How Apple's Loss at Supreme Court Could Impact Entertainment

Mark Wilson/Getty Images
U.S. Supreme Court 

A few weeks ago, those subscribing to YouTube TV were dismayed to learn that the price for an online bundle of television networks was going up. After the Google division reached a content licensing deal with Discovery,  YouTube TV passed along the cost to consumers. No longer would YouTube TV cost $40 a month. Instead, the service would be priced at $50, or even more. It became a parenthetical in many stories about YouTube TV's price increase, but actually quite importantly, those who signed up for the service through Apple had to pay $55.

Do those stuck paying supracompetitive prices — like five extra bucks per month — have any legal recourse against Apple? Well, according to a decision from the U.S. Supreme Court on Monday, they just might. And not just them, either. A 5-4 majority decision from Justice Brett Kavanaugh may open up more consumer suits alleging antitrust violations.

The bar on such suits had been legal interpretation of a 1977 decision, Illinois Brick Co. v. Illinois, which held that only direct purchasers and not indirect purchasers could sue. In the case that was decided today by the high court, a district court had initially rejected a class action against Apple because it deemed the app developer as setting prices and selling directly to consumers, even if such price was influenced by what Apple was charging the app developer to access its electronic store. The district court's conclusion was then reversed by the Ninth Circuit Court of Appeals before getting to the Supreme Court.

Kavanaugh, joining the four liberal justices on the high court, doesn't believe it makes sense to bar app purchasers from going after Apple for the way it allegedly has leveraged its monopoly.

"If a retailer has engaged in unlawful monopolistic conduct that has caused consumers to pay higher-than-competitive prices, it does not matter how the retailer structured its relationship with an upstream manufacturer or supplier—whether, for example, the retailer employed a markup or kept a commission," he writes in the opinion.

The ruling figures to impact entertainment — and not just because a lot of people have iPhones and are increasingly buying access to content migrating online.

Take the price for attending live concerts, for instance.

As the Apple case was headed toward the Supreme Court, it was being contrasted with a decision from the Eighth Circuit, Campos v. Ticketmaster. There, a group of music fans were attempting to hold Ticketmaster liable for the high prices concert venues were charging for admission. But they ran into an Illinois Brick wall. The Eighth Circuit ruled the plaintiffs didn't have standing to sue Ticketmaster on antitrust grounds partly because of the complications in assessing responsibility for overcharges. In the eyes of the judges, the Illinois Brick rule made most sense: If ticket prices were too high due to antitrust behavior, the concert venues could take action. Allowing the ultimate buyers of tickets to sue would necessitate tough questions about whether the venues were passing on monopoly costs.

Partly because of this reasoning (now basically rejected in what may turn out to be a shot in the arm to those suing Ticketmaster over concert prices), the dissent in today's opinion from Justice Neil Gorsuch talks about the "massive efforts" to apportion damages.

"Consider first the question of causation," writes Gorsuch. "To determine if Apple’s conduct damaged plaintiffs at all (and if so, the magnitude of their damages), a court will first have to explore whether and to what extent each individual app developer was able — and then opted — to pass on the 30% commission to its consumers in the form of higher app prices. … Will the court hear testimony to determine the market power of each app developer, how each set its prices, and what it might have charged consumers for apps if Apple’s commission had been lower?"

Kavanaugh shrugs it off. He writes that plaintiffs will still have to prove that a retailer like Apple caused the consumer to pay a higher-than-competitive price. Otherwise, he adds, the damages will be zero. (By explicitly talking about the Apple surcharge, Google's YouTube TV could make analysis easier for prospective plaintiffs.) But to elevate the issue of upstream market structure above the substance of what consumers are paying, Kavanaugh believes, gets in the way of the good antitrust review and potentially does harm.

The opinion states, "If accepted, Apple’s theory would provide a roadmap for monopolistic retailers to structure transactions with manufacturers or suppliers so as to evade antitrust claims by consumers and thereby thwart effective antitrust enforcement."

This article originally appeared in THR.com.