Supreme Court Interrupts Apple’s “Glorious Anniversary”

Below is my column in The Hill newspaper on the 5-4 ruling of the Supreme Court against Apple Corporation.

Here is the column:

It was 35 years ago when an electrifying commercial showed prisoners in drab gray uniforms watching a televised Big Brother extol the “glorious anniversary” of the “garden of pure ideology, where each worker may bloom, secure from the pests of purveying contradictory truths.” Then a young woman ran up and heaved a sledgehammer into the giant screen, shattering the myth of the single truth and the “unification of thoughts.”

It was late 1984, and the launch of the Apple Macintosh. Over the years, many came to wonder if Apple had not simply created its own “garden of pure ideology” by coercing people to buy Apple products and slavishly following their “geniuses” in those antiseptically white showrooms. Now a figure has emerged and shattered the unchallenged domination of Apple.

What was surprising is this time, the runner throwing the sledgehammer was Supreme Court Associate Justice Brett Kavanaugh, who sided with the four liberal justices to rule that customers could sue Apple over its allegedly monopolizing conduct. Thecase, Apple versus Pepper, could have far reaching consequences for colossal technology companies.

The decision hits the company where it is dominant and seemingly impenetrable with the App Store. Entrance to it promises access to a largely captive audience of users. Apple claims to feature more than two million apps and to generate billions of dollars for developers. The plaintiffs showed that developers have to pay Apple a 30 percent commission that is then passed on as a 30 percent markup for users.

Apple argued that the arrangement meant its customers are not direct purchasers from Apple and instead buy from the app developers. It is a legal sleight of hand in that by grabbing the 30 percent commission from app developers, Apple could argue that it was not subject to antitrust laws under a 1977 case, Illinois Brick Company versus Illinois, in which the Supreme Court blocked antitrust damages for “indirect purchasers.”

That was until the figurative sledgehammer hit the screen this week. Not only did Kavanaugh deliver a majority with the left wing of the Supreme Court, but he upheld the liberal Ninth Circuit. Apple will now be viewed as a distributor which sells apps to its customers directly. That is closer to reality for Apple users, who purchase what Apple allows in its App Store.

Indeed, Kavanaugh portrayed Apple as that imposing and manipulative Big Brother, writing that its theory “would disregard statutory text and precedent, create an unprincipled and economically senseless distinction among monopolistic retailers and furnish monopolistic retailers with a how to guide for evasion of the antitrust laws.” Equally fascinating is that the dissent to the decision was written by Associate Justice Neil Gorsuch, who of course is the other Supreme Court nominee of President Trump.

Gorsuch suggested that Kavanaugh was revising or ignoring Illinois Brick Company, which is a reasonable view given the similarity of the “pass on” techniques in the two cases. Gorsuch also warned that Apple could easily evade the ruling by restructuring to have Apple users pay app developers directly, and then have those app developers pay a commission to Apple.

While that could be true, the decision clearly shows that antitrust rules are flexible enough to apply to new practices by technology companies to control prices and access to products. The most chilling line of the ruling may be that “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.” For consumer advocates, it shatters a myth that will encourage people to sue these companies for predatory practices.

Apple itself was previously found to have engaged in antitrust violations by manipulating the price of eBooks and later settled for $450 million. It has been accused of heavy handed efforts on music streaming services, and it is being targeted by European regulators. It has also been accused of removing or restrictingapps for screen time monitoring and parental controls favor its own products. Apple thus far has largely been able to engage in monopolizing conduct and, to quote its 1984 commercial, allow its enemies to “talk themselves to death” and get buried “with their own confusion.” They are much less confused and more empowered this week.

Some liberals hope the other shattering effect of this decision may be felt by the new conservative majority. That may be a bit premature, however, it is notable that Gorsuch and Kavanaugh have divided on a number of key cases this term. Kavanaugh voted with the left wing of the Supreme Court to protect the appellate rights of criminal defendants. Conservatives were not happy when litigants could not get the necessary four justices to hear a case on blocking Medicaid money for abortion clinics. The conservative holdouts were obvious when only Justices Gorsuch, Clarence Thomas, and Samuel Alito objected to denial of review. That was a telling moment.

When Kavanaugh was nominated, I wrote a column expressing the irony that Trump had criticized Chief Justice John Roberts but decided on a nominee with a resume and demeanor that was a virtual clone of Roberts. Neither Roberts nor Kavanaugh would agree to be the fourth vote to allow the abortion case to be heard. Conversely, Gorsuch has broken with the conservatives on Native American rights and immigration cases. Gorsuch and Kavanaugh were never the robotic jurists portrayed by their foes in their confirmation hearings. Indeed, some of the liberal justices show equal, if not greater, bloc voting records. However, both men remain committed conservatives with well established jurisprudential views.

When it comes to the Apple decision, those views took them to opposite sides of the Supreme Court division. Yet, these are not sledgehammers hitting the figurative big screen of the judiciary. For its part, Apple remains a behemoth firm that pulled in more than $265 billion in sales and close to $60 billion in profits last year. It is not that small anti-Orwellian operating system from 1984. I was one of those watching in 1984. I bought the first Macintosh and have owned Apple products ever since. I still remember the promise Apple made in its commercial that 1984 will not be like the book “1984.” That was true back then but, 35 years later, I am not so sure.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University. You can follow him on Twitter @JonathanTurley.

31 thoughts on “Supreme Court Interrupts Apple’s “Glorious Anniversary””

  1. The 1984 commercial is kind of ironic being that the PC was an open architecture whereas the Mac was closed. It’s why the PC was ultimately the winner and better.

    1. Jim, obviously people disagree with you because so many people have Apple computers. I wouldn’t say one is better than the other but at least in the past I understood Apple’s graphics were better and the PC had more power. Stockwise I prefer Apple because I bought the stock when the i pod was released before the quarter ended so the numbers hadn’t yet been released.

      1. Allen,
        The pc was way better. The pc was the standard for people who used their computer for work. Remember, Dell, HP, Gateway, IBM and a host of others? They all made PC’s, who made a Mac other than Apple? Even in the graphics world, a PC running NT with Corel Draw ran circles around a Mac for refresh times. I had a Graphic artist come to our plant and she was amazed at what it could do since she only believed Macs could do graphics. Apple was gong bankrupt until the govt. went after Microsoft and Microsoft bailed them out. They needed the competition to keep the feds happy. Today, things are different but not because of the Mac, but due to the ipod, etc…

        1. “Apple was gong bankrupt ”

          Yet, Jim, Apple survived and became a powerhouse. Comparisons without metrics is impossible. I recognize the PC was used by businesses but that wasn’t necessarily Apple’s market. Decades ago I had to network one of my businesses and used (I think) Unix. I couldn’t use an Apple product at the time nor could I load an Apple product up with so much speed. I didn’t want to be involved in the day to day maintainance of the system because IT was not my business so I hired an IT guy and kept out of the way. For portable laptops I found that buying two identical ones could save a lot of angst because the odds were that one would always be working.

          I’m not arguing that one is better than the other rather they are two different products with so many variables that they cannot be compared unless on picked one variable at a time. I have both a PC and a Mac Book Pro. I find the Mac Book Pro to be preferrable to the PC.

          In the end what counts is how the user finds the experience and in that experience for me the Apple and i-phone are the winners.

          Today under Cook I am concerned about Apple’s future. I looked at them as an innovator and invested in them as an innovator. Cook appears to know how to run a business but I suspect innovation is too far from his mindset to move Apple forward so I no longer have Apple stock. If and when Apple finds a suitable visionary I will go back in but that type of individual is rare and hard to find. If he is found he will need a Tim Cook to reign him in.

  2. I’m reminded of MS and Apple in the early days. Apple’s marketing policy was make sure everything works properly out of the box and charge what the market will support. Microsoft policy was Market now, fix later but pretend that it will work and never fix it just repeat the cycle.

    Apple got caught on the wrong side of 5-4 No problem with that but when did Microsoft ever get charged with conspiracy to defraud?

  3. This “technicality” defense on Apple’s part failed miserably. That said, Apple still has a meritocratic argument for exercising curator control over the apps that can run on its platform:

    Apple adds value to the end user by vetting apps:
    1) PRIVACY – Apple defends end-user privacy rights by rejecting apps that hoover up the end user’s personal conduct and information. Apple will argue that this is a primary competitive differentiator between its app ecosystem and that of Android.
    2) CRIME PREVENTION – Apple defends law by screening out apps that are attempts to thwart law enforcement or to break laws. Example: Any app that tries to scam the end-user (cybercrime, cyberextortion) will be removed from the AppStore promptly upon presentation of evidence.
    3) TECHNICAL RELIABILITY – Apple tests all the apps before publishing them for compatibility, not just to protect the iOS and other running apps, but to protect the user from dealing with buggy apps.

    Apple will argue at the class action suit that customers do have a choice between the Apple ecosystem and that of Android, so therefore, there is no attempt to monopolize the market for mobile-device apps. And by giving the app developer-publisher the responsibility for end-user pricing, there is no attempt to control pricing in a predatory manner.

    Apple will have a strong case on the merits against anti-trust.

    1. Imagine if AT&T cut off your phone service because they didn’t like what you & your friends talk about.

      Same with the electric company.

      Imagine if Apple/Google/Youtube/Facebook “Colluded” to ban outfits like Infowars all at the same time.

      Think Racketeering & Torturous Interference.

      Then imagine Infowars got a bunch of those companies internal docs showing their plans to ban infowars/Alex Jones & then Prez Trump ask for & received those & others docs so he can ship these case to the DOJ anti-trust Div!

      That American hating Commie company, yes Apple moved most the the company to China, can just go to hell.

  4. The difference between Roberts’ resume and Kavanaugh’s is that Kavanaugh probably wouldn’t have found Obamacare to be Constitutional under the taxing power, when it clearly was rent-seeking by the insurance companies, who suddenly got every working American as an involuntary customer. Kavanaugh’s more of a libertarian (though not always, as this ruling shows), and Roberts is more of a statist (though thankfully, he didn’t line up with the 1930 Court on Miller v. U.S. on their extremely statist interpretation of the Second Amendment to the Constitution).

    1. US v Miller just says a sawed off shotgun was not a “militia weapon” and thus fell outside the 2d amd. The case could be taken in a restrictive manner, but it’s not really a problem insofar as it seemed to assume the validity of an “individual rights” interpretation of 2d amendment– which is obvious from use of the text “the right of the people.”

      Of course it protects the states’ rights to armed militias too; just not ONLY the state right as the restrictionist gun grabbers would have us pretend.

      1. Mr Kurtz,

        The US v Miller case started out right up the road here.

        I’m not sure where to find the info, maybe it’s in the ruling, but it’s supposedly admitted that the judge states he’s unaware of the US military using sawed off shotguns.

        It was shown that yes indeed the military used sawed off shotguns, thus that ruling could be subject to being stuck down.

        But that brings up the whole issue with all these unconstitutional courts, in order for a citizen to have standing they 1st have to break administrative ruling.

        I seen some guys out of Arkansas take that route years back to get into court & they ended up in prison.

        1. the funny thing is you can get one of these technically legal short barreled shotguns which are technically pistols now so that part of the NFA barely matters

          google “mossberg shockwave”

          (sorry if that gives any of the antigun people ideas — but I am not a mossberg shareholder anyways, lol )

          1. A female friend of mine who lived alone swore by her Mossberg and would keep it close to the door. She told me it was a very effective tool.

            1. that’s the kind with a stock. that one doesn’t have a stock and it’s harder to aim a shotgun without one than you might suspect

              1. It’s a matter of personal choice, but remember we are dealing with a shotgun that is in a home where there isn’t that much space. That weapon need not be shot from the shoulder and there is a spread.

            2. Allan,

              She’d be 1000 times better off with an AR15 “Defence Weapon!!!! ” close to her person then a damn shoulder busting 12ga shotgun!!!

              Tell her she could take her shotgun & hit Joe Biden in the face for giving American women such unsafe advice!!!

              Just go to any gun range & shoot those guns, they’ll/you’ll know after the 1st couple of shots!

              idiocracy writ large currently in the US on multiple important issues.

              1. I don’t know what’s going on with these West Coast Loonies at like Google/YouTube?

                This clip plays correctly for me now, you, I don’t know?

          2. Remember what happened when the British military came for the private citizen owned cannons.

            I’ll ask someone I know about that US v Miller case later today when I get more time.

          3. Mr Kurtz,

            This post doesn’t even start to address Oklahoman’s Okie/USC “God Given Constitutional Rights”, such as the Right to Own Nuke Weapons, Biological/Chem, Old Cannons, Laser Cannons, Light Sabres, Disrupters or other such modern/advanced weapons.

            The current troubles in the US is that American don’t have & know how to use weapons!!!

            IE: Chicago! The people there are not taking nearly enough Criminals off the street every day!!!

            LOL;)

            (From the majority opinion of that case:

            *”In the absence of any evidence tending to show that possession or use of
            a ‘shotgun having a barrel of less than eighteen inches in length’ at this
            time has some reasonable relationship to the preservation or efficiency of
            a well regulated militia*, we cannot say that the Second Amendment
            guarantees the right to keep and bear such an instrument. Certainly it is
            not within judicial notice that this weapon is any part of the ordinary
            military equipment or that its use could contribute to the common defense.
            Aymette v. State of Tennessee, 2 Humph., Tenn., 154, 158.”

            Commentary: the justices did not have such evidence submitted due to
            situations around the case. Miller was a suspected bank robber who had
            testified against his gang and was found shot to death shortly after. The
            case dropped quietly.

            “The Constitution as originally adopted granted to the Congress power- ‘To
            provide for calling forth the Militia to execute the Laws of the Union,
            suppress Insurrections and repel Invasions; To provide for organizing,
            arming, and disciplining, the Militia, and for governing such Part of them
            as may be employed in the Service of the United States, reserving to the
            States respectively, the Appointment of the Officers, and the Authority of
            training the Militia according to the discipline prescribed by Congress.’
            U.S.C.A.Const. art. 1, 8. *With obvious purpose to assure the continuation
            and render possible the effectiveness of such forces the declaration and
            guarantee of the Second Amendment were made*. It must be interpreted and
            applied with that end in view.”

            Commentary: short-barreled shotguns are only occasionally used in military
            service, but short-barreled rifles are almost standard issue. the
            20″barreled M-16 has largely been superseded by the 14.5″ M4, and the 10.3″
            Mk.18 has seen quite wide issue as well, especially for special forces.
            Silencers similarly have only grown massively usage. And of course, all of
            these are capable of automatic fire. )

      2. US v Miller committed the same error modern gun control advocates do: assuming that Congress intended the subordinate, dependent clause referring to a “well-regulated militia” to limit the application of the main sentence, “The right to keep and bear arms shall not be infringed”. Since they don’t teach how to diagram a sentence in schools these days, no one under the age of 60 can read the Second Amendment properly, But the majority of the Supreme Court did, twice.

  5. “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.”

    If this point were to appear before the Supreme Court I would advocate knocking it down for being overly vague. This leads to unnecessary suits and costs that can easily cost more to the consumer than if such a ruling did not exist.

    1. And, as you say, the market remains open. No one must use the App Store and its customer base is not captive. At worst, all an owner of Apple hardware must do is switch platforms to Android, some flavor of linux, or Windows and be unfettered to or by Apple entirely. But the Apple App Store isn’t the only place to buy Apple applications, anyway.

      1. I don’t care about this, but how many people are going to switch platforms on Apple Hardware? The geekiest of the geeks. I’m long time Windows, Android user because I think “Apple knows best” proprietary BS is BS.

        1. That’s essentially what I meant by “switch platforms” – hardware and all. Don’t ride along with Apple’s OS follies, because they’ve demonstrated that as sorry as Microsoft is at system security, etc. Apple is worse.

      2. Jean, I believe Apple customers are not prevented buying apps from outside of the Apple Store. Apple is essentially marking things up by 50%. If one goes to a Macy’s store and buys a shirt they might find mark-ups of 4 times the price paid.

        One of the reasons people pay for Apple and some of their high prices is that Apple makes things easy and is not as likely to be hit with virus’s perhaps because they have proprietary software.

        1. a lot of the apps install undesirable spyware. the apps may be cleaner but unless they come from a big name they’re probably full of junk

          1. True of Avast which worked until you tried too NOT renew. All the time they claimed to be keeping this ware and that wear off your computer they turned out to be the biggest problem of all.

        2. I ran a “mixed shop” (some Apples, some Windows boxes) in my home all through the 2000-2010 decade and can testify that
          (a) Apple Macintoshes made things easy largely by having less powerful and versatile apps than you could run under Windows and
          (b) when Apple created a zero-day exploit, it was devastating and allowed intruders to rummage through the victim’s hard drive contents.

          Much the same is true of Android versus iPhone – after its “IceCream” release, Android largely became stable. I’ve never owned an iPhone, but friends who have don’t report anything like the reliablity of my Android smartphone.

          1. Jean, In the past I only used PC computers. Because of my needs they were loaded for speed and memory along with service contracts that covered onsite service. I don’t know how many failures we had. Of course as time passed everything got better but still for my portable use the PC laptops all gave me trouble. I went to Apple without a problem since. I still maintain one PC. and also have a couple of i-pads. AS far as the phone I switched to Apple as well. I am not interested in all the extras but am interested in the ease of use and ability to read the i-phone on the net.

            A good number of years ago there was a blog site on the WSJ where people (some engineers) discussed the differences. The conclusion I drew at that time were that is you wanted to fool around with the programming go to the android. If you wanted ease go to the i-phone which all agreed was more stable.

            If I need complicated computer work to be done, I pay someone. For me that is a lot less expensive.

        3. Which, except for “One of the reasons people pay for Apple and some of their high prices is that Apple makes things easy and is not as likely to be hit with virus’s perhaps because they have proprietary software.”

          But Apple’s had its own zero-day exploits, one of which basically let intruders do what they wanted in the machine/s root directory, making it more promiscuous than (insert name of your least favorite Hollywood personality).

  6. The tech companies are garnering more power than they should so that some intervention is likely needed. I don’t think this was the right case nor the right decision.

    In Apple’s favor, that 30% seems like a type of warranty for consumers that the app is good and won’t cause problems on one’s computer. Apple permits its customers to call for help on the phone to fix problems for free and bad apps can create a lot of lost time.

    One need not purchase an app through the Apple store so the market is still open. If Apple’s power is still too great then I believe there were reasonable alternatives that were better than the ruling.

    Google and Facebook technology on the other hand clearly obstruct free interaction on the net. They are companies that need to be dealt with.

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