App Stores, Aftermarkets & Antitrust

Abstract

App stores have become the subject of controversy and criticism within antitrust. For instance, app developers such as Spotify and Epic Games (creator of Fortnite) allege that Apple’s 30 percent cut of all sales in the App Store violates the antitrust laws and is indicative of monopoly power. The idea is that iPhone users are locked into Apple’s walled garden iOS platform, which frees Apple to engage in misconduct in the App Store “aftermarket” to the detriment of users and app developers. This Article challenges the recent economic and legal characterizations of app stores and the nature of the alleged harm. First, this Article builds an accessible, economic framework to illustrate how app stores do not represent the same type of aftermarkets that were condemned in the Supreme Court’s landmark Kodak case. Importantly, the differences between Kodak-like aftermarkets and app store aftermarkets raise serious questions whether the digital revival of the aftermarket doctrine conforms with the economic realities of these markets. Second, the complexity of the commercial relationships found in app stores has raised questions regarding who has standing to seek antitrust damages in this type of market setting. This Article provides an overview of the development of the current doctrine of antitrust standing—focusing on Illinois Brick and Apple v. Pepper. Further, this Article contends that Justice Kavanaugh’s opinion in Pepper, which gave iPhone users the right to sue Apple over the 30 percent commission, was right for the wrong reason. Instead, Justice Gorsuch’s dissent offers a much more economically sound approach to antitrust standing—as his “proximate cause” standard does not artificially focus on identifying the “direct purchaser,” which is unnecessarily limiting for more complex commercial relationships. As the number of antitrust claims against various app stores proliferate, the consequences of faulty characterizations of app stores will only grow.