1. More like Taco Bell sold cars, too, and when you tried to turn your Tacomobile into the drive through lane at Burger King, the steering wheel would freeze up.

        Gearheads can get under the hood, and install a bypass mechanism, but the regular Tacomobile owner is just flat out of luck.

      2. “With an iPhone, you can’t get apps of any kind from any source other than the Apple Store.”

        But you can if you purchase a competing product, Android. So in what sense is this like Demolition Man?

        “It you want a restaurant analogy this is more akin to the situation in the movie “Demolition Man” where all restaurants are Taco Bell.”

        In the movie, there are eateries that are not Taco Bell. In the sewer, remember?

        1. But you can if you purchase a competing product, Android.

          No. You can’t buy the IOS app for your Android phone.

          And even if an Android version is available it’s unrealistic – dare I say hyper-legalistic – to say, just buy an Android phone and save the 60 cents by buying from the developer.

          1. Keep it simple. Do people who don’t use the IOS app store still purchase apps? Yes. Is the plaintiff complaining about the price of apps? Yes. (Even though Apple doesn’t set that price, the app seller does.)

            1. People who have IOS devices and refuse to use the IOS app store, are unable to purchase apps at all.

              1. This isn’t true. I own an IOS device. I can’t purchase apps for my IOS device outside of the IOS app store, but that doesn’t prevent me from purchasing apps for other devices.

    3. “In the most simplistic sense. McDonalds is a monopoly seller of Big Macs, too.

      (Difference is, McDonalds sets the price of Big Macs, while Apple doesn’t set the price of apps.)”
      No, David, not the most simplistic sense, at all, and your McDonalds analogy is not apt. What is going on here is that Apple is controlling an enormous market; a market it created, for sure, and for which is is the sole platform supplier, and for which it controls all commerce in applications for that platform. They have monopolized that market, by requiring app sellers to sell through them, and them alone, and to pay whatever price Apple demands, which is now 30% of the app price set by the app provider. Yes, Apple doesn’t set the price; in a sense, the market does. But Apple extracts a share that only a monopoly could.

      A more apt analogy would be the 1956 IBM consent decree that “compelled IBM to support machines that had third party devices, such as disk drives and main memory, installed on them and to provide interfaces to machines to third parties so they could create such devices.” Then it was disk drives. Now it is software.

      As for your “most simplistic case” comment, go to the FTC webpage for the definition of monopoly and you will find this (as the first sentence):
      “The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power. ”

      Does this adequately describe Apple with regard to the App Store?

      This is off-point, though. The question is, I think, who is selling, Apple or the app providers? Let me ask you this: when you buy something at Wal-Mart, are you buying it from Wal-Mart, or from Wal-Mart’s supplier? Who do you pay? Who process your credit card payment? Did you know that Wal-Mart doesn’t own any of that merchandise until the moment you purchase it, and only owns it for, perhaps, milliseconds? I posit the exact same is so for the App Store. For Apple to say they are not selling the apps is nonsense.

      1. Apple doesn’t say that it isn’t selling the apps. Apple sells apps to iOS users, as an agent for app developers. But it isn’t apps, or even iOS apps, which Apple has allegedly monopolized. There is robust competition when it comes to iOS apps.

        It is Apple’s – and the United States’ – position that Apple is alleged to have monopolized iOS app distribution services rather than iOS apps. And for such services, iOS users aren’t the direct purchasers. App developers are the direct purchasers of those services. Even if Apple’s commission is supracompetitive, iOS users are only harmed by it if app developers pass that cost through to them.

        1. Perhaps I am ignorant of some nuance in this case, but what you say does not comport at all to what I have read in the non-legal media. If what you say is so, who, exactly, is the plaintiff here?

          My understanding is that the suit was brought by a Mr. Pepper, an iPhone user and App Store customer, and joined by several others, against Apple, “who accuse Apple of driving up the price of apps by charging third-party app developers a 30 percent commission. ”

          “Apple argued that App Store customers technically buy apps from third-party developers and have no direct purchasing relationship with Apple, and therefore no standing to seek damages from the company. But in a 5–4 decision, written by conservative Justice Brett Kavanaugh, the court voted against Apple, allowing the case to proceed.”

          This from the article in Wired magazine.

          So what on earth are you talking about? Where did your narrative come from???

          1. I can’t speak to how most media outlets have characterized the legal arguments made in this case. I haven’t read much of that characterization and I haven’t read the article you refer to.

            My understanding of the legal arguments is based on having read the Supreme Court briefing – mostly the merits briefing, but also some of the cert briefing – and having listened to the oral argument.

            1. Let’s net this out, O.K.? The appeal before SCOTUS is whether the iPhone app customers were purchasing directly from Apple, or from app providers. Right? Apple said no, they are purchasing from the app suppliers. The majority said yes, they are purchasing directly from/through Apple, so they have standing.

              Isn’t that it?

              1. It was not Apple’s position that iPhone app customers were not purchasing directly from Apple. Rather, it was Apple’s position that the transactional relationship between iPhone app customers and itself didn’t matter when it came to the Illinois Brick consideration. That’s because, according to Apple, it wasn’t accused of having monopolized apps. It was accused of having monopolized app distribution services. So what mattered for the Illinois Brick consideration was whether iPhone app customers, or in the alternative app developers, purchased such distribution services from Apple.

                That is also essentially the position that the United States took. The plaintiffs did purchase apps directly from Apple, but they didn’t purchase app distribution services from Apple. And the latter is what Apple had allegedly monopolized.

                If you’ve read commentary to the effect that Apple claimed that it doesn’t sell (third-party) apps to iPhone users – that that was the basis of its legal position – then that commentary was mistaken. Apple didn’t deny that it sells apps to iPhone users. To the contrary, it repeatedly acknowledged that it did.

                It did argue that it acted as an agency seller rather than as a reseller, but I don’t think that point can credibly be argued against. It didn’t buy apps from developers and then resell them. It didn’t, e.g., decide the prices it would sell apps at. It sold apps as an agent on behalf of app developers, the principals.

                1. You are distorting this by resolving “seller” to a binary, rather than accepting the concept of indirect and direct sellers, which is what the case is all about in relation to Brick.

                  1. You keep missing the point, which he’s made repeatedly. It matters not whether Apple sells apps to customers, or not. Because the plaintiffs aren’t alleging that Apple is a monopolist with respect to apps. They are alleging that Apple is a monopolist with respect to app distribution services. And Apple sells app distribution services to app developers. The thing plaintiffs here sued Apple because of the prices Apple was charging app developers.

                  2. I’m not distorting it. I understand the distinction between direct and indirect purchasers which matters under Illinois Brick.

                    What I’m saying, in response to things you have asserted, is that Apple doesn’t claim that it doesn’t sell apps. Further, it doesn’t even argue that the plaintiffs only purchase apps from Apple indirectly.

                    Instead, what Apple argues – among other things – is that the nature of Apple’s relationship with app purchasers doesn’t matter when it comes to the Illinois Brick consideration. That’s because, according to Apple and the United States, the plaintiffs aren’t really alleging that Apple monopolizes apps. They are alleging that Apple monopolizes app distribution services. And the plaintiffs are not direct purchasers of those services.

                    From Apple’s merits brief:

                    “In this case, the pass-through issue is clear and unavoidable, and not the least bit lessened by Apple’s role in selling and delivering apps to iPhone users. Respondents do not allege that Apple monopolized apps, but rather distribution services, an entirely different “upstream” product that consumers do not purchase at all. In that context, the transactional connection between Apple and app purchasers is not meaningful for the Illinois Brick issue.”

                    And:

                    “From that perspective – considering Respondents’ theory of antitrust injury and what it implies for Illinois Brick – the ‘actual market realities’ that matter are that consumers do not purchase the allegedly monopolized service from Apple, only developers do; and while consumers do purchase apps from Apple (acting as the developers’ sales agent) app prices are set by developers alone.”

                    And from Apple’s (merits) reply brief:

                    “Respondents would have this Court hold that, in all cases, any party ‘who purchase[s] a product or a service directly from an antitrust violator can sue that violator for damages.’ Resp. Br. 23. They claim that prohibiting damages claims by directly interacting plaintiffs would create ‘a new exception to Illinois Brick.’ Id. at 38. This is incorrect. Illinois Brick prohibits all pass-through damages claims. Honoring that principle here does not create an Illinois Brick exception; it falls squarely within the rule.

                    Respondents hijack the ‘direct purchaser’ shorthand to contend that Illinois Brick begins and ends with whether the plaintiff deals, transacts, or buys ‘directly’ from the alleged monopolist. But that takes the overcharge out of ‘overcharged direct purchaser,’ making the term empty and unhelpful.”

                    [Me writing] In other words… According to Apple, being a direct purchaser of something (e.g. apps) from the alleged monopolist isn’t enough. In order to have standing under Illinois Brick, a plaintiff needs to have directly purchased that which is allegedly overcharged for (e.g. app distribution services).

                    And the United States agrees, from its (amicus) merits brief:

                    “A plaintiff whose alleged injury is derivative of harm done to another is not a direct purchaser under that analytic framework, even if the plaintiff had a direct contractual relationship with the alleged antitrust violator. Respondents’ claim to direct-purchaser status is particularly weak because, although they purchased apps directly from Apple, they did not purchase the app-distribution services that Apple allegedly monopolized. Any injury they may have suffered is instead derivative of the harm done to the developers who did purchase (and allegedly were overcharged for) those services.”

          2. In the previous post I left out an answer to your first question.

            Yes, the plaintiffs are iPhone owners.

            A large number of app developers, through amicus briefs filed by associations representing them, supported Apple in this manner.

            1. It’s like NCAA v. Board of Regents. When the purported victims of the antitrust violation are siding with the monopolists, it suggests hat the plaintiff is mixed up.

      2. When you buy goods, the seller is whoever owned them before you did and transferred ownership to you. Not (necessarily) who you handed the money to, or who handled the delivery. If it were otherwise, the seller of the groceries I bought this morning would have been the young woman at checkout #3.
        As for Wal-Mart, they pioneered Vendor Managed Inventory some years ago and there was a lot of speculation they were headed toward a consignment model, but other than a few oddballs like Marketplace and online drop-shipping my information is they still own their inventory even if they make suppliers manage it.

        1. “If it were otherwise, the seller of the groceries I bought this morning would have been the young woman at checkout #3.”

          The checkout person is an employee and agent of the store, so when you hand her the cash, you are effectively handing it to the store. And, not your definition is not correct, as there are many, many cases where the sales person is not the one who owns the goods. A sales person who doesn’t own the good still profits from the sale, and assumes some liability as well.

          1. Publius, that’s right. As in the grocery store, it often happens that the sales person is not the seller.

            If, as you believed, Wal-Mart was selling consigned goods, then it would be happening there too. The seller would be the supplier and Wal-Mart would be acting as their sales agent.

          2. As an aside, I wondered what you were quoting about the IBM consent decree. I’ll grant that IBM did introduce a disk drive in 1956, a vacuum-tube monster 5 feet high and wide holding 5 megabytes, but it didn’t put in an appearance in the document. The text instead went into some detail about enabling 3rd party suppliers of punch cards, and preventing IBM from controlling the supply of paper to make them.

      3. “They have monopolized that market…”

        This is wrong, but even if it is true, it is not something the court adjudicates at the standing stage.

        “…and to pay whatever price Apple demands…”

        This is true for every seller of everything, ever.

        The reference to IBM is a good example of everything that’s wrong with antitrust law. Tying agreements don’t harm consumers. Full stop. They shouldn’t be the subject of antitrust laws at all.

  9. I think Justice Gorsuch’s is the fairer reading of Illinois Brick. I also think that he’s right in that the Court’s decision could be easy for Apple – and other parties who find themselves similarly situation with regard to direct/indirect purchasers – to work around.

    That said, I think there’s a pivotal distinction which some fail to make in relation to this case. What has Apple allegedly monopolized? iOS apps or iOS app distribution services?

    If it’s the latter, then iOS device users aren’t direct purchasers and, under Illinois Brick, shouldn’t be allowed to bring this action. The app developers are the direct purchasers of those distribution services.

    If it’s the former, then iOS device users are direct purchasers and should be allowed to bring this action. Apple, by its own admission, sells – as an agent, not (for the most part) as a primary – iOS apps to iOS device users. But monopolization of iOS apps would be a much harder case to make than monopolization of iOS app distribution services. Thousands of developers have created millions of apps which are downloaded billions of times per year through the App Store.

  10. “Kavanaugh is thought of as a textualist, and so is Gorsuch. How, then, are we to understand their disagreement on the meaning of the Sherman Antitrust Act in this case?”

    Because “textualism” is a principle of constitutional interpretation not applicable to statutes.

  11. If you think the Illinois Brick rule was “Direct purchasers from the alleged violator may sue,” then you’ll probably think the end consumers can sue. That’s the Kavanaugh majority. But if you think the Illinois Brick rule was “Those who directly pay the alleged inflated prices may sue,” then you’ll probably think standing is reserved for the app developers, not the end consumers. That’s the Gorsuch dissent.

    Elegant legal prose, as is the description of Illinois Brick that it culminates.

  12. … Kagan has also been using them [contractions] but only in separate opinions.

    Someone else senior to her objects to them — not to the point of refusing to concur, but probably just grumblingly around the conference table — so she’s playing Respectful Junior Justice while also playing Twenty-First Century Easy-Breezy Justice. Great catch; hilarious, actually.

  13. In the case of Apple at least the distinction is somewhat moot. All the plaintiffs would have to do is write and publish a simple app in the Apple store, and then they would have standing regardless of the interpretation of the Illinois Brick ruling

    1. Oh, right, that’s simple! Why didn’t they think of that?

      /sarcasm

  14. Think about this in terms of consumer protection. Since app developers know app purchasers will pay X for an app, they will not charge 30% less even if they didn’t have to use the IOS app store. The plaintiffs cannot receive cheaper apps by winning. The reason the manufacturers aren’t challenging the 30% is because Apple is solving a problem for them.

  15. Now this isn’t exactly right, because if any person who’s injured can sue the alleged antitrust violator, then we’d have virtually no statutory standing requirements at all

    No that IS exactly right. Standing is a silly judge created concept. It needs to be done away with, because its often used (like in this case) to make a decision.

  16. I think it is like It’s like NCAA v. Board of Regents
    NTS

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