Legal Case Summary

We will hear argument first this morning in case 17204, Apple versus Pepper. Mr. Wall. Thank you, Mr. Chief Justice, and may it please the Court. The only damage its theory in this monopolization action is rooted in a 30 percent commission that Apple charges app developers in which allegedly causes those developers to increase app prices to consumers. The case is borrowed by the Court's Illinois brick doctrine because the developer's pricing decisions are necessarily in the causal chain that links the commission to any consumer damages. If the commission increases beyond the competitive level, but apps developers do not change their app's prices, consumers suffer no damages. And if app developers do change their prices to pass on some or all of the overcharge, well, that is precisely the kind of damages theory that the Illinois brick doctrine prohibits. Is there any, in your view, is there any first spire in this picture? Excuse me? Is there any first spire in this picture? Well, there's two different buyers in this picture. There are the app developers who, by contract with Apple, are buying a package of services which include distribution and software, intellectual property, and testing, and so forth. And then the plaintiffs in this case are the buyer of the apps themselves that are made with that package of goods and services in it. My question was, within Illinois brick, is there in this case anyone who would qualify as a first spire, the standing to sue Apple? The developers. Yes, without a doubt, the developers are the ones who, in the first instance, pay the 30 percent commission. I think it is important to root the analysis in the common ground, which has been conceded, that the only damages theory is based upon that 30 percent commission. That is charged by contract between Apple and the developers, and it is deducted from whatever price that the developer chooses to set subject to only the minimal risk. I'm sorry, the first sale is from Apple to the customer. It's the customer who pays the 30 percent. But there has always been a transaction between Apple and the developer before that, which has the pricing decision of what the developer is going to do on account of the 30 percent commission. There is a number of more generally about Illinois brick. That was a case of a vertical monopoly. Concrete block, person manufacture monopolizes the next intermediate market who then sells to a customer. Yes. All right. This is not quite like that. This is dramatically different. This is a closed loop. It is a closed loop, but in terms of the injury theory, which is what is at issue? They are not claiming the 30 percent as their injury

. No, they are claiming their injury is the suppression of a cheaper price. It doesn't have to be 30 percent. They are not seeking 30 percent of their sales. They have to go out and prove at the next step how without this monopoly they would have paid less. It could be as little as a penny or nothing, or it could be something more. But the point is that this closed loop with Apple as it spoke, they are the first purchaser of that 30 percent markup. No, they are not. If the first purchaser is clearly the app developer who by contract agrees that every time it puts a positive price on an app, it will allow Apple to take 30 percent of it. Apple took 30 percent from the customer, not from the developer. Apple collects the funds, but even the Ninth Circuit here agreed that the process, the payment flow, is immaterial to the Illinois-Break issue. Surnya, I wouldn't think that's true even if they concluded it. In a simple theory, I would have thought it would have been an antitrust for at least a hundred years. What you do is you look to see who you claim as the monopolist. Who do they claim as the monopolist? Apple. Apple. And if you pay them, if that's true, they can raise prices to some people, lower them to others as their suppliers. And if you are injured because you paid them more, the monopolist, you can collect damages. And if you are injured because they forced your price down, you are a supplier, you can collect damages. End of theory. I don't see anything in Illinois-Break that conflicts with that. The emphasis in all three of this Court's decision on both pass on defenses and damages theories, that's what the doctrine disallows. It says that- Surnya, if I don't mean to interrupt you, but I don't want to you to miss the point I'm making. If Joe Smith buys from Bill, who bought from the monopolist, then we have something indirect. But if Joe Smith bought from the monopolist, it is direct. That's a simple theory. Now, I can't find in reason or in case law or in anything I've ever learned in any trust, anything that would conflict with that. Anyway, I want you is to tell me what

. What conflicts with that in this case is that the alleged monopolization, which is over the distribution function, allegedly first manifests in a 30 percent commission. Consumers do not pay the 30 percent commission. There was an effort in the district court to try to argue that Apple added that, but that was abandoned. So what we have here instead is a damaged theory that runs through the independent pricing decisions of the app developers. Sotomayor, you asked the Justice Breyer to depend on what you said that the alleged monopolization is in the distribution function, because I understood the respondent now to be saying, no, that's wrong. The alleged monopolization is in the apps themselves. In other words, the consumer says you have a monopoly on apps. You might also have a monopoly on the distribution function, which the app developers have to live with, but you have a monopoly on apps, which the consumers have to live with. So in responding to Justice Breyer, you said, well, it's because the alleged monopoly is the distribution function, but I don't think that that's correct. Well, two points, Justice Kagan. First of all, it is correct. The complaint repeatedly alleges at Paragraphs 3, 8, and 53 that this is a case about a distribution market. It has always been a case about a distribution market, and it necessarily is, because there is no good faith allegation that Apple actually monopolizes the apps as software. It is simply the pipeline, the sale of the apps, which is, which is alternatively describing this case as either distribution or as the so-called aftermarket, which is simply limiting that to iOS apps instead of the 80s app. Kagan. There are a lot of words in this case that I tend to have trouble understanding. One is to sided market. Another is a lot that you used. So I go by simple analogy. If Bill buys from the monopolist, he is a direct purchaser. If Bill buys from Sam who buys from the monopolist, he is an indirect purchaser. Anyone can understand that. And when I get into what I think of as jargon, I begin to think, suppose I were you advising a United Fruit Company, I have a great idea. You won't have to torpedo the boats of your competitors anymore. Here's what you do. What you do is you buy from the farmers and you tell the farmers what you will pay the banana farmers. Is a very low price plus 30% commission

. And then what you do is when you sell to banana consumers throughout the world, you charge them that 30% commission, which they say is a higher price. And if you United Fruit did not become the monopolist. Now I think I'm advising J Rockefeller. John Rockefeller and I give him the same advice. And I give the same advice to United shoe, which happened to be a distribution company. And we, thereby, happen. Well, you see the point. But the difference here is that there is no third party intermediary that is setting the price and exercising its independent determination as to whether any or all of the initial overcharge, which is some part or all of the commission, is going to manifest itself in the apps price. And that's why I started with the simple, I would say, you know, the hypothetical of, imagine the price today is the competitive price. The 30% is the competitive price. And it goes up by 10 points tomorrow. No consumer is injured unless the apps prices change. The apps prices have to change. And if they do, and they only change by virtue of a decision which implicates everything this Court talked about in Hanover shoe, in Illinois brick. And you do a lot of that. Kagan Well, I think you're avoiding the question a bit, because I mean, the questions that are being put to you by my colleagues are really what was Illinois brick about? Was it about a vertical supply chain or instead was it about a pass through theory? Now, in the facts of Illinois brick, and indeed in the facts of all the Illinois brick cases that we've discussed, you had both. So you didn't have to separate the two. And now here, you don't have both because this is not a vertical supply chain, but there still is a pass through mechanism. So then the question is, does Illinois brick apply to that or not? And I think what Justice Breyer was suggesting to you that as long as it's not that vertical supply chain where the person is not buying from the monopolist itself, here the person is transacting with the monopolist itself, that that's what separates this case from Illinois brick and makes it entirely different, not with standing, that there's some kind of pass through mechanism involved. Kagan Well, I completely agree with you that the key to this is deciding what Illinois brick was about. Was it simply a formalistic case about vertical chains or was it about pass through? And in answering that question, I would begin with first of all with Hanover Schoo, which is about a pass on defense and about the difficulties and the potential complication of antitrust litigation through pass on defense. And then the framing of the question in Illinois brick by this Court, which said having already found that we will not allow a pass on defense, we are now confronted with the question to whether allow pass on to be used offensively. It was 100 percent about pass on. The vertical chain was the factual setting of the case, and indeed, respondents' argument would have this Court believe that the factual setting is the sum in substance of the Court's reasoning. Mr. Wall, could I ask you about what troubles me about your position? And it is this. Illinois brick was not about economic theory

. It was about the courts, the courts, the basis for the decision was not economic theory, as I read the case. It's the Court's calculation of what makes for an effective and efficient litigation scheme. And maybe your answer to this question is that the validity of Illinois brick is not before us, but I really wonder whether in light of what has happened since then, the Court's evaluation stands up and take the third point that it makes about that, the so-called direct purchasers are the most efficient and most in the best position to sue. If you look at this case, how many app developers are there whose apps are sold at the Apple store? Ten's of thousands. Has any one of them ever sued? None have ever sued. There have been plenty of disputes, but none has ever gone to litigation. For that matter, no State or Federal, any trust agency has ever sued either. We do not take that, we do not take the absence of litigation as evidence of an oppressed developer community that cannot speak for itself. The fact of the matter is that nowadays, major companies, suing their suppliers, happens all of the time. The idea that it doesn't, which was decried by Judge Posner as fanciful, has proven to be fanciful because it literally happens all of the time. Well, Mr. Wall, along those lines, I take your point that Illinois brick and handover shoe might be read about the economic realities of the past through mechanism being important rather than the contractual formalities, whether it's a sales agent or a formal purchase between the manufacturer and the distributor. And any trust normally accounts for economics rather than forms of contract. I take your point. But building on what Justice Alito had in mind, Illinois brick has been questioned by 31 states before this court. They're in Amicus brief. You're asking us to extend Illinois brick. Admittedly, only because of a contractual formality and the economic realities are the same. I'll spot you all of that for purposes of this question. But why should we build on Illinois brick? Shouldn't we question Illinois brick perhaps, given the fact that so many states have done so, they've repealed it. There haven't been a huge number of reported problems with indirect purchasers and direct purchasers receiving double recovery, one of the problems Illinois brick built on. And the other one which Justice Alito alluded to is direct purchasers don't always sue because there's a threat that monopolists will share the rents with the direct purchasers. And indirect purchasers may be better suited to enforce the antitrust laws. So long wind up, sorry, but there's a pitch. Sure. So a few things. First of all, it is an enormously complicated and controversial issue with the Illinois brick doctrine

. You can see this in the briefing in this case where yes, you did have states saying repeal it, you also had the plaintiffs bar through the American antitrust institute say don't repeal it. There have been, I think, on the order of 17 efforts in Congress to have it changed, not once has it ever gotten to the floor. It is a quintessentially controversial political issue which belongs across the street not here. I would disagree completely. Why is that so if the Court created the doctrine in the first place? Because I don't think it's fair to say that the Court has created it. What the Court did was applied the foundational principle of all Section 4 jurisprudence, which is the proximate cause principle of damage is not going past the first step. And then it dealt with that in the context of the potential for duplicative pass through overcharge claims, which are a unique problem in antitrust. It's not a general problem of all damage theories, but when you have overcharge cases, and this gets to, just as Gorsuch's point about the potential for duplicative recovery, it's not hypothetical. It's automatic. It's mathematical. If the first purchaser gets 100 percent of the overcharge because of Hanover Schoo, anything else that is recovered, that gets added on that, is necessarily duplicative, and that's what happens in the district courts. You get the direct purchasers and the direct purchasers suing on whatever theory optimizes their levels of recovery. I'd like to reserve the rest of my time and turn it over to the solicitor general at this point. Thank you, Council. General Francisco? Mr. Chief Justice, and may it please the Court, I'd like to begin where Mr. Wall left out, and I think it addresses many of the questions that have been asked here. At bottom, Illinois, Brick and Hanover Schoo properly understood prohibit pass through theories, and they reflect a basic application of the background principles of proximate cause that this Court generally reads into statutes of this sort, and in particular the rule that damages stop at the first step. Here the first step is the Atmaker's pricing decision, because the respondents, the consumers, are injured if and only if the Atmaker's decide to increase their prices in order to recoup apples. General, I have to say I find that a not intuitive argument. I mean, because it just seems to me that when you're looking at the relationship between the consumer and Apple, there is only one step. I mean, I pick up my iPhone, I go to Apple's App Store, I pay Apple directly with the credit card information that I've supplied to Apple. From my perspective, I've just engaged in a one-step transaction with Apple. And when I come in and say Apple is a monopolist, and Apple is charging a super competitive price by extracting a commission that it could only extract because of its market power, I mean, there is my one step. I understand that, Your Honor, but in proximate cause, the issue is not transactional proximity. The issue is proximity between the illegal conduct on the one hand, here Apple's monopolistic overcharge, and the injury to consumers on the other hand, here the higher prices. And Apple's monopolistic overcharge is not the direct cause of higher prices

. The direct cause of the higher prices is the app makers decision to increase their prices in order to recoup the opportunity. How do we know that? How do we know that? Given that Apple really operates as a retailer in many respects here, as Justice Greiton points out, and how do we know that the 30% charge is not affecting the price? Well, you don't know in any way that any retailer that adds 30% would affect the ultimate price paid by the consumer. And you don't know for sure, but that's the whole point. Here, because app makers set the final price, they have a choice to make. They either absorb the overcharge and keep prices the same, in which case the consumers aren't harmed at all, or they increase their prices to recoup the overcharge, in which case the app makers are also harmed because they face a drop in sales as a result of increased consumers are harmed, then, too. Yes, Your Honor, and that's the whole point of Illinois brick and hand over shoe. When you've got part of the harm going to that initial party that's bearing the full brunt of the overcharge in the first instance because of its pricing decision, that's the party that gets the whole queen. But we have ambiguity about what Illinois brick means here, and shouldn't that ambiguity, if there is such ambiguity, be resolved by looking at the tax to the statute? Any person injured? Yes, Your Honor. And what I think that Illinois brick reflects is the type of statutory interpretation that this Court has engaged in in a variety of cases, including the RICO cases, including the Lexmark cases, where you interpret background principles of approximate cause to be built into the statute, including the rule that damages stop at the first step. Does it make a difference, General, that Apple is influencing the prices here? In other words, this is, you're suggesting that the app developers are just sort of setting these prices independently. But I'll give you sort of two ways in which that's not true. The first way is this $0.99 charge, which you might say, well, that doesn't matter because, you know, it could be $0.99 or it could be $100.99. But in fact, these are all low-cost products for the most part. So, saying a price has to end with the number 99 is saying a lot about the fact that you can't charge $0.77 or $0.55 or $0.32. So, that's one. And the other is the entire allegation here is that Apple is truly a monopolist on both sides of the market. It's able to dictate the developers, whatever price structure it wants. And it's also able to dictate to consumers what the nature of the sale is going to be. And in that event, it sure seems as though Apple, you know, happened to set up this commission that puts it in the orbit of Illinois brick. But it could have done a thousand other things that are essentially the same that would have taken it out of the Illinois brick rule. Sure

. And let me take those points in turn. First, the $0.99 pricing policy. The first thing I'll point out is it's not in the complaint. But we'll put that to the side and assume that it's part of this case. Here, I don't think it changes the fact that the app makers still control the overall price and to the extent that respondents are harmed by that, it's based on a pass-through. Look, if I go to an auction house and I have to bid in $10 increments, nobody thinks the auction house is setting the price. The bidders are still setting the price. And here, the respondents are- But if you have to bid in $10 increments and the true alternative prices are $3.5 and $7. Then indeed you are setting the price. And well, that's my second point, Your Honor. Here, any injury is based on a pass-through because that makers are either going to round up or they're going to round down. If they round down to the loader $0.99 price point, the consumers aren't injured at all. If they round up to the next $0.99 price point, the consumers are injured as a result of a pass-through theory. And it's that intermediating pricing decision that we think that under the principles of Proxima clause that- The problem is that they're not measuring damages by that. As I understand, they're saying it's not the 30 percent. It is what the price would be if we could buy apps outside of this closed loop. And it could be theoretically a lot higher than the markup. It could well be within it, but the point is that that 30 percent or whatever that 30 percent figure is, is not the measure of our damages. That's as I understand. That they're saying that developers may have their own claim. Their damages likely have to stay within the 30 percent, but we don't measure our damages by that. So respectfully, I'll disagree with that and in explaining it, Justice Kagan, I think I can also answer the second part of your question. The harm to the consumers here is that they have to pay higher prices for apps

. And the reason they have to pay higher prices for apps in Justice Kagan, this goes to your question, is because Apple controls the pipeline that connects at makers on the one hand and iPhone users on the other. And the way they exploit that pipeline through their alleged monopoly is by charging that 30 percent commission. So the only reason consumers are harmed here in the form of paying higher prices is because the app makers decide to increase their prices in order to recoup that commission and just as prior to your question, the reason why this makes it different than your hypothetical of bill buys from SAM and you have transactional proximity is because the question isn't proximity between the parties who are transacting with one another, but proximity between the antitrust violation, the 30 percent commission, and the harm to consumers in the form of higher prices. I wouldn't have thought that was the antitrust violation. I would have thought the antitrust violation is having enormous market power achieved by not patents and not for skill for side in industry, but rather anti-competitive or more restrictive than necessary practices. Alcoa, for sure. Alcoa did not charge higher than competitive prices, and that's why Learned Hand said the easy life, not necessarily higher prices, is the reward often of monopoly. Now, for sure. I would have thought it's a matter for proof at the damages stage whether, in fact, Apple, assuming they prove it is a monopoly, has extracted higher than competitive prices from those particular people, the plaintiffs, or whether they've just had the easy life. Now, I don't think that's a stage we're at in this case. So if you say right, right, right, they must win. So what I wanted to say is that, for sure, the Illinois brick theory doesn't apply across the board, but it does apply when somebody is bringing an overcharged theory as an Illinois brick, as in Hanover shoe, and has here. The dough we have we had trial on that? Your Honor, where you have that kind of overcharged theory, what Illinois brick says asks is, under basic principles of proximate cause, is there some party other than the monopolist that's standing in between the plaintiffs injury in the form of higher prices and the monopolist's violation in the form of the commission? And whenever the price setter, the ultimate price setter, is somebody other than the monopolist, it's never the monopolist's overcharged, that is the direct cause of the injury. But if the app developer, if Apple bought the apps from the app developer and then added 30% to it and sold it to the consumer, you would agree that a claim could lie there, correct? Your Honor, I want to make sure I understand the hypothetical. If Apple's buying the app from the app developer, for a price. Right. Apple's then adding 30% to that price and selling it to the consumer. The consumer alleges that Apple's doing that as a result of monopolistic behavior. Claim lie? Yes, you can sue Apple directly, but you can't sue Apple if Apple isn't the price setting party, but the app maker is the price setting party. And that's why I finished the answer, Your Honor, and that's why the key is who sets the price and it's very hard to manipulate our rule. Because under our rule, you actually have to change the party that has the authority to set the final price. And that's a fundamental change in the nature of the transaction itself. Thank you, Council. Mr. Frederick? Thank you, Mr. Chief Justice, and may it please the Court. Apple directed anti-competitive restraints at iPhone owners to prevent them from buying apps anywhere other than Apple's monopoly app store

. As a result, iPhone owners paid Apple more for apps than they would have paid in a competitive retail market. Under this Court's precedence, iPhone owners have a cause of action under Section for the Clayton Act directly against Apple for those overcharges. The Court of Appeals should be affirmed for three reasons. First, Illinois Brick is a bright line rule that respondents easily satisfied. Second, Apple directed its monopoly abuses at respondents. So it's appropriate that respondents can sue Apple for their damages as a result of those violations. And third, Apple seeks to expand and modify the bright line rule of Illinois Brick to deny indisputably direct purchasers, an antitrust remedy, and to change the rule into a standardless inquiry that will be hard to apply at the pleading stage. Now, if I could return to the first point, the direct purchaser rule is a bright line rule. This Court said so in Illinois Brick, and importantly, a case that has not yet been discussed today in Utilicorp, in which the Court said Illinois Brick is a bright line rule for direct purchasers notwithstanding the economics that go into that. Utilicorp was a case that protected the defendants who were asserting that, who were asserting that there was a break in the link of the chain. This is cases really the flip side of that to protect plaintiffs who directly purchase from the alleged antitrust violator and are claiming damages as a result of that antitrust violation. There's one antitrust violation under your theory, which is the increase, the 30 percent increase that Apple imposes when it's, when it's, when as you put it, it sells the apps. Wrong. And this is very important for the Court to understand. The antitrust violation here is the monopoly app store. Consumers cannot buy an app anywhere other than Apple's 100 percent owned monopoly app store. When it comes to the 30 percent increase, you're obviously saying the purchasers, again, under your theory of the apps are harmed by that and recovered, can recover damages for that. And also that the developers are harmed by that and they can recover damages for it as well. In other words, to the extent, as, like he said, that Apple is in a two-sided market, there's, there's a subject to suit on both sides of the market for a single antitrust price increase that there alleged to have imposed. So, Mr. Chief Justice, I think that your question kind of gets to the core of a lot of the confusion here because by having an wholly owned monopoly app store, Apple is able to distort the market at the supply chain and at the retail chain for consumers. We, representing consumer iPhone owners, are suing only for the damages that we incur. That is the higher than what a competitive market price would be for apps. Our measure of damages is not necessarily the 30 percent. The 30 percent is simply proof that Apple is acting as a monopolist because it acts. I understand, I understand your claim on your side of the market, but you do think that the developers have a claim as well, don't you? Well, I have no belief. It's not the same

. It is a different claim. For the same price increase, the same. I disagree with that, Mr. Chief Justice. The Apple supplier of the apps, if they have a claim, it is that Apple has distorted the market for the supply of apps in a way that hurts app developers' profits. Their argument would be, if we weren't suffering under the one monopoly store constraint, we might be able to charge a different price lower than 99 cents and be able to get a direct purchase from an iPhone. Well, I think you're just saying that the measure of damages would be different between the two sides of the market. And, but there would be different damages. In other words, you're saying the consumer says, I'm paying a higher price for the product. It might be the entire 30 percent commission. It might be some portion of the 30 percent commission that's super competitive, but I'm paying a higher price for the product. And the app developer says, well, I don't, you know, that's irrelevant to me. I don't have to buy the product. What's relevant to me is fewer people are buying my apps. And that represents some amount of lost profits. But those two things are not, I mean, it is true that two people are being able to sue because Apple is transaction with each of these people and each of them has a gripe against what the way Apple has structured the market. But the damages are entirely different. One is a measure of lost profits, which may or may not exist. The other is, I'm paying too much. That's correct. And if that's an interesting theory, but is that the theory, is that the, your claim? Yes. I thought this place was all about the 30 percent. Well, the other side has been trying Justice Alito to make the case all about the 30 percent. But if you read that. So the 30 percent is nothing to do with this? What the 30 percent is, is an allegation that Apple is monopolizing the sale of apps. And we know that because they can extract 30 percent on every single sale, which only a monopolist could do. The 30 percent is not a measure of damages. I'm not aware of any case from this Court that says you have to plead antitrust damages with particularity. But the, because of the ability to extract a monopoly rent, we can say in good faith that they, we are paying more than we would pay than if a competitive market exists. I think you agree that there can only be one monopoly rent. And then the question becomes, who's paying it? And it might be spread partially between direct purchasers and indirect purchasers. It might be partially spread between the app makers and the purchasers of apps. And disaggregating that is the question that we've been wrestling with here. I guess here's where I'm stuck and need your help. You say that Illinois brick is a bright line rule, premised on the existence of a contractual relationship between the buyer, the ultimate purchaser and the intermediate seller. And that there has to be that kind of relationship rather than a sales agency relationship like we have here. But antitrust doesn't usually depend upon such contractual formalities. It usually depends upon the underlying economics. And I have a hard time distinguishing this case from Illinois brick in the sense of the, in the question of economic pass-through and the problems that it presents, the possibility that the intermediate purchaser may absorb the monopoly rent and not pass it along. Now that raises for me the question, further question, I'll wind it up quickly, I promise. Whether Illinois brick is correct, right? And you have an amicus that says it's not. But you don't make that argument. I'm really curious why. The plaintiff's bar is not making that argument before this court. So there's a whole whole bunch of things for you to chew on. Okay, I'll try to chew on them succinctly, Your Honor. We haven't asked for Illinois brick to be overruled because we plainly meet the bright line rule. We paid Apple and Apple's- Say I don't buy the formalistic contractual. It seems to me an argument in the law of contracts rather than the law of antitrust. So help me out with economics. Economics. We paid money. Apple never shared that money with any middleman. Illinois brick is a case about a middleman

. I'm not aware of any case from this Court that says you have to plead antitrust damages with particularity. But the, because of the ability to extract a monopoly rent, we can say in good faith that they, we are paying more than we would pay than if a competitive market exists. I think you agree that there can only be one monopoly rent. And then the question becomes, who's paying it? And it might be spread partially between direct purchasers and indirect purchasers. It might be partially spread between the app makers and the purchasers of apps. And disaggregating that is the question that we've been wrestling with here. I guess here's where I'm stuck and need your help. You say that Illinois brick is a bright line rule, premised on the existence of a contractual relationship between the buyer, the ultimate purchaser and the intermediate seller. And that there has to be that kind of relationship rather than a sales agency relationship like we have here. But antitrust doesn't usually depend upon such contractual formalities. It usually depends upon the underlying economics. And I have a hard time distinguishing this case from Illinois brick in the sense of the, in the question of economic pass-through and the problems that it presents, the possibility that the intermediate purchaser may absorb the monopoly rent and not pass it along. Now that raises for me the question, further question, I'll wind it up quickly, I promise. Whether Illinois brick is correct, right? And you have an amicus that says it's not. But you don't make that argument. I'm really curious why. The plaintiff's bar is not making that argument before this court. So there's a whole whole bunch of things for you to chew on. Okay, I'll try to chew on them succinctly, Your Honor. We haven't asked for Illinois brick to be overruled because we plainly meet the bright line rule. We paid Apple and Apple's- Say I don't buy the formalistic contractual. It seems to me an argument in the law of contracts rather than the law of antitrust. So help me out with economics. Economics. We paid money. Apple never shared that money with any middleman. Illinois brick is a case about a middleman. There's no middleman here. We paid the money. Apple kept 30 percent of it before 70 percent- Again, that's based on the form of the relationship. They talked to me about the possibility, the problem that the app producer might absorb the monopoly rent. That's the economic problem that I'm stuck with. Okay. If I could try to answer your question with a hypothetical and if the court would indulge me, suppose at a competitive market, the price for an Apple's 90 cents, not 99 cents, as Apple is charging. It's 90 cents. We would all agree, I think, that the consumer can sue for the 9 cent differential between the monopoly price. I understand the 99 cent argument. Let's put that aside. All right. Now that we've got that aside, let's look at it from the developer's perspective. If they had a claim, if they had a claim, and I'm not saying that they do, but if they had a claim, they would need to show the difference between the profits that they would have achieved in the monopoly app store versus the profits they would have achieved at a competitive market price. That depends on three factors. One is the difference in sales that they would achieve between 99 cents and 90 cents. The second is how their sales differences would affect their revenue. And the third is whether the commission was 30 percent in a competitive market. Okay. So if you take my hypothetical, the damage is for the developer, there are three possibilities. One is that it's zero. If the commission went to 22 percent in a competitive market, the developer takes home 70 cents just as it does with Apple's 30 percent and a 99 cent monopoly market. At a 22 percent commission, the developer has zero damages. The developer would have positive damages if the commission were zero, because then the app developer sustains damages of 20 cents. The developer would make the 90 cents in the competitive market instead of the 70 cents that Apple is now passing along by virtue of the monopoly market. The damages would be negative, though, if in a competitive market the commission stayed at 30 percent. Because there, the benefits that would achieve by the monopoly price of 99 cent give the developer an extra eight cents per transaction

. There's no middleman here. We paid the money. Apple kept 30 percent of it before 70 percent- Again, that's based on the form of the relationship. They talked to me about the possibility, the problem that the app producer might absorb the monopoly rent. That's the economic problem that I'm stuck with. Okay. If I could try to answer your question with a hypothetical and if the court would indulge me, suppose at a competitive market, the price for an Apple's 90 cents, not 99 cents, as Apple is charging. It's 90 cents. We would all agree, I think, that the consumer can sue for the 9 cent differential between the monopoly price. I understand the 99 cent argument. Let's put that aside. All right. Now that we've got that aside, let's look at it from the developer's perspective. If they had a claim, if they had a claim, and I'm not saying that they do, but if they had a claim, they would need to show the difference between the profits that they would have achieved in the monopoly app store versus the profits they would have achieved at a competitive market price. That depends on three factors. One is the difference in sales that they would achieve between 99 cents and 90 cents. The second is how their sales differences would affect their revenue. And the third is whether the commission was 30 percent in a competitive market. Okay. So if you take my hypothetical, the damage is for the developer, there are three possibilities. One is that it's zero. If the commission went to 22 percent in a competitive market, the developer takes home 70 cents just as it does with Apple's 30 percent and a 99 cent monopoly market. At a 22 percent commission, the developer has zero damages. The developer would have positive damages if the commission were zero, because then the app developer sustains damages of 20 cents. The developer would make the 90 cents in the competitive market instead of the 70 cents that Apple is now passing along by virtue of the monopoly market. The damages would be negative, though, if in a competitive market the commission stayed at 30 percent. Because there, the benefits that would achieve by the monopoly price of 99 cent give the developer an extra eight cents per transaction. So in that way, Mr. Chief Justice, the developer has a different claim that's based on its lost profits. And that would be irrespective of whether the buyer of the app, the consumer, sustained damage for the nine cents in my hypothetical. You can run these out under different, you can get your law clerks to run all the different scenarios, it always works the same way. Kelser, unless you're prepared to overrule, it wasn't our case. Alkoa, I think all you'd have to show is one, they have monopoly power. And two, they achieved it through less restrictive, for more restrictive than necessary practices. End of your burden. In your case, and Justice Corsuch is quite right, there's only one monopoly profit to be earned. And so you'd have a different question when you get to the damages stage. The different question is, well, how did they divide that monopoly profit? You'd like to show that they got some of it from consumers, but that's for a later proceeding. That's correct. And you're adding one thing, one of the things that we want to use in order to prove that they do have monopoly power, i.e., the power to raise price significantly above a competitive level, is a charge of so-oblety, buddy, much money. That's just a piece of evidence here. And we'll worry later, agreeing that there's only one monopoly profit in theory, as to who got what. Now, have I stated that correctly? Yes, you have Justice Breyer. I mean, the basic problem in this case, as it comes to this Court, is who gets to complain about the monopoly app store? We say, as the buyers of the apps from the monopoly app store, there's no form or function, there are no contract issues, Justice Corsuch, that create a different form versus function problem. We're paying the money, they're keeping it. And we think we're paying more than we would have to if their market was a competitive. They say it would be different if Apple purchased the apps from the app developer and then added 30% on the sale. And why is that not different? Because it's irrelevant, and here's where we part company from the Solizard General. It's irrelevant who sets the price so long as what the violation is here, the monopoly app store, leads to higher prices that the consumers have to pay. That's what the violation is. That's how we are approximately harmed. So in the very hypothetical Justice Kavanaugh that you posed to the Solizard General, the Solizard General concedes we are direct purchasers in a situation where the app developer sets the price and they simply tack on 30% by virtue of their monopoly power

. So in that way, Mr. Chief Justice, the developer has a different claim that's based on its lost profits. And that would be irrespective of whether the buyer of the app, the consumer, sustained damage for the nine cents in my hypothetical. You can run these out under different, you can get your law clerks to run all the different scenarios, it always works the same way. Kelser, unless you're prepared to overrule, it wasn't our case. Alkoa, I think all you'd have to show is one, they have monopoly power. And two, they achieved it through less restrictive, for more restrictive than necessary practices. End of your burden. In your case, and Justice Corsuch is quite right, there's only one monopoly profit to be earned. And so you'd have a different question when you get to the damages stage. The different question is, well, how did they divide that monopoly profit? You'd like to show that they got some of it from consumers, but that's for a later proceeding. That's correct. And you're adding one thing, one of the things that we want to use in order to prove that they do have monopoly power, i.e., the power to raise price significantly above a competitive level, is a charge of so-oblety, buddy, much money. That's just a piece of evidence here. And we'll worry later, agreeing that there's only one monopoly profit in theory, as to who got what. Now, have I stated that correctly? Yes, you have Justice Breyer. I mean, the basic problem in this case, as it comes to this Court, is who gets to complain about the monopoly app store? We say, as the buyers of the apps from the monopoly app store, there's no form or function, there are no contract issues, Justice Corsuch, that create a different form versus function problem. We're paying the money, they're keeping it. And we think we're paying more than we would have to if their market was a competitive. They say it would be different if Apple purchased the apps from the app developer and then added 30% on the sale. And why is that not different? Because it's irrelevant, and here's where we part company from the Solizard General. It's irrelevant who sets the price so long as what the violation is here, the monopoly app store, leads to higher prices that the consumers have to pay. That's what the violation is. That's how we are approximately harmed. So in the very hypothetical Justice Kavanaugh that you posed to the Solizard General, the Solizard General concedes we are direct purchasers in a situation where the app developer sets the price and they simply tack on 30% by virtue of their monopoly power. It's no different here if you think about it in terms of what is actually going on. Suppose Apple dropped its commission from 30% to 20%, but it maintained the price restriction of a 99 cent app. From the consumer's perspective, we're still overpaying for the app. Under that hypothetical, Apple simply gives the app developer more money, but that doesn't affect the consumer welfare at all. We're going to create a one-sided. Go ahead, please. The general said that if in fact Apple bought these products from suppliers and paid them, and then added 30% to you, that that would be a classic antitrust violation. You're saying that's basically what they're doing here anyway. But let's take the reverse. Let's say they collected money from you and paid all of it over to the developer, and then told the developer, give us 30% of that back. What you then still be a direct purchaser and so we would still be direct purchasers if under your hypothetical we're pying it from Apple, and then Apple is engaging in the Justice Gorsuch formover function situations in terms of how the money gets moved around. I think that the, in that situation, we are still directly purchasing and we're still able to complain about Apple's violation. And I think under your hypothetical, Justice Sotomayor, we have to keep the idea that Apple is still operating a monopoly app store. It's no different than if there was a grocery store chain that monopolized the sale of all vegetables. If they, if that is the only place you could buy vegetables, we would say that that monopoly store outlet was able to control prices and affect output, that's basically what's happening. Well, I think Justice Sotomayor's question is, it requires further exploration. I mean, are we in danger of just incentivizing a restructuring of contracts here so that all that Apple does or people like it is make you purchase directly from the app provider, and then it then returns the profit to Apple later. And if that's all we're doing, then what is the point of Illinois brick? And you still haven't explained to me why the plaintiff's bar is asking to overturn Illinois brick when 31 states are. So help me on both those. There are two separate questions. Okay, so let me take the second one first, Justice Sotomayor. So if I don't represent the plaintiff's bar, I represent the consumers in this case, and the consumers in this case have no brief and no beef with Illinois brick. We think we are direct purchasers. We satisfy the rule. We come within the bright line. That's okay with us. What the Court decides to do with Illinois brick is obviously something where I think you go to a different situation if the case arises

. It's no different here if you think about it in terms of what is actually going on. Suppose Apple dropped its commission from 30% to 20%, but it maintained the price restriction of a 99 cent app. From the consumer's perspective, we're still overpaying for the app. Under that hypothetical, Apple simply gives the app developer more money, but that doesn't affect the consumer welfare at all. We're going to create a one-sided. Go ahead, please. The general said that if in fact Apple bought these products from suppliers and paid them, and then added 30% to you, that that would be a classic antitrust violation. You're saying that's basically what they're doing here anyway. But let's take the reverse. Let's say they collected money from you and paid all of it over to the developer, and then told the developer, give us 30% of that back. What you then still be a direct purchaser and so we would still be direct purchasers if under your hypothetical we're pying it from Apple, and then Apple is engaging in the Justice Gorsuch formover function situations in terms of how the money gets moved around. I think that the, in that situation, we are still directly purchasing and we're still able to complain about Apple's violation. And I think under your hypothetical, Justice Sotomayor, we have to keep the idea that Apple is still operating a monopoly app store. It's no different than if there was a grocery store chain that monopolized the sale of all vegetables. If they, if that is the only place you could buy vegetables, we would say that that monopoly store outlet was able to control prices and affect output, that's basically what's happening. Well, I think Justice Sotomayor's question is, it requires further exploration. I mean, are we in danger of just incentivizing a restructuring of contracts here so that all that Apple does or people like it is make you purchase directly from the app provider, and then it then returns the profit to Apple later. And if that's all we're doing, then what is the point of Illinois brick? And you still haven't explained to me why the plaintiff's bar is asking to overturn Illinois brick when 31 states are. So help me on both those. There are two separate questions. Okay, so let me take the second one first, Justice Sotomayor. So if I don't represent the plaintiff's bar, I represent the consumers in this case, and the consumers in this case have no brief and no beef with Illinois brick. We think we are direct purchasers. We satisfy the rule. We come within the bright line. That's okay with us. What the Court decides to do with Illinois brick is obviously something where I think you go to a different situation if the case arises. But on your other point, I think it's the other side that is actually asking for the opportunity to use contracts in order to distort or we characterize matters in a way that evades the Illinois brick bright line. Well, assume for the moment that I believe that economics underlying the two arrangements are very similar, hard to distinguish. I haven't yet heard you give me a good argument why. So let's just posit that. Then it really is just about form, isn't it? No, I think in that hypothetical, I would be prepared to say if we were paying the developer directly for the app and the app developer could set whatever price it wanted to set, okay, keep with me on that assumption. The app developer operating in a free market can set whatever it wants to set. And then Apple comes after the app developer and says, hey, you bought it through our store, we want whatever we want. That becomes not a problem with the consumer. That becomes a problem between the developer and the app. So pricing control is really important to approximate cause then. I bet you're pardoned. So pricing control is really important to approximate cause. Pricing control is not important to price, to approximate cause in the sense that, whether I think under direct, approximate cause, we're buying the app directly from the app developer and remember a key part of my answer was the app developer can set that price competitively in a competitive market. What arrangements happen between Apple exercising its monopoly control through the app store and the supplier is not something we are approximately affected by that? Your point was that the other side is putting form over the reality. That's correct. And they're doing it in a way that is particularly standard less because what the court and Utilicorp held was that even when it is absolutely clear, a hundred percent of the overcharge is going from the natural gas supplier through the utility directly to the consumer, this court held no. We're going to keep the bright line rule. Only the utility gets to complain about the natural gas overcharge. And it was that bright line rule that the court said is going to apply. And the reason is exactly Justice Alito for the point that you made, which is that it's a bad judicial administration at the pleading stage, we're just trying to figure out who has the claim and who could complain about the antitrust violation. Here, if that's clearly the consumers because we're the ones who are paying Apple the money to receive the app. And so to Justice Kavanaugh to finish off the point, what the other side is essentially asking is that instead of having a bright line rule, it's a very fuzzy rule because they don't have a test for what constitutes a pass through. They don't have a test that applies when there is no middleman, there's no middleman in this particular transaction. It's directly between the iPhone owner and Apple. And so you're going to have to figure out, do they get a one ticket good for this case only? They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their app store. Kavanaugh What concerns me about your argument is that it doesn't seem to be based on the way in which this claim was understood by the lower courts. Maybe they misunderstood it

. But on your other point, I think it's the other side that is actually asking for the opportunity to use contracts in order to distort or we characterize matters in a way that evades the Illinois brick bright line. Well, assume for the moment that I believe that economics underlying the two arrangements are very similar, hard to distinguish. I haven't yet heard you give me a good argument why. So let's just posit that. Then it really is just about form, isn't it? No, I think in that hypothetical, I would be prepared to say if we were paying the developer directly for the app and the app developer could set whatever price it wanted to set, okay, keep with me on that assumption. The app developer operating in a free market can set whatever it wants to set. And then Apple comes after the app developer and says, hey, you bought it through our store, we want whatever we want. That becomes not a problem with the consumer. That becomes a problem between the developer and the app. So pricing control is really important to approximate cause then. I bet you're pardoned. So pricing control is really important to approximate cause. Pricing control is not important to price, to approximate cause in the sense that, whether I think under direct, approximate cause, we're buying the app directly from the app developer and remember a key part of my answer was the app developer can set that price competitively in a competitive market. What arrangements happen between Apple exercising its monopoly control through the app store and the supplier is not something we are approximately affected by that? Your point was that the other side is putting form over the reality. That's correct. And they're doing it in a way that is particularly standard less because what the court and Utilicorp held was that even when it is absolutely clear, a hundred percent of the overcharge is going from the natural gas supplier through the utility directly to the consumer, this court held no. We're going to keep the bright line rule. Only the utility gets to complain about the natural gas overcharge. And it was that bright line rule that the court said is going to apply. And the reason is exactly Justice Alito for the point that you made, which is that it's a bad judicial administration at the pleading stage, we're just trying to figure out who has the claim and who could complain about the antitrust violation. Here, if that's clearly the consumers because we're the ones who are paying Apple the money to receive the app. And so to Justice Kavanaugh to finish off the point, what the other side is essentially asking is that instead of having a bright line rule, it's a very fuzzy rule because they don't have a test for what constitutes a pass through. They don't have a test that applies when there is no middleman, there's no middleman in this particular transaction. It's directly between the iPhone owner and Apple. And so you're going to have to figure out, do they get a one ticket good for this case only? They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their app store. Kavanaugh What concerns me about your argument is that it doesn't seem to be based on the way in which this claim was understood by the lower courts. Maybe they misunderstood it. But I mean, the opening line of the order of granting Apple's motion to dismiss the second amended complaint by the district court, the thrust of plaintiff's second amended complaint is that Apple has engaged in the anti-trust conduct by collecting 30 percent of the price of iPhone applications. The district court just missed it, Justice Alito. Respectfully. Okay. Where can you point to me where in the ninth Circuit's opinion they understood your claim in the way that you've characterized it this morning? Yeah. They said on page 21a of the petition app, I think that's the page, that this is simply about a monopoly distribution, and that it is a simple case as a result of that. If you look at the bottom of 21a, the very last paragraph, instead we rest our analysis is compelled by Hannah Rischou, Illinois Brick, Utila Corp and Delaware Valley on the fundamental distinction between a manufacturer produced on the one hand and a distributor on the other. Apple is a distributor of the iPhone apps selling them directly to purchasers through its app store. And because of that, we have standing to complain that they are the seller of the apps. That's, it's a very simple case in that, it's viewed through that lens. Now, I accept Justice Alito that there have been a lot of arguments in this idea about the 30 percent has led to a certain lack of clarity, but I think that the position we have written in our brief is the best articulation of what the underlying theory is here, and that is that the Apple monopoly app store over charges iPhone owners for apps. And the role of the end in $0.99 requirement in that theory is what? In other words, would your theory be the same if no such requirement existed, or would it not? It would be still an overcharged case, Justice Kagan, because the theory economically is that if you are having to buy only from a monopoly, you are paying more than you would if there was a, you know, discount apps warehouse, or you could buy directly from the apps developer. Our assertion is that with multiple sellers, multiple suppliers of the apps, we would be able to buy them at a lower price. So what's the significant of that end in $0.99 rule? The significance of it is that it informs the price elevation and the price overcharge. And it also informs that contrary to Apple's assertion, they are not the agent of the apps developers. I mean, they put that in their contract. That's where you get to Justice Gorsuch's form over substance problem, because at $0.99 says they are telling the app developer, we are foreclosing from you 99 percent of all pricing options. Well, if it's that significant, why didn't you include it in the complaint? Because it's not significant from this perspective, Mr. Chief Justice, and that is that with a monopoly store, the prices are overcharged. Our theory is relatively simple. They brought up the 99 cents in the blue brief. I think it's at page 9 of their brief, where they raised the 99 cents issue. And as we were thinking about what the implications of that were, it became clear to us that that meant the app developer couldn't possibly be. Sounds kind of leave the data come up with a new litigation

. But I mean, the opening line of the order of granting Apple's motion to dismiss the second amended complaint by the district court, the thrust of plaintiff's second amended complaint is that Apple has engaged in the anti-trust conduct by collecting 30 percent of the price of iPhone applications. The district court just missed it, Justice Alito. Respectfully. Okay. Where can you point to me where in the ninth Circuit's opinion they understood your claim in the way that you've characterized it this morning? Yeah. They said on page 21a of the petition app, I think that's the page, that this is simply about a monopoly distribution, and that it is a simple case as a result of that. If you look at the bottom of 21a, the very last paragraph, instead we rest our analysis is compelled by Hannah Rischou, Illinois Brick, Utila Corp and Delaware Valley on the fundamental distinction between a manufacturer produced on the one hand and a distributor on the other. Apple is a distributor of the iPhone apps selling them directly to purchasers through its app store. And because of that, we have standing to complain that they are the seller of the apps. That's, it's a very simple case in that, it's viewed through that lens. Now, I accept Justice Alito that there have been a lot of arguments in this idea about the 30 percent has led to a certain lack of clarity, but I think that the position we have written in our brief is the best articulation of what the underlying theory is here, and that is that the Apple monopoly app store over charges iPhone owners for apps. And the role of the end in $0.99 requirement in that theory is what? In other words, would your theory be the same if no such requirement existed, or would it not? It would be still an overcharged case, Justice Kagan, because the theory economically is that if you are having to buy only from a monopoly, you are paying more than you would if there was a, you know, discount apps warehouse, or you could buy directly from the apps developer. Our assertion is that with multiple sellers, multiple suppliers of the apps, we would be able to buy them at a lower price. So what's the significant of that end in $0.99 rule? The significance of it is that it informs the price elevation and the price overcharge. And it also informs that contrary to Apple's assertion, they are not the agent of the apps developers. I mean, they put that in their contract. That's where you get to Justice Gorsuch's form over substance problem, because at $0.99 says they are telling the app developer, we are foreclosing from you 99 percent of all pricing options. Well, if it's that significant, why didn't you include it in the complaint? Because it's not significant from this perspective, Mr. Chief Justice, and that is that with a monopoly store, the prices are overcharged. Our theory is relatively simple. They brought up the 99 cents in the blue brief. I think it's at page 9 of their brief, where they raised the 99 cents issue. And as we were thinking about what the implications of that were, it became clear to us that that meant the app developer couldn't possibly be. Sounds kind of leave the data come up with a new litigation. Well, no, we're at a pleading stage, Justice Gorsuch. In the Supreme Court, the blue brief, really? Well, it's there. I mean, should we be taking that up now? I mean, maybe you can amend your complaint or something like that on remand, but should we be addressing that? Well, Justice Gorsuch, they were the ones that's what I'm saying. They brought up the 99 cents. It wasn't us. It's not sort of, and you reviewed that first view, right? Well, no, our point was that when they raised the 99 cents, is somehow proof that the developer actually gets to set the price. We say, no, it's actually irrelevant for the reasons which I've already stated, but secondly, it's just wrong because if you're constraining what 99 percent of the pricing options are, that's what it is, what it is. But it also has the effect economically of raising the prices that the consumers have to pay. It's going to add to your damages, correct? Well, it potentially. It could potentially add to the damages, or it could subtract from the damages. We don't know what we know is what the price is in a non-competitive market, and we will have to have experts that will assess what the damages would be in a competitive market. Your theory doesn't depend on the 99 cents. Our theory of damages or a theory of the violation. The theory of the violation is the wholly owned monopoly app store as the place to sell apps. That is what the violation is here, and how you calculate the damages is you look at what is the overcharge based on what the monopoly is selling the app for versus what it would be sold for in a competitive market. The anti-trust scholars, and I would direct you to page 23 of their brief, they go through a lot of the pricing scenarios that you have explored through hypotheticals here, and they make very clear that as a matter of function, what is happening here is that the monopoly seller of the apps here is extracting an overcharge from the purchasers who are direct purchasers of those apps. If this case were to go to trial as a class action would every app purchaser potentially be entitled to three times the 30 percent overcharge, or would it depend on the particular app? Your Honor, I think that I don't know the answer to your question fully. I'll be candid. I have not thought about how the experts are actually going to try to prove it up. What I would say, though, is that they're probably what will likely happen is that because there are apps that are sold at 99 cent, a huge number of them are free, but a huge number are sold at 99 cents. Some other strata is sold for $1.99. Some other strata is sold for $2.99 or $6.99. And I haven't put my head around to be perfectly honest exactly how you would carve up the damages on some sort of a pro-rata basis. But the idea, of course, of the Clayton Act is that treble damages designed to deter antitrust violations

. Well, no, we're at a pleading stage, Justice Gorsuch. In the Supreme Court, the blue brief, really? Well, it's there. I mean, should we be taking that up now? I mean, maybe you can amend your complaint or something like that on remand, but should we be addressing that? Well, Justice Gorsuch, they were the ones that's what I'm saying. They brought up the 99 cents. It wasn't us. It's not sort of, and you reviewed that first view, right? Well, no, our point was that when they raised the 99 cents, is somehow proof that the developer actually gets to set the price. We say, no, it's actually irrelevant for the reasons which I've already stated, but secondly, it's just wrong because if you're constraining what 99 percent of the pricing options are, that's what it is, what it is. But it also has the effect economically of raising the prices that the consumers have to pay. It's going to add to your damages, correct? Well, it potentially. It could potentially add to the damages, or it could subtract from the damages. We don't know what we know is what the price is in a non-competitive market, and we will have to have experts that will assess what the damages would be in a competitive market. Your theory doesn't depend on the 99 cents. Our theory of damages or a theory of the violation. The theory of the violation is the wholly owned monopoly app store as the place to sell apps. That is what the violation is here, and how you calculate the damages is you look at what is the overcharge based on what the monopoly is selling the app for versus what it would be sold for in a competitive market. The anti-trust scholars, and I would direct you to page 23 of their brief, they go through a lot of the pricing scenarios that you have explored through hypotheticals here, and they make very clear that as a matter of function, what is happening here is that the monopoly seller of the apps here is extracting an overcharge from the purchasers who are direct purchasers of those apps. If this case were to go to trial as a class action would every app purchaser potentially be entitled to three times the 30 percent overcharge, or would it depend on the particular app? Your Honor, I think that I don't know the answer to your question fully. I'll be candid. I have not thought about how the experts are actually going to try to prove it up. What I would say, though, is that they're probably what will likely happen is that because there are apps that are sold at 99 cent, a huge number of them are free, but a huge number are sold at 99 cents. Some other strata is sold for $1.99. Some other strata is sold for $2.99 or $6.99. And I haven't put my head around to be perfectly honest exactly how you would carve up the damages on some sort of a pro-rata basis. But the idea, of course, of the Clayton Act is that treble damages designed to deter antitrust violations. And so this Court has made very clear in its cases that the point of having that deterrence is to avoid having the monopolist in this case act in a way that it is not penalized for its monopoly behavior. And if you were to suppose that it was just a single damages problem, it would be easy from monopolists to simply act. And if they get caught, they just simply pay over what they caused in damage. But the idea behind the Clayton Act's treble damages remedy is designed to deter actions just like this. And that is why Apple cannot point to another e-commerce distributor that does what it does. And every other instance, as we point out in the Red Brief, there is an alternative to buying the product. And in fact, Apple doesn't even do this with its own computer software. And we have pleaded that in the complainant, Mr. Chief Justice, where we say that if you buy software, you can buy an open source and you do not have to buy it through Apple's monopoly chain. So the iPhone app monopoly app store is a unique feature of the e-commerce setting. Apple has found ways using technology and contractual constraints to limit the opportunity of a competitive market to flourish. If a competitive market did flourish, the prices that iPhone owners pay would be lower. Thank you. Thank you, Council. Three minutes, Mr. Wall. Thank you, Mr. Chief Justice. I think I need to begin with the experience I had in this case for its first nine years. And that is it was about a 30 percent commission. Paragraph 48 of the complaint is the key allegation, which is the root of the damage of theory, which maintains that the 30 percent commission is a monopoly price. It's called a monopoly price. It's elsewhere called a super competitive price. It is the root of the damage theory, not just in part, not just on the periphery, but entirely. The brief end opposition at pages 5 and 12 make this unmistakably clear. At page 5, the brief end opposition states, quote, respondent seek damages based solely on the 30 percent markup. So whatever other attributes of this case one may want to talk about, that might contribute to the liability theory

. And so this Court has made very clear in its cases that the point of having that deterrence is to avoid having the monopolist in this case act in a way that it is not penalized for its monopoly behavior. And if you were to suppose that it was just a single damages problem, it would be easy from monopolists to simply act. And if they get caught, they just simply pay over what they caused in damage. But the idea behind the Clayton Act's treble damages remedy is designed to deter actions just like this. And that is why Apple cannot point to another e-commerce distributor that does what it does. And every other instance, as we point out in the Red Brief, there is an alternative to buying the product. And in fact, Apple doesn't even do this with its own computer software. And we have pleaded that in the complainant, Mr. Chief Justice, where we say that if you buy software, you can buy an open source and you do not have to buy it through Apple's monopoly chain. So the iPhone app monopoly app store is a unique feature of the e-commerce setting. Apple has found ways using technology and contractual constraints to limit the opportunity of a competitive market to flourish. If a competitive market did flourish, the prices that iPhone owners pay would be lower. Thank you. Thank you, Council. Three minutes, Mr. Wall. Thank you, Mr. Chief Justice. I think I need to begin with the experience I had in this case for its first nine years. And that is it was about a 30 percent commission. Paragraph 48 of the complaint is the key allegation, which is the root of the damage of theory, which maintains that the 30 percent commission is a monopoly price. It's called a monopoly price. It's elsewhere called a super competitive price. It is the root of the damage theory, not just in part, not just on the periphery, but entirely. The brief end opposition at pages 5 and 12 make this unmistakably clear. At page 5, the brief end opposition states, quote, respondent seek damages based solely on the 30 percent markup. So whatever other attributes of this case one may want to talk about, that might contribute to the liability theory. The injury theory, the damages theory is, in their words, solely about the 30 percent. And it- It's all I have a question about this Court's case law and I like your attitude. If Apple had, in every agreement with an iPhone owner, a provision that you can sue, you can't sue, you have to go to an arbitral form in one by one. Then Apple would be home free in this case. We do not have such a provision. In fact, all of the relevant agreements with both developers and consumers state that- that there should be litigation in the Northern District of California- Yes, I know you don't, but suppose you did. If that were the case, then this would be a matter for arbitration. I don't think it changes with the legal question. And it would take this case out of this Court, put it in an arbitral form with a single complainant. Indeed, it would, but that's not this case. There is no concern about that in this case. The second point that I want to make is, relates to this duplicative recovery possibility. There is- we never heard any suggestion prior to the Respondent's Merit's Brief about potential loss profits claims based upon monopsony. And so to the contrary, the theory throughout the life of this case is that- that developers, if they sued, would sue over the same 30% markup, the brief unopposition at 12 says any claim by the apps developers, excuse me, a claim by the apps developers, even if they had one would not overlap the 30% markup paid by apps purchasers, rather it is a piece of the same 30% pie. So going back to what is Illinois brick about, it is about not having that apportionment fight. They admitted to the time that this case was on this Court's doorstep that this is all about an apportionment fight between the developers. As to the- which is the better rule, the formalistic rule or the substantive rule? I suggest that- that the formalistic rule is always the one that is most subject to manipulation. The substantive rule that asks is your damages theory a pass on theory, focuses on what is of economic substance. And here that's what the district court judge did. In- in a patient but persistent manner, she required them to say what is your theory? And it- and it- in it- J-A-137-0143, you see the transcript of the district court argument when- when finally at J-A-141 they said or 143 rather they said their theory is that because of the commission the developer would mark up the app. That is a classic overcharge case. Now to be sure in a new setting, it's a new world setting, it's not the brick and mortar setting of the three cases that this case- that this Court has decided before. But it is the same economics that should have the same outcome prohibiting pass-through damages claims. Thank you, counsel. The case is submitted.

We will hear argument first this morning in case 17204, Apple versus Pepper. Mr. Wall. Thank you, Mr. Chief Justice, and may it please the Court. The only damage its theory in this monopolization action is rooted in a 30 percent commission that Apple charges app developers in which allegedly causes those developers to increase app prices to consumers. The case is borrowed by the Court's Illinois brick doctrine because the developer's pricing decisions are necessarily in the causal chain that links the commission to any consumer damages. If the commission increases beyond the competitive level, but apps developers do not change their app's prices, consumers suffer no damages. And if app developers do change their prices to pass on some or all of the overcharge, well, that is precisely the kind of damages theory that the Illinois brick doctrine prohibits. Is there any, in your view, is there any first spire in this picture? Excuse me? Is there any first spire in this picture? Well, there's two different buyers in this picture. There are the app developers who, by contract with Apple, are buying a package of services which include distribution and software, intellectual property, and testing, and so forth. And then the plaintiffs in this case are the buyer of the apps themselves that are made with that package of goods and services in it. My question was, within Illinois brick, is there in this case anyone who would qualify as a first spire, the standing to sue Apple? The developers. Yes, without a doubt, the developers are the ones who, in the first instance, pay the 30 percent commission. I think it is important to root the analysis in the common ground, which has been conceded, that the only damages theory is based upon that 30 percent commission. That is charged by contract between Apple and the developers, and it is deducted from whatever price that the developer chooses to set subject to only the minimal risk. I'm sorry, the first sale is from Apple to the customer. It's the customer who pays the 30 percent. But there has always been a transaction between Apple and the developer before that, which has the pricing decision of what the developer is going to do on account of the 30 percent commission. There is a number of more generally about Illinois brick. That was a case of a vertical monopoly. Concrete block, person manufacture monopolizes the next intermediate market who then sells to a customer. Yes. All right. This is not quite like that. This is dramatically different. This is a closed loop. It is a closed loop, but in terms of the injury theory, which is what is at issue? They are not claiming the 30 percent as their injury. No, they are claiming their injury is the suppression of a cheaper price. It doesn't have to be 30 percent. They are not seeking 30 percent of their sales. They have to go out and prove at the next step how without this monopoly they would have paid less. It could be as little as a penny or nothing, or it could be something more. But the point is that this closed loop with Apple as it spoke, they are the first purchaser of that 30 percent markup. No, they are not. If the first purchaser is clearly the app developer who by contract agrees that every time it puts a positive price on an app, it will allow Apple to take 30 percent of it. Apple took 30 percent from the customer, not from the developer. Apple collects the funds, but even the Ninth Circuit here agreed that the process, the payment flow, is immaterial to the Illinois-Break issue. Surnya, I wouldn't think that's true even if they concluded it. In a simple theory, I would have thought it would have been an antitrust for at least a hundred years. What you do is you look to see who you claim as the monopolist. Who do they claim as the monopolist? Apple. Apple. And if you pay them, if that's true, they can raise prices to some people, lower them to others as their suppliers. And if you are injured because you paid them more, the monopolist, you can collect damages. And if you are injured because they forced your price down, you are a supplier, you can collect damages. End of theory. I don't see anything in Illinois-Break that conflicts with that. The emphasis in all three of this Court's decision on both pass on defenses and damages theories, that's what the doctrine disallows. It says that- Surnya, if I don't mean to interrupt you, but I don't want to you to miss the point I'm making. If Joe Smith buys from Bill, who bought from the monopolist, then we have something indirect. But if Joe Smith bought from the monopolist, it is direct. That's a simple theory. Now, I can't find in reason or in case law or in anything I've ever learned in any trust, anything that would conflict with that. Anyway, I want you is to tell me what. What conflicts with that in this case is that the alleged monopolization, which is over the distribution function, allegedly first manifests in a 30 percent commission. Consumers do not pay the 30 percent commission. There was an effort in the district court to try to argue that Apple added that, but that was abandoned. So what we have here instead is a damaged theory that runs through the independent pricing decisions of the app developers. Sotomayor, you asked the Justice Breyer to depend on what you said that the alleged monopolization is in the distribution function, because I understood the respondent now to be saying, no, that's wrong. The alleged monopolization is in the apps themselves. In other words, the consumer says you have a monopoly on apps. You might also have a monopoly on the distribution function, which the app developers have to live with, but you have a monopoly on apps, which the consumers have to live with. So in responding to Justice Breyer, you said, well, it's because the alleged monopoly is the distribution function, but I don't think that that's correct. Well, two points, Justice Kagan. First of all, it is correct. The complaint repeatedly alleges at Paragraphs 3, 8, and 53 that this is a case about a distribution market. It has always been a case about a distribution market, and it necessarily is, because there is no good faith allegation that Apple actually monopolizes the apps as software. It is simply the pipeline, the sale of the apps, which is, which is alternatively describing this case as either distribution or as the so-called aftermarket, which is simply limiting that to iOS apps instead of the 80s app. Kagan. There are a lot of words in this case that I tend to have trouble understanding. One is to sided market. Another is a lot that you used. So I go by simple analogy. If Bill buys from the monopolist, he is a direct purchaser. If Bill buys from Sam who buys from the monopolist, he is an indirect purchaser. Anyone can understand that. And when I get into what I think of as jargon, I begin to think, suppose I were you advising a United Fruit Company, I have a great idea. You won't have to torpedo the boats of your competitors anymore. Here's what you do. What you do is you buy from the farmers and you tell the farmers what you will pay the banana farmers. Is a very low price plus 30% commission. And then what you do is when you sell to banana consumers throughout the world, you charge them that 30% commission, which they say is a higher price. And if you United Fruit did not become the monopolist. Now I think I'm advising J Rockefeller. John Rockefeller and I give him the same advice. And I give the same advice to United shoe, which happened to be a distribution company. And we, thereby, happen. Well, you see the point. But the difference here is that there is no third party intermediary that is setting the price and exercising its independent determination as to whether any or all of the initial overcharge, which is some part or all of the commission, is going to manifest itself in the apps price. And that's why I started with the simple, I would say, you know, the hypothetical of, imagine the price today is the competitive price. The 30% is the competitive price. And it goes up by 10 points tomorrow. No consumer is injured unless the apps prices change. The apps prices have to change. And if they do, and they only change by virtue of a decision which implicates everything this Court talked about in Hanover shoe, in Illinois brick. And you do a lot of that. Kagan Well, I think you're avoiding the question a bit, because I mean, the questions that are being put to you by my colleagues are really what was Illinois brick about? Was it about a vertical supply chain or instead was it about a pass through theory? Now, in the facts of Illinois brick, and indeed in the facts of all the Illinois brick cases that we've discussed, you had both. So you didn't have to separate the two. And now here, you don't have both because this is not a vertical supply chain, but there still is a pass through mechanism. So then the question is, does Illinois brick apply to that or not? And I think what Justice Breyer was suggesting to you that as long as it's not that vertical supply chain where the person is not buying from the monopolist itself, here the person is transacting with the monopolist itself, that that's what separates this case from Illinois brick and makes it entirely different, not with standing, that there's some kind of pass through mechanism involved. Kagan Well, I completely agree with you that the key to this is deciding what Illinois brick was about. Was it simply a formalistic case about vertical chains or was it about pass through? And in answering that question, I would begin with first of all with Hanover Schoo, which is about a pass on defense and about the difficulties and the potential complication of antitrust litigation through pass on defense. And then the framing of the question in Illinois brick by this Court, which said having already found that we will not allow a pass on defense, we are now confronted with the question to whether allow pass on to be used offensively. It was 100 percent about pass on. The vertical chain was the factual setting of the case, and indeed, respondents' argument would have this Court believe that the factual setting is the sum in substance of the Court's reasoning. Mr. Wall, could I ask you about what troubles me about your position? And it is this. Illinois brick was not about economic theory. It was about the courts, the courts, the basis for the decision was not economic theory, as I read the case. It's the Court's calculation of what makes for an effective and efficient litigation scheme. And maybe your answer to this question is that the validity of Illinois brick is not before us, but I really wonder whether in light of what has happened since then, the Court's evaluation stands up and take the third point that it makes about that, the so-called direct purchasers are the most efficient and most in the best position to sue. If you look at this case, how many app developers are there whose apps are sold at the Apple store? Ten's of thousands. Has any one of them ever sued? None have ever sued. There have been plenty of disputes, but none has ever gone to litigation. For that matter, no State or Federal, any trust agency has ever sued either. We do not take that, we do not take the absence of litigation as evidence of an oppressed developer community that cannot speak for itself. The fact of the matter is that nowadays, major companies, suing their suppliers, happens all of the time. The idea that it doesn't, which was decried by Judge Posner as fanciful, has proven to be fanciful because it literally happens all of the time. Well, Mr. Wall, along those lines, I take your point that Illinois brick and handover shoe might be read about the economic realities of the past through mechanism being important rather than the contractual formalities, whether it's a sales agent or a formal purchase between the manufacturer and the distributor. And any trust normally accounts for economics rather than forms of contract. I take your point. But building on what Justice Alito had in mind, Illinois brick has been questioned by 31 states before this court. They're in Amicus brief. You're asking us to extend Illinois brick. Admittedly, only because of a contractual formality and the economic realities are the same. I'll spot you all of that for purposes of this question. But why should we build on Illinois brick? Shouldn't we question Illinois brick perhaps, given the fact that so many states have done so, they've repealed it. There haven't been a huge number of reported problems with indirect purchasers and direct purchasers receiving double recovery, one of the problems Illinois brick built on. And the other one which Justice Alito alluded to is direct purchasers don't always sue because there's a threat that monopolists will share the rents with the direct purchasers. And indirect purchasers may be better suited to enforce the antitrust laws. So long wind up, sorry, but there's a pitch. Sure. So a few things. First of all, it is an enormously complicated and controversial issue with the Illinois brick doctrine. You can see this in the briefing in this case where yes, you did have states saying repeal it, you also had the plaintiffs bar through the American antitrust institute say don't repeal it. There have been, I think, on the order of 17 efforts in Congress to have it changed, not once has it ever gotten to the floor. It is a quintessentially controversial political issue which belongs across the street not here. I would disagree completely. Why is that so if the Court created the doctrine in the first place? Because I don't think it's fair to say that the Court has created it. What the Court did was applied the foundational principle of all Section 4 jurisprudence, which is the proximate cause principle of damage is not going past the first step. And then it dealt with that in the context of the potential for duplicative pass through overcharge claims, which are a unique problem in antitrust. It's not a general problem of all damage theories, but when you have overcharge cases, and this gets to, just as Gorsuch's point about the potential for duplicative recovery, it's not hypothetical. It's automatic. It's mathematical. If the first purchaser gets 100 percent of the overcharge because of Hanover Schoo, anything else that is recovered, that gets added on that, is necessarily duplicative, and that's what happens in the district courts. You get the direct purchasers and the direct purchasers suing on whatever theory optimizes their levels of recovery. I'd like to reserve the rest of my time and turn it over to the solicitor general at this point. Thank you, Council. General Francisco? Mr. Chief Justice, and may it please the Court, I'd like to begin where Mr. Wall left out, and I think it addresses many of the questions that have been asked here. At bottom, Illinois, Brick and Hanover Schoo properly understood prohibit pass through theories, and they reflect a basic application of the background principles of proximate cause that this Court generally reads into statutes of this sort, and in particular the rule that damages stop at the first step. Here the first step is the Atmaker's pricing decision, because the respondents, the consumers, are injured if and only if the Atmaker's decide to increase their prices in order to recoup apples. General, I have to say I find that a not intuitive argument. I mean, because it just seems to me that when you're looking at the relationship between the consumer and Apple, there is only one step. I mean, I pick up my iPhone, I go to Apple's App Store, I pay Apple directly with the credit card information that I've supplied to Apple. From my perspective, I've just engaged in a one-step transaction with Apple. And when I come in and say Apple is a monopolist, and Apple is charging a super competitive price by extracting a commission that it could only extract because of its market power, I mean, there is my one step. I understand that, Your Honor, but in proximate cause, the issue is not transactional proximity. The issue is proximity between the illegal conduct on the one hand, here Apple's monopolistic overcharge, and the injury to consumers on the other hand, here the higher prices. And Apple's monopolistic overcharge is not the direct cause of higher prices. The direct cause of the higher prices is the app makers decision to increase their prices in order to recoup the opportunity. How do we know that? How do we know that? Given that Apple really operates as a retailer in many respects here, as Justice Greiton points out, and how do we know that the 30% charge is not affecting the price? Well, you don't know in any way that any retailer that adds 30% would affect the ultimate price paid by the consumer. And you don't know for sure, but that's the whole point. Here, because app makers set the final price, they have a choice to make. They either absorb the overcharge and keep prices the same, in which case the consumers aren't harmed at all, or they increase their prices to recoup the overcharge, in which case the app makers are also harmed because they face a drop in sales as a result of increased consumers are harmed, then, too. Yes, Your Honor, and that's the whole point of Illinois brick and hand over shoe. When you've got part of the harm going to that initial party that's bearing the full brunt of the overcharge in the first instance because of its pricing decision, that's the party that gets the whole queen. But we have ambiguity about what Illinois brick means here, and shouldn't that ambiguity, if there is such ambiguity, be resolved by looking at the tax to the statute? Any person injured? Yes, Your Honor. And what I think that Illinois brick reflects is the type of statutory interpretation that this Court has engaged in in a variety of cases, including the RICO cases, including the Lexmark cases, where you interpret background principles of approximate cause to be built into the statute, including the rule that damages stop at the first step. Does it make a difference, General, that Apple is influencing the prices here? In other words, this is, you're suggesting that the app developers are just sort of setting these prices independently. But I'll give you sort of two ways in which that's not true. The first way is this $0.99 charge, which you might say, well, that doesn't matter because, you know, it could be $0.99 or it could be $100.99. But in fact, these are all low-cost products for the most part. So, saying a price has to end with the number 99 is saying a lot about the fact that you can't charge $0.77 or $0.55 or $0.32. So, that's one. And the other is the entire allegation here is that Apple is truly a monopolist on both sides of the market. It's able to dictate the developers, whatever price structure it wants. And it's also able to dictate to consumers what the nature of the sale is going to be. And in that event, it sure seems as though Apple, you know, happened to set up this commission that puts it in the orbit of Illinois brick. But it could have done a thousand other things that are essentially the same that would have taken it out of the Illinois brick rule. Sure. And let me take those points in turn. First, the $0.99 pricing policy. The first thing I'll point out is it's not in the complaint. But we'll put that to the side and assume that it's part of this case. Here, I don't think it changes the fact that the app makers still control the overall price and to the extent that respondents are harmed by that, it's based on a pass-through. Look, if I go to an auction house and I have to bid in $10 increments, nobody thinks the auction house is setting the price. The bidders are still setting the price. And here, the respondents are- But if you have to bid in $10 increments and the true alternative prices are $3.5 and $7. Then indeed you are setting the price. And well, that's my second point, Your Honor. Here, any injury is based on a pass-through because that makers are either going to round up or they're going to round down. If they round down to the loader $0.99 price point, the consumers aren't injured at all. If they round up to the next $0.99 price point, the consumers are injured as a result of a pass-through theory. And it's that intermediating pricing decision that we think that under the principles of Proxima clause that- The problem is that they're not measuring damages by that. As I understand, they're saying it's not the 30 percent. It is what the price would be if we could buy apps outside of this closed loop. And it could be theoretically a lot higher than the markup. It could well be within it, but the point is that that 30 percent or whatever that 30 percent figure is, is not the measure of our damages. That's as I understand. That they're saying that developers may have their own claim. Their damages likely have to stay within the 30 percent, but we don't measure our damages by that. So respectfully, I'll disagree with that and in explaining it, Justice Kagan, I think I can also answer the second part of your question. The harm to the consumers here is that they have to pay higher prices for apps. And the reason they have to pay higher prices for apps in Justice Kagan, this goes to your question, is because Apple controls the pipeline that connects at makers on the one hand and iPhone users on the other. And the way they exploit that pipeline through their alleged monopoly is by charging that 30 percent commission. So the only reason consumers are harmed here in the form of paying higher prices is because the app makers decide to increase their prices in order to recoup that commission and just as prior to your question, the reason why this makes it different than your hypothetical of bill buys from SAM and you have transactional proximity is because the question isn't proximity between the parties who are transacting with one another, but proximity between the antitrust violation, the 30 percent commission, and the harm to consumers in the form of higher prices. I wouldn't have thought that was the antitrust violation. I would have thought the antitrust violation is having enormous market power achieved by not patents and not for skill for side in industry, but rather anti-competitive or more restrictive than necessary practices. Alcoa, for sure. Alcoa did not charge higher than competitive prices, and that's why Learned Hand said the easy life, not necessarily higher prices, is the reward often of monopoly. Now, for sure. I would have thought it's a matter for proof at the damages stage whether, in fact, Apple, assuming they prove it is a monopoly, has extracted higher than competitive prices from those particular people, the plaintiffs, or whether they've just had the easy life. Now, I don't think that's a stage we're at in this case. So if you say right, right, right, they must win. So what I wanted to say is that, for sure, the Illinois brick theory doesn't apply across the board, but it does apply when somebody is bringing an overcharged theory as an Illinois brick, as in Hanover shoe, and has here. The dough we have we had trial on that? Your Honor, where you have that kind of overcharged theory, what Illinois brick says asks is, under basic principles of proximate cause, is there some party other than the monopolist that's standing in between the plaintiffs injury in the form of higher prices and the monopolist's violation in the form of the commission? And whenever the price setter, the ultimate price setter, is somebody other than the monopolist, it's never the monopolist's overcharged, that is the direct cause of the injury. But if the app developer, if Apple bought the apps from the app developer and then added 30% to it and sold it to the consumer, you would agree that a claim could lie there, correct? Your Honor, I want to make sure I understand the hypothetical. If Apple's buying the app from the app developer, for a price. Right. Apple's then adding 30% to that price and selling it to the consumer. The consumer alleges that Apple's doing that as a result of monopolistic behavior. Claim lie? Yes, you can sue Apple directly, but you can't sue Apple if Apple isn't the price setting party, but the app maker is the price setting party. And that's why I finished the answer, Your Honor, and that's why the key is who sets the price and it's very hard to manipulate our rule. Because under our rule, you actually have to change the party that has the authority to set the final price. And that's a fundamental change in the nature of the transaction itself. Thank you, Council. Mr. Frederick? Thank you, Mr. Chief Justice, and may it please the Court. Apple directed anti-competitive restraints at iPhone owners to prevent them from buying apps anywhere other than Apple's monopoly app store. As a result, iPhone owners paid Apple more for apps than they would have paid in a competitive retail market. Under this Court's precedence, iPhone owners have a cause of action under Section for the Clayton Act directly against Apple for those overcharges. The Court of Appeals should be affirmed for three reasons. First, Illinois Brick is a bright line rule that respondents easily satisfied. Second, Apple directed its monopoly abuses at respondents. So it's appropriate that respondents can sue Apple for their damages as a result of those violations. And third, Apple seeks to expand and modify the bright line rule of Illinois Brick to deny indisputably direct purchasers, an antitrust remedy, and to change the rule into a standardless inquiry that will be hard to apply at the pleading stage. Now, if I could return to the first point, the direct purchaser rule is a bright line rule. This Court said so in Illinois Brick, and importantly, a case that has not yet been discussed today in Utilicorp, in which the Court said Illinois Brick is a bright line rule for direct purchasers notwithstanding the economics that go into that. Utilicorp was a case that protected the defendants who were asserting that, who were asserting that there was a break in the link of the chain. This is cases really the flip side of that to protect plaintiffs who directly purchase from the alleged antitrust violator and are claiming damages as a result of that antitrust violation. There's one antitrust violation under your theory, which is the increase, the 30 percent increase that Apple imposes when it's, when it's, when as you put it, it sells the apps. Wrong. And this is very important for the Court to understand. The antitrust violation here is the monopoly app store. Consumers cannot buy an app anywhere other than Apple's 100 percent owned monopoly app store. When it comes to the 30 percent increase, you're obviously saying the purchasers, again, under your theory of the apps are harmed by that and recovered, can recover damages for that. And also that the developers are harmed by that and they can recover damages for it as well. In other words, to the extent, as, like he said, that Apple is in a two-sided market, there's, there's a subject to suit on both sides of the market for a single antitrust price increase that there alleged to have imposed. So, Mr. Chief Justice, I think that your question kind of gets to the core of a lot of the confusion here because by having an wholly owned monopoly app store, Apple is able to distort the market at the supply chain and at the retail chain for consumers. We, representing consumer iPhone owners, are suing only for the damages that we incur. That is the higher than what a competitive market price would be for apps. Our measure of damages is not necessarily the 30 percent. The 30 percent is simply proof that Apple is acting as a monopolist because it acts. I understand, I understand your claim on your side of the market, but you do think that the developers have a claim as well, don't you? Well, I have no belief. It's not the same. It is a different claim. For the same price increase, the same. I disagree with that, Mr. Chief Justice. The Apple supplier of the apps, if they have a claim, it is that Apple has distorted the market for the supply of apps in a way that hurts app developers' profits. Their argument would be, if we weren't suffering under the one monopoly store constraint, we might be able to charge a different price lower than 99 cents and be able to get a direct purchase from an iPhone. Well, I think you're just saying that the measure of damages would be different between the two sides of the market. And, but there would be different damages. In other words, you're saying the consumer says, I'm paying a higher price for the product. It might be the entire 30 percent commission. It might be some portion of the 30 percent commission that's super competitive, but I'm paying a higher price for the product. And the app developer says, well, I don't, you know, that's irrelevant to me. I don't have to buy the product. What's relevant to me is fewer people are buying my apps. And that represents some amount of lost profits. But those two things are not, I mean, it is true that two people are being able to sue because Apple is transaction with each of these people and each of them has a gripe against what the way Apple has structured the market. But the damages are entirely different. One is a measure of lost profits, which may or may not exist. The other is, I'm paying too much. That's correct. And if that's an interesting theory, but is that the theory, is that the, your claim? Yes. I thought this place was all about the 30 percent. Well, the other side has been trying Justice Alito to make the case all about the 30 percent. But if you read that. So the 30 percent is nothing to do with this? What the 30 percent is, is an allegation that Apple is monopolizing the sale of apps. And we know that because they can extract 30 percent on every single sale, which only a monopolist could do. The 30 percent is not a measure of damages. I'm not aware of any case from this Court that says you have to plead antitrust damages with particularity. But the, because of the ability to extract a monopoly rent, we can say in good faith that they, we are paying more than we would pay than if a competitive market exists. I think you agree that there can only be one monopoly rent. And then the question becomes, who's paying it? And it might be spread partially between direct purchasers and indirect purchasers. It might be partially spread between the app makers and the purchasers of apps. And disaggregating that is the question that we've been wrestling with here. I guess here's where I'm stuck and need your help. You say that Illinois brick is a bright line rule, premised on the existence of a contractual relationship between the buyer, the ultimate purchaser and the intermediate seller. And that there has to be that kind of relationship rather than a sales agency relationship like we have here. But antitrust doesn't usually depend upon such contractual formalities. It usually depends upon the underlying economics. And I have a hard time distinguishing this case from Illinois brick in the sense of the, in the question of economic pass-through and the problems that it presents, the possibility that the intermediate purchaser may absorb the monopoly rent and not pass it along. Now that raises for me the question, further question, I'll wind it up quickly, I promise. Whether Illinois brick is correct, right? And you have an amicus that says it's not. But you don't make that argument. I'm really curious why. The plaintiff's bar is not making that argument before this court. So there's a whole whole bunch of things for you to chew on. Okay, I'll try to chew on them succinctly, Your Honor. We haven't asked for Illinois brick to be overruled because we plainly meet the bright line rule. We paid Apple and Apple's- Say I don't buy the formalistic contractual. It seems to me an argument in the law of contracts rather than the law of antitrust. So help me out with economics. Economics. We paid money. Apple never shared that money with any middleman. Illinois brick is a case about a middleman. There's no middleman here. We paid the money. Apple kept 30 percent of it before 70 percent- Again, that's based on the form of the relationship. They talked to me about the possibility, the problem that the app producer might absorb the monopoly rent. That's the economic problem that I'm stuck with. Okay. If I could try to answer your question with a hypothetical and if the court would indulge me, suppose at a competitive market, the price for an Apple's 90 cents, not 99 cents, as Apple is charging. It's 90 cents. We would all agree, I think, that the consumer can sue for the 9 cent differential between the monopoly price. I understand the 99 cent argument. Let's put that aside. All right. Now that we've got that aside, let's look at it from the developer's perspective. If they had a claim, if they had a claim, and I'm not saying that they do, but if they had a claim, they would need to show the difference between the profits that they would have achieved in the monopoly app store versus the profits they would have achieved at a competitive market price. That depends on three factors. One is the difference in sales that they would achieve between 99 cents and 90 cents. The second is how their sales differences would affect their revenue. And the third is whether the commission was 30 percent in a competitive market. Okay. So if you take my hypothetical, the damage is for the developer, there are three possibilities. One is that it's zero. If the commission went to 22 percent in a competitive market, the developer takes home 70 cents just as it does with Apple's 30 percent and a 99 cent monopoly market. At a 22 percent commission, the developer has zero damages. The developer would have positive damages if the commission were zero, because then the app developer sustains damages of 20 cents. The developer would make the 90 cents in the competitive market instead of the 70 cents that Apple is now passing along by virtue of the monopoly market. The damages would be negative, though, if in a competitive market the commission stayed at 30 percent. Because there, the benefits that would achieve by the monopoly price of 99 cent give the developer an extra eight cents per transaction. So in that way, Mr. Chief Justice, the developer has a different claim that's based on its lost profits. And that would be irrespective of whether the buyer of the app, the consumer, sustained damage for the nine cents in my hypothetical. You can run these out under different, you can get your law clerks to run all the different scenarios, it always works the same way. Kelser, unless you're prepared to overrule, it wasn't our case. Alkoa, I think all you'd have to show is one, they have monopoly power. And two, they achieved it through less restrictive, for more restrictive than necessary practices. End of your burden. In your case, and Justice Corsuch is quite right, there's only one monopoly profit to be earned. And so you'd have a different question when you get to the damages stage. The different question is, well, how did they divide that monopoly profit? You'd like to show that they got some of it from consumers, but that's for a later proceeding. That's correct. And you're adding one thing, one of the things that we want to use in order to prove that they do have monopoly power, i.e., the power to raise price significantly above a competitive level, is a charge of so-oblety, buddy, much money. That's just a piece of evidence here. And we'll worry later, agreeing that there's only one monopoly profit in theory, as to who got what. Now, have I stated that correctly? Yes, you have Justice Breyer. I mean, the basic problem in this case, as it comes to this Court, is who gets to complain about the monopoly app store? We say, as the buyers of the apps from the monopoly app store, there's no form or function, there are no contract issues, Justice Corsuch, that create a different form versus function problem. We're paying the money, they're keeping it. And we think we're paying more than we would have to if their market was a competitive. They say it would be different if Apple purchased the apps from the app developer and then added 30% on the sale. And why is that not different? Because it's irrelevant, and here's where we part company from the Solizard General. It's irrelevant who sets the price so long as what the violation is here, the monopoly app store, leads to higher prices that the consumers have to pay. That's what the violation is. That's how we are approximately harmed. So in the very hypothetical Justice Kavanaugh that you posed to the Solizard General, the Solizard General concedes we are direct purchasers in a situation where the app developer sets the price and they simply tack on 30% by virtue of their monopoly power. It's no different here if you think about it in terms of what is actually going on. Suppose Apple dropped its commission from 30% to 20%, but it maintained the price restriction of a 99 cent app. From the consumer's perspective, we're still overpaying for the app. Under that hypothetical, Apple simply gives the app developer more money, but that doesn't affect the consumer welfare at all. We're going to create a one-sided. Go ahead, please. The general said that if in fact Apple bought these products from suppliers and paid them, and then added 30% to you, that that would be a classic antitrust violation. You're saying that's basically what they're doing here anyway. But let's take the reverse. Let's say they collected money from you and paid all of it over to the developer, and then told the developer, give us 30% of that back. What you then still be a direct purchaser and so we would still be direct purchasers if under your hypothetical we're pying it from Apple, and then Apple is engaging in the Justice Gorsuch formover function situations in terms of how the money gets moved around. I think that the, in that situation, we are still directly purchasing and we're still able to complain about Apple's violation. And I think under your hypothetical, Justice Sotomayor, we have to keep the idea that Apple is still operating a monopoly app store. It's no different than if there was a grocery store chain that monopolized the sale of all vegetables. If they, if that is the only place you could buy vegetables, we would say that that monopoly store outlet was able to control prices and affect output, that's basically what's happening. Well, I think Justice Sotomayor's question is, it requires further exploration. I mean, are we in danger of just incentivizing a restructuring of contracts here so that all that Apple does or people like it is make you purchase directly from the app provider, and then it then returns the profit to Apple later. And if that's all we're doing, then what is the point of Illinois brick? And you still haven't explained to me why the plaintiff's bar is asking to overturn Illinois brick when 31 states are. So help me on both those. There are two separate questions. Okay, so let me take the second one first, Justice Sotomayor. So if I don't represent the plaintiff's bar, I represent the consumers in this case, and the consumers in this case have no brief and no beef with Illinois brick. We think we are direct purchasers. We satisfy the rule. We come within the bright line. That's okay with us. What the Court decides to do with Illinois brick is obviously something where I think you go to a different situation if the case arises. But on your other point, I think it's the other side that is actually asking for the opportunity to use contracts in order to distort or we characterize matters in a way that evades the Illinois brick bright line. Well, assume for the moment that I believe that economics underlying the two arrangements are very similar, hard to distinguish. I haven't yet heard you give me a good argument why. So let's just posit that. Then it really is just about form, isn't it? No, I think in that hypothetical, I would be prepared to say if we were paying the developer directly for the app and the app developer could set whatever price it wanted to set, okay, keep with me on that assumption. The app developer operating in a free market can set whatever it wants to set. And then Apple comes after the app developer and says, hey, you bought it through our store, we want whatever we want. That becomes not a problem with the consumer. That becomes a problem between the developer and the app. So pricing control is really important to approximate cause then. I bet you're pardoned. So pricing control is really important to approximate cause. Pricing control is not important to price, to approximate cause in the sense that, whether I think under direct, approximate cause, we're buying the app directly from the app developer and remember a key part of my answer was the app developer can set that price competitively in a competitive market. What arrangements happen between Apple exercising its monopoly control through the app store and the supplier is not something we are approximately affected by that? Your point was that the other side is putting form over the reality. That's correct. And they're doing it in a way that is particularly standard less because what the court and Utilicorp held was that even when it is absolutely clear, a hundred percent of the overcharge is going from the natural gas supplier through the utility directly to the consumer, this court held no. We're going to keep the bright line rule. Only the utility gets to complain about the natural gas overcharge. And it was that bright line rule that the court said is going to apply. And the reason is exactly Justice Alito for the point that you made, which is that it's a bad judicial administration at the pleading stage, we're just trying to figure out who has the claim and who could complain about the antitrust violation. Here, if that's clearly the consumers because we're the ones who are paying Apple the money to receive the app. And so to Justice Kavanaugh to finish off the point, what the other side is essentially asking is that instead of having a bright line rule, it's a very fuzzy rule because they don't have a test for what constitutes a pass through. They don't have a test that applies when there is no middleman, there's no middleman in this particular transaction. It's directly between the iPhone owner and Apple. And so you're going to have to figure out, do they get a one ticket good for this case only? They happen to be the largest company in the world, or at least they were some weeks ago, and they are able to extract monopoly pricing by virtue of a unique e-commerce monopoly on their app store. Kavanaugh What concerns me about your argument is that it doesn't seem to be based on the way in which this claim was understood by the lower courts. Maybe they misunderstood it. But I mean, the opening line of the order of granting Apple's motion to dismiss the second amended complaint by the district court, the thrust of plaintiff's second amended complaint is that Apple has engaged in the anti-trust conduct by collecting 30 percent of the price of iPhone applications. The district court just missed it, Justice Alito. Respectfully. Okay. Where can you point to me where in the ninth Circuit's opinion they understood your claim in the way that you've characterized it this morning? Yeah. They said on page 21a of the petition app, I think that's the page, that this is simply about a monopoly distribution, and that it is a simple case as a result of that. If you look at the bottom of 21a, the very last paragraph, instead we rest our analysis is compelled by Hannah Rischou, Illinois Brick, Utila Corp and Delaware Valley on the fundamental distinction between a manufacturer produced on the one hand and a distributor on the other. Apple is a distributor of the iPhone apps selling them directly to purchasers through its app store. And because of that, we have standing to complain that they are the seller of the apps. That's, it's a very simple case in that, it's viewed through that lens. Now, I accept Justice Alito that there have been a lot of arguments in this idea about the 30 percent has led to a certain lack of clarity, but I think that the position we have written in our brief is the best articulation of what the underlying theory is here, and that is that the Apple monopoly app store over charges iPhone owners for apps. And the role of the end in $0.99 requirement in that theory is what? In other words, would your theory be the same if no such requirement existed, or would it not? It would be still an overcharged case, Justice Kagan, because the theory economically is that if you are having to buy only from a monopoly, you are paying more than you would if there was a, you know, discount apps warehouse, or you could buy directly from the apps developer. Our assertion is that with multiple sellers, multiple suppliers of the apps, we would be able to buy them at a lower price. So what's the significant of that end in $0.99 rule? The significance of it is that it informs the price elevation and the price overcharge. And it also informs that contrary to Apple's assertion, they are not the agent of the apps developers. I mean, they put that in their contract. That's where you get to Justice Gorsuch's form over substance problem, because at $0.99 says they are telling the app developer, we are foreclosing from you 99 percent of all pricing options. Well, if it's that significant, why didn't you include it in the complaint? Because it's not significant from this perspective, Mr. Chief Justice, and that is that with a monopoly store, the prices are overcharged. Our theory is relatively simple. They brought up the 99 cents in the blue brief. I think it's at page 9 of their brief, where they raised the 99 cents issue. And as we were thinking about what the implications of that were, it became clear to us that that meant the app developer couldn't possibly be. Sounds kind of leave the data come up with a new litigation. Well, no, we're at a pleading stage, Justice Gorsuch. In the Supreme Court, the blue brief, really? Well, it's there. I mean, should we be taking that up now? I mean, maybe you can amend your complaint or something like that on remand, but should we be addressing that? Well, Justice Gorsuch, they were the ones that's what I'm saying. They brought up the 99 cents. It wasn't us. It's not sort of, and you reviewed that first view, right? Well, no, our point was that when they raised the 99 cents, is somehow proof that the developer actually gets to set the price. We say, no, it's actually irrelevant for the reasons which I've already stated, but secondly, it's just wrong because if you're constraining what 99 percent of the pricing options are, that's what it is, what it is. But it also has the effect economically of raising the prices that the consumers have to pay. It's going to add to your damages, correct? Well, it potentially. It could potentially add to the damages, or it could subtract from the damages. We don't know what we know is what the price is in a non-competitive market, and we will have to have experts that will assess what the damages would be in a competitive market. Your theory doesn't depend on the 99 cents. Our theory of damages or a theory of the violation. The theory of the violation is the wholly owned monopoly app store as the place to sell apps. That is what the violation is here, and how you calculate the damages is you look at what is the overcharge based on what the monopoly is selling the app for versus what it would be sold for in a competitive market. The anti-trust scholars, and I would direct you to page 23 of their brief, they go through a lot of the pricing scenarios that you have explored through hypotheticals here, and they make very clear that as a matter of function, what is happening here is that the monopoly seller of the apps here is extracting an overcharge from the purchasers who are direct purchasers of those apps. If this case were to go to trial as a class action would every app purchaser potentially be entitled to three times the 30 percent overcharge, or would it depend on the particular app? Your Honor, I think that I don't know the answer to your question fully. I'll be candid. I have not thought about how the experts are actually going to try to prove it up. What I would say, though, is that they're probably what will likely happen is that because there are apps that are sold at 99 cent, a huge number of them are free, but a huge number are sold at 99 cents. Some other strata is sold for $1.99. Some other strata is sold for $2.99 or $6.99. And I haven't put my head around to be perfectly honest exactly how you would carve up the damages on some sort of a pro-rata basis. But the idea, of course, of the Clayton Act is that treble damages designed to deter antitrust violations. And so this Court has made very clear in its cases that the point of having that deterrence is to avoid having the monopolist in this case act in a way that it is not penalized for its monopoly behavior. And if you were to suppose that it was just a single damages problem, it would be easy from monopolists to simply act. And if they get caught, they just simply pay over what they caused in damage. But the idea behind the Clayton Act's treble damages remedy is designed to deter actions just like this. And that is why Apple cannot point to another e-commerce distributor that does what it does. And every other instance, as we point out in the Red Brief, there is an alternative to buying the product. And in fact, Apple doesn't even do this with its own computer software. And we have pleaded that in the complainant, Mr. Chief Justice, where we say that if you buy software, you can buy an open source and you do not have to buy it through Apple's monopoly chain. So the iPhone app monopoly app store is a unique feature of the e-commerce setting. Apple has found ways using technology and contractual constraints to limit the opportunity of a competitive market to flourish. If a competitive market did flourish, the prices that iPhone owners pay would be lower. Thank you. Thank you, Council. Three minutes, Mr. Wall. Thank you, Mr. Chief Justice. I think I need to begin with the experience I had in this case for its first nine years. And that is it was about a 30 percent commission. Paragraph 48 of the complaint is the key allegation, which is the root of the damage of theory, which maintains that the 30 percent commission is a monopoly price. It's called a monopoly price. It's elsewhere called a super competitive price. It is the root of the damage theory, not just in part, not just on the periphery, but entirely. The brief end opposition at pages 5 and 12 make this unmistakably clear. At page 5, the brief end opposition states, quote, respondent seek damages based solely on the 30 percent markup. So whatever other attributes of this case one may want to talk about, that might contribute to the liability theory. The injury theory, the damages theory is, in their words, solely about the 30 percent. And it- It's all I have a question about this Court's case law and I like your attitude. If Apple had, in every agreement with an iPhone owner, a provision that you can sue, you can't sue, you have to go to an arbitral form in one by one. Then Apple would be home free in this case. We do not have such a provision. In fact, all of the relevant agreements with both developers and consumers state that- that there should be litigation in the Northern District of California- Yes, I know you don't, but suppose you did. If that were the case, then this would be a matter for arbitration. I don't think it changes with the legal question. And it would take this case out of this Court, put it in an arbitral form with a single complainant. Indeed, it would, but that's not this case. There is no concern about that in this case. The second point that I want to make is, relates to this duplicative recovery possibility. There is- we never heard any suggestion prior to the Respondent's Merit's Brief about potential loss profits claims based upon monopsony. And so to the contrary, the theory throughout the life of this case is that- that developers, if they sued, would sue over the same 30% markup, the brief unopposition at 12 says any claim by the apps developers, excuse me, a claim by the apps developers, even if they had one would not overlap the 30% markup paid by apps purchasers, rather it is a piece of the same 30% pie. So going back to what is Illinois brick about, it is about not having that apportionment fight. They admitted to the time that this case was on this Court's doorstep that this is all about an apportionment fight between the developers. As to the- which is the better rule, the formalistic rule or the substantive rule? I suggest that- that the formalistic rule is always the one that is most subject to manipulation. The substantive rule that asks is your damages theory a pass on theory, focuses on what is of economic substance. And here that's what the district court judge did. In- in a patient but persistent manner, she required them to say what is your theory? And it- and it- in it- J-A-137-0143, you see the transcript of the district court argument when- when finally at J-A-141 they said or 143 rather they said their theory is that because of the commission the developer would mark up the app. That is a classic overcharge case. Now to be sure in a new setting, it's a new world setting, it's not the brick and mortar setting of the three cases that this case- that this Court has decided before. But it is the same economics that should have the same outcome prohibiting pass-through damages claims. Thank you, counsel. The case is submitted