On November 26, 2018, the Supreme Court began hearing oral arguments for Apple Inc. v. Pepper. As Reuters reports, the justices appeared to lean in favor of allowing the antitrust case to continue. This article has been updated with comment from Apple that was sent after the oral argument.

Has Apple monopolized the market for iPhone apps? That's the question at the heart of Apple Inc. v. Pepper, a case the Supreme Court agreed to hear Monday, which could have wide-reaching implications for consumers as well as other companies like Amazon. The dispute is over whether Apple, by charging app developers a 30 percent commission fee and only allowing iOS apps to be sold through its own store, has inflated the price of iPhone apps. Apple, supported by the Trump administration, argues that the plaintiffs in the case—iPhone consumers—don't have the right to sue under current antitrust laws in the US.

The case marks a rare instance in which the court has agreed not only to hear an antitrust case, but also one where no current disagreement exists in the circuit courts. The outcome could change decades of antitrust legal precedent—either strengthening or weakening consumer protections against monopolistic power. The case also represents a huge source of revenue for Apple; the company raked in an estimated $11 billion last year in App Store commissions alone.

The Illinois Brick Doctrine

At the core of the lawsuit is another Supreme Court case from 1977, Illinois Brick Co. v. Illinois, which established what is known as the Illinois Brick Doctrine. That rule says you can't sue for antitrust damages if you're not the direct purchaser of a good or service. If I have a monopoly on bread and the local deli sells you a sandwich, you can't sue me. It's just too hard to figure out how much of your sandwich price was inflated due to my illegal activity.

'Apple is trying to argue that the consumers don't have the standing to sue here because the app developers set the price.' Sandeep Vaheesan, Open Markets Institute

Here's where things get complicated. Apple isn't buying apps from developers and then reselling them to consumers. It merely charges a 30 percent commission fee, and only makes them available in its own App Store. Because of that, Apple argues that it's protected from antitrust lawsuits lodged by consumers because it's not the direct seller, the developers are. It views the App Store like a mall; it's merely charging developers rent to sell in it.

"Apple is trying to argue that the consumers don't have the standing to sue here because the app developers set the price," says Sandeep Vaheesan, an antitrust lawyer at the Open Markets Institute, a nonprofit that advocates against monopolistic power. "What the consumers are really upset at is how the apps are being priced by developers."

But the plaintiffs in the suit argue that Apple monopolized the distribution of the apps, not the apps themselves. In a world where app stores could actually compete for developers' products, the commission rates might be lower, resulting in lower-priced apps. This plays out on Android already; the majority of app downloads go through the Google Play Store, but users can also go to the Amazon Appstore for occasionally discounted apps, or F-Droid for exclusively open source apps.

By comparison, Apple is less like a mall, and more like the only store in town. iOS app developers have to abide by Apple's lengthy guidelines if they want to sell their products to iPhone consumers and the company can exclusively decide when it doesn't want certain apps on its phones.

"On the face of it, I certainly think [the plaintiffs] have got a strong case. Whether it's a winning case, I don't know yet," says John Lopatka, an antitrust professor at Penn State Law School and the author of Federal Antitrust Law and The Microsoft Case: Antitrust, High Technology, and Consumer Welfare. "If they lose, it's because the court is going to want to change to some extent just what this Illinois Brick rule is."