Apple v. Pepper: Applying the Indirect Purchaser Rule to Online Platforms

Long-established antitrust precedent bars customers who buy a firm’s product through intermediaries from suing that firm for antitrust damages. In Apple Inc. v. Pepper, this “indirect purchaser rule” is brought into the smartphone age in a price-fixing dispute between technology giant Apple and iPhone users. This case will determine whether iPhone users buy smartphone applications directly from Apple through the App Store, or if Apple is merely an intermediary seller-agent of app developers. The indirect purchase rule is generally considered settled precedent. How the rule should apply to online platforms, however, differs between circuit courts, which have split on the question of how to determine which users of online marketplaces are direct purchasers and which users are indirect purchasers. Here, the Supreme Court must decide whether the app purchasers are direct purchasers of apps from Apple. If so, the plaintiff app purchasers can proceed in bringing an antitrust suit against Apple. Alternatively, the Court could decide that the consumer app purchasers are merely indirect purchasers of Apple, who actually buy apps directly from third-party software developers. In that case, Apple would be classified as a passive middleman, immune to antitrust suit by app purchasers. The Court should take the former approach and affirm the decision of the Ninth Circuit holding that consumer app purchasers have standing to sue Apple’s App Store. Otherwise, consumers will be unable to recover for potentially legitimate antitrust injuries, and Apple’s conduct will be unlikely to be challenged by another party