Antitrust and Unfair Competition Law

Competition: Fall 2018, Vol 28, No. 1

APPLYING ILLINOIS BRICK TO E-COMMERCE: WHO IS THE DIRECT PURCHASER FROM AN APP STORE?

By Ryan M. Sandrock1

Fifty years after Hanover Shoe, the Supreme Court will decide a case that could confirm the existing Hanover Shoe/Illinois Brick framework or create some new structure for private antitrust enforcement. The core Supreme Court decisions on the "direct purchaser" rule considered facts regarding shoe manufacturing machinery and concrete blocks. The case on which the Supreme Court will next hear argument on the this rule—Apple v. Pepper— involves facts regarding the iPhone and Apple’s App Store. And whether the sale of apps is comparable (or not) to the sale of concrete blocks could have a substantial impact on not just the law of antitrust and internet commerce but also alleged anti-competitive activity in any industry. In the view of Assistant Attorney General Makan Delrahim and others, Hanover Shoe and Illinois Brick should be reconsidered. If the Supreme Court follows that path, there could be a new Apple rule regarding who can sue and a new framework for private antitrust enforcement that could make it easier for indirect purchasers (including end-user consumers) to bring claims. Alternatively, the Court could reaffirm its precedent, thereby allowing antitrust defendants to continue to use Illinois Brick to fend off liability under federal law to indirect purchasers.

I. THE LONG-STANDING ILLINOIS BRICK WALL TO INDIRECT PURCHASER CLAIMS

The Supreme Court’s 1977 decision in Illinois Brick2provides that only those plaintiffs who purchased directly from antitrust defendants are entitled to sue for damages under federal law—"indirect purchasers" cannot recover under federal antitrust laws. A variety of state laws, however, do allow for such damages claims.

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