Client Alerts
May 30, 2019

Supreme Court Opens Door to Antitrust Claims Against Online Platforms in Apple Inc. v. Pepper

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In Illinois Brick, the Supreme Court established a fundamental rule that—barring limited exceptions—only antitrust plaintiffs who purchase products or services directly from an entity charging inflated prices can seek damages for their overcharges. Indirect purchasers (typically consumers) cannot sue such an entity under federal antitrust law, even though their overcharges may have been passed on to them by direct purchasers (such as distributors or retailers). The Illinois Brick rule has been justified as facilitating more effective enforcement of the federal antitrust laws by concentrating damages recoveries in directly affected parties, simplifying damages calculations, and preventing antitrust defendants from facing duplicative claims. However, the rule has been controversial, and it is not applied to indirect purchasers suing defendants under the antitrust laws of many states.

In Apple Inc. v. Pepper, the Supreme Court was given the opportunity to revisit Illinois Brick in the context of digital commerce transactions. In their amicus brief, 30 states and the District of Columbia argued that the Supreme Court should overrule Illinois Brick. While the Supreme Court declined to take up the states’ invitation, it has handed down a decision that affects the antitrust risk calculus for certain online platforms and other entities that operate in two-sided markets. The Supreme Court held that users who purchased products directly from Apple (and by implication, from other similarly situated platforms and intermediaries) may seek antitrust damages for Apple’s alleged overcharges—irrespective of whether the platform or another party (such as an application developer) sets the retail price of the product to the consumer and merchants) and newspapers (which connect readers with advertisers) are two classic examples of intermediaries in two-sided markets.

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