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Plaintiffs Hit an Illinois Brick Wall: Indirect Purchasers of iPhone Apps Lack Standing to Bring Antitrust Suit

On December 2, 2013, United States District Judge Yvonne Gonzalez Rogers of the Northern District of California dismissed a case against Apple brought by a putative class of consumers who purchased applications from the App Store claiming that Apple’s 30 percent commission violated Section 2 of the Sherman Act.  Judge Gonzalez Rogers held that the consumers were indirect purchasers barred from bringing suit under Illinois Brick and dismissed the case with prejudice.  In re Apple iPhone Antitrust Litigation, No. 11-cv-06714-YGR (N.D. Cal December 2, 2013).

The purported class argued that Apple monopolized the aftermarket for iPhone applications by collecting a 30 percent commission on all apps sold by independent developers in its virtual store.  Applications for the iPhone are only available in the Apple App Store, and many of them are made by independent developers and then vetted by Apple.  When apps are sold, the developers keep 70 percent of the proceeds, while Apple’s cut is 30 percent.  After the court dismissed plaintiffs’ First Amended Complaint for lack of standing, the consumers attempted to recast themselves as direct purchasers, arguing that Apple’s 30 percent fee is a direct cost to them because applications would have inevitably been 30 percent cheaper but-for Apple’s commission.

Relying on the Ninth Circuit’s recent decision in In re ATM Fee Antitrust Litigation, Judge Gonzalez Rogers rejected Plaintiffs’ argument that they were in fact direct purchasers because Apple’s fee was “borne by developers” and paid “from their own proceeds” rather than being a direct cost to consumers who purchased apps from the App Store.  The court refused to speculate that app prices would have necessarily been 30 percent lower without Apple’s commission.  It found that because the fee was at most passed on to consumers by the developers, the consumers were indirect purchasers under Illinois Brick.  Moreover, plaintiffs failed to allege that any of the exceptions to the Illinois Brick doctrine applied.  Judge Gonzales Rogers thus dismissed the indirect purchasers’ suit for lack of standing without leave to amend.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume III, Number 353

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About this Author

Nail Popović, Business Trial Legal Specialist, Sheppard Mullin"
Partner

Mr. Popovic is a partner in the Business Trial Practice Group in the firm's San Francisco office and is Chair of the International Arbitration Practice.

Areas of Practice

Mr. Popovic’s litigation experience includes a wide range of commercial disputes, including consumer class actions, white collar criminal matters (including internal investigations) and international dispute resolution (including international arbitration and litigation) and counseling. Mr. Popovic has developed expertise in legal issues related to environmental marketing, as well as federal...

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