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October 2013

Somers v. Apple Illustrates That in Antitrust Law, the Devil Is in the Details

Apple, Inc. is safe from antitrust scrutiny -- at least for the time being -- as a result of the U.S. Court of Appeals for the Ninth Circuit’s recent ruling in Somers v. Apple, Inc.

In Somers, the plaintiff sued Apple alleging state and federal antitrust claims. The plaintiff sought to represent a class of indirect purchasers of the iPod device as well as direct purchasers of iTunes music. She alleged that Apple encoded its music and iPod devices with software making its music and devices incompatible with non-Apple products and services. The plaintiff alleged that Apple’s behavior excluded competition within the relevant product and music markets. Specifically, Apple allegedly created and implemented periodic software updates that prevented the use of Apple music and products with non-Apple products and services. The plaintiff alleged that this anticompetitive behavior resulted in Apple obtaining an unlawful monopoly over the portable digital media player and music download markets.

The district court denied the certification of class of the indirect purchasers under Federal Rule of Civil Procedure 23(b)(3) based upon the fact that the plaintiff abandoned her underlying individual claim. Specifically, she failed to renew her individual claim based upon an overcharge iPod theory in her amended complaint but instead asserted a new theory based upon diminution of iPod value. Because the plaintiff abandoned the individual claim for which she sought certification, on Sept. 3 the Ninth Circuit ruled that she waived her right to review the issue of class certification on appeal.

Moreover, the district court dismissed the plaintiff’s antitrust claims with prejudice under Federal Rule of Civil Procedure 12(b)(6) as unsupportable based upon the pleadings. The Ninth Circuit agreed, finding that the plaintiff failed to allege sufficient facts for an antitrust violation because Apple used its software encoding from the beginning, thus, the software updates only “served to maintain the status quo” rather than alter it. 

The Ninth Circuit found that the plaintiff’s monopolization claim, based on a theory of diminution in value of the iPod, was barred by the U.S. Supreme Court’s ruling in Illinois Brick Co. v. Illinois, 431 U.S. 720 (U.S. 1977) because the plaintiff was an indirect purchaser of the iPod and lacked standing. The Ninth Circuit found that the plaintiff did not state a claim for monopolization based on overcharging of music because Apple has charged the same price whether or not a competitor is in the market.  

Finally, the Ninth Circuit held that the plaintiff failed to state a claim for injunctive relief barring Apple’s use of encoded software since an “inability to freely play . . . encoded music is not comparable to the loss of free choice between market alternatives.” Apple’s actions did not result in antitrust injury. These details, apparently overlooked by the plaintiff in the pre-filing investigation or during the pleading stage of her case, ultimately doomed her case and spared Apple from antitrust scrutiny.

To read the opinion in Somers v. Apple, Inc., No. 11-168962013, 2013 Trade Case. (CCH) P78,503 (9th Cir. 2013), please click here.


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