Privity vs. Proximity: The Supreme Court’s Erroneous Reading of the Illinois Brick Doctrine in Apple Inc. v. Pepper

The rapid development of the digital marketplace led the United States Supreme Court to revisit the forty-two year old antitrust precedent set in Illinois Brick Co. v. Illinois. In Illinois Brick, the Supreme Court decided that under Section 4 of the Clayton Act, direct purchasers have standing to sue for treble damages due to unfair business practices, while indirect purchasers do not. Over four decades later, in Apple Inc. v. Pepper, the Court reevaluated this doctrine. This time, the Court had to determine which party received the “direct purchaser” status in a situation where plaintiffs bought apps from third-party developers in Apple’s App store at prices set by the developers. iPhone users argued that Apple unlawfully monopolized the retail market for the sale of apps, setting higher-than-competitive prices and locking consumers into buying apps only from Apple. Apple asserted a statutory standing defense under Illinois Brick, arguing that the plaintiffs did not have standing because they were not direct purchasers from Apple. The Court found that iPhone users who purchased apps from the App Store were direct purchasers because they purchased apps directly from Apple and thus have standing under Illinois Brick to sue for damages due to alleged antitrust violations under Section 4 of the Clayton Act. This Comment proposes that the Apple majority should have read the Illinois Brick Doctrine through the traditional proximate cause analysis of the Clayton Act. In its primary context, antitrust law was considered a codification of the common law, and any conduct that restrained trade was considered on par with other harmful torts. Accordingly, under the tort concept of proximate cause, the correct plaintiff with standing to bring suit for damages is the one most proximately harmed by the antitrust conduct. iPhone users have a causal link between Apple and themselves due to purchasing apps directly from the App Store and are thus directly harmed by Apple’s alleged monopolistic conduct. Moreover, by declaring that iPhone users were direct purchasers under the Illinois Brick Doctrine because they contracted with Apple, the majority confirmed a pass-on theory that was rejected by both Illinois Brick and Hanover Shoe. The Illinois Brick opinion was concerned with tracing complex economic adjustments and stated that pass-on cases would allow for apportionment of the recovery throughout the distribution chain and increase the overall costs of recovery. Under a proximate cause analysis, this complexity would be eliminated, as the Court may compute damages through a comparison of markets, rather than estimating the amounts passed on at each stage of the distribution chain