You Should Have the Right to Sue Apple

Posted by New York Times

You Should Have the Right to Sue Apple

By Rebecca Kelly Slaughter, FTC

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.

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