On Nov. 26, the Department of Justice argued before the Supreme Court in the case Apple v. Pepper, that the millions of us who have bought iPhone applications through Apple’s App Store — the only way the company offers to buy an app for the device — are not really Apple’s customers.
Some app buyers allege that the App Store is an illegal monopoly and that Apple forces them to pay higher prices for apps than they would have paid in a competitive market. The question before the Supreme Court is not whether Apple has engaged in anticompetitive conduct in violation of the law. Instead, this case is about whether app buyers are entitled to present the facts of their case to a court — and the decision will have consequences for the ability of all Americans to hold corporations accountable for illegal monopolistic conduct.
Under a 41-year-old precedent, Illinois Brick Co. v. Illinois, “indirect purchasers,” those who purchased from an intermediary and not from the party that violated antitrust law, cannot sue an alleged monopolist and recover damages. In that case, the court said that state and local governments, which paid higher construction costs to their general contractors as a result of price fixing by cement block manufacturers, could not sue to recover damages from the price fixers. Apple’s lawyers argued that this rule should be used to deny the app buyers in Apple v. Pepper the right to sue Apple, because they, too, are only “indirect purchasers” from Apple. The “direct purchasers,” Apple says, are the app developers, to whom Apple sells app distribution services through the App Store and who pay Apple a commission on those sales.
The Justice Department supported Apple’s reasoning before the court. I sit on the Federal Trade Commission, the agency that is jointly responsible, with the Justice Department, for enforcement of antitrust laws, and I strongly disagree with our sister agency’s position. Apple users can buy apps only through Apple’s App Store. They must deal directly with Apple as a distributor of iPhone apps rather than with the individual app developers. That is why the lower court decided that consumers are indeed “direct purchasers” and eligible to sue under the antitrust laws.
Putting aside the merits of the underlying antitrust claim, this case comes down to first principles. Should the consumers who are potential victims of alleged antitrust violations be allowed to make their case before a judge or jury? Should citizens play a role as a meaningful check against anticompetitive corporate conduct? I believe the answer is yes. America is grappling with serious questions about the levels of concentration and competition in our economy, and the Supreme Court should reinforce rather than constrict the ability of consumers to seek justice for illegal abuses of market power.
When today’s antitrust laws were written a century ago, Congress recognized that government agencies have finite resources, so lawmakers created a legal mechanism for private citizens to bring suit for damages. The broad language of the Clayton Act provides that “any person” who is harmed by antitrust violations may sue in federal court for those violations. Lawmakers believed that this measure would strengthen antitrust enforcement and deterrence efforts. To encourage private actions, Congress allowed victims to recover three times the amount of damages they suffered.
For people who have been victims of anticompetitive corporate conduct, private lawsuits are the primary means for getting compensation. A 2013 study found that 60 of the largest successful private antitrust cases from 1990 to 2011 resulted in at least $33 billion in compensation to victims. Private enforcement also bolsters the Federal Trade Commission’s efforts to stop anticompetitive conduct — for example, in the pharmaceutical industry.
A Supreme Court decision that treats iPhone app buyers as too far removed from Apple to bring a federal antitrust suit against the company would undermine Congress’ intent to permit any victim of antitrust violations to seek justice. Worse, it would give a free pass for antitrust law violations in cases in which consumers are the victims with the greatest incentive to go to court. App developers, who Apple claims are the “direct purchasers” of their app services, may not be inclined to bring an antitrust case against their business partner. Apple is the gatekeeper to the apps’ millions of target customers.
The case before the court is not simply about one company or one group of consumers. It is about the right of citizens to hold corporate monopoly power in check in industries across our economy.
People harmed by a company’s illegal monopolistic conduct should be able to seek a remedy from our federal courts to stop and deter corporate conduct that threatens competitive markets.
America was founded on the promise that every citizen has equal access to the law. Yet in recent years, the Supreme Court has systematically shut the courthouse door to consumers, small businesses and workers, especially by forcing plaintiffs out of court and into mandatory arbitration. Apple v. Pepper is yet another instance in which the court will decide whether to keep the courthouse doors open for citizens or to close them before they even get a chance to present their case.
Rebecca Kelly Slaughter is a commissioner of the Federal Trade Commission.
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