Templeton Timothy – Antitrust laws have been in place for decades, and their objective is to eliminate or regulate practices that may obstruct free competition. Whenever people discuss antitrust laws, they are likely referencing one or more of four acts by Congress. The first is The Sherman Act of 1890. The aim of this act was to regulate competition among different industries as well as prevent one enterprise from gaining a stranglehold on the market. Less than two decades later in 1914, the Federal Trade Commission Act was passed, which prohibited unfair competition practices and deceptive advertising to consumers. In the same year the Clayton Act prohibited mergers that substantially consolidated the market and anticompetitive practices such as price discrimination between purchasers. In 1976, Congress passed the Hart-Scott-Rodino Antitrust Improvements Act which requires a company to notify the Federal Trade Commission if it is considering entering into a merger that could substantially affect the free market. Because Congress has been particularly vague with respect to the scope of antitrust action, much of the legislative doctrine has been and will continue to be charted by the Supreme Court, which recently gained a new member in Justice Brett Kavanaugh.
Recently up for Supreme Court consideration was the Apple Inc. v. Pepper case from the Ninth Circuit Court of Appeals. The crux of this case rests on Apple’s conduct through the App Store with third-party app developers. Beginning in the Northern District of California, Pepper was the named plaintiff in a class action brought on behalf of anyone who has paid for an iPhone app since 2007. The plaintiff’s argument was that the 30% commission fee that Apple imposed “illegally monopolized the distribution of iPhone apps.” By charging third-party developers an extra fee for distribution across iPhones, the plaintiff argued, Apple is functionally acting as a filter for what products are available to the general consumer. However, with respect to who can bring these types of antitrust suits, the Supreme Court has long-since decided that only the first purchaser may sue for antitrust violations, not other people later in the commerce stream. Apple countered the plaintiff’s argument by asserting that since Apple charges the fee to the app developers and not the consumers, the app purchasers do not have standing to sue, as they are not the ‘first purchasers’ in this case. The District Court found Apple’s argument more persuasive and dismissed the lawsuit without giving Pepper a chance to amend his complaint. The Ninth Circuit Court of Appeals reversed that decision, finding that the app buyers were direct purchasers and thereby giving them standing to bring the suit. Apple appealed to the Supreme Court, which granted certiorari to decide the issue.
Before the Supreme Court heard oral arguments, however, Justice Kennedy stepped down from the Court. Historically a powerful swing vote on important issues such as antitrust violations, whoever replaced him on the Court would have a marked influence on antitrust jurisprudence almost immediately, as Apple Inc. v. Pepper still waits on the docket. With Justice Kavanaugh confirmed to the Court, it makes sense to examine his judicial history to see where he falls on the antitrust spectrum. If he stands with Justices Thomas, Roberts, Alito, and Gorsuch, then he’ll be unlikely to find antitrust violations, preferring to let the free market wax and wane in a self-regulatory manner. However, if his conservative ideals and deference to stare decisis take root, Justice Kavanaugh may have no choice but to side with Justices Breyer, Ginsburg, Sotomayor, and Kagan in order to uphold strong precedent in favor of limiting commercial giants like Apple.
In his twelve years on the D.C. Circuit Court of Appeals, then-Judge Kavanaugh authored three opinions that could foreshadow his leanings in the upcoming Apple case. In the 2012 Metroil, Inc. v. Exxonmobil Corporation, the appellants alleged that a DC provision invalidated the obligations that the involved parties owed one another. The statute in question prohibited the assignment of rights that materially increased the burden on a contracting party. In Metroil, the new contract would allow Exxon to access to Metroil’s bank account at any time to withdraw funds. Then-judge Kavanaugh opted not to invalidate the contract because a clause provided that the method of payment could include “any other method… designated from time to time.” Such a strict adherence to contractual language is likely indicative of a deference to drafters’ intent that Justice Kavanaugh will employ on the bench. In this instance, that is a point for Apple because the fee is explicitly imposed on the app developers, not the consumers that Pepper represents in the class action. This distinction will likely signal to Justice Kavanaugh that app consumers were not in contemplation when the fee was incorporated, negating their standing to bring the current suit. In 2015, Judge Kavanaugh wrote the opinion for Venetian Casino Resort v. NLRB. In this case, an employer asked for the police to issue criminal citations to anyone protesting, which violates both fair labor practices from the National Labor Relations Act as well as assembly and petition rights from the First Amendment. Almost immediately after conceding that the actions by the Venetian Casino Resort objectively violated the laws, Judge Kavanaugh went on to invoke an exception whereby the doctrine is not triggered if the petition was not genuinely intended to influence police action. This back and forth mirrored a 2018 antitrust case where Judge Kavanaugh was asked to rule on the admissibility of corporate records. The majority, authored by then-Judge Kavanaugh found that while the communications in question did serve a business purpose ripe for antitrust analysis, because the communications were seeking legal advice on those selfsame antitrust violations, attorney-client privilege precluded their use!
Overall, it appears that anyone hoping for Justice Kavanaugh to break for the plaintiffs should be well-prepared for disappointment. Justice Kavanaugh’s conservative ideals and federalist principles are not likely to nudge him against Apple in this case. He has a verified history of deferring to statutory language and congressional intent as a rationale for abstaining from action as opposed to condoning it. Moreover, his judicial history shows that even if he does find the applicability of antitrust doctrine, he is adept at invoking exceptions in order to allow the free market and contracting parties to regulate themselves.
