Apple v. Pepper: Rationalizing Antitrust’s Indirect Purchaser Rule

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In Apple v. Pepper the Supreme Court held that consumers who allegedly paid too much for apps sold on Apple’s iStore could sue Apple for antitrust damages because they were “direct purchasers.” The decision reflects some bizarre complexities that have resulted from the Supreme Court’s 1977 decision in Illinois Brick, which held that only direct purchasers could sue for overcharge injuries under the federal antitrust laws. The indirect purchaser rule was problematic from the beginning. The Supreme Court’s Daubert decision, which came fifteen years after Illinois Brick, should be the controlling mechanism for evaluating expert models rather than anything as blunt, categorical, and frankly wrong as the indirect purchaser rule. Daubert rulings, which are generally not subject to jury control, should provide judges with an adequate mechanism for ensuring that expert damages reports are based on reliable and relevant assumptions, methodologies, and data. Antitrust damage formulations, even for indirect purchasers, need be no more complex or speculative than damages for a large number of business violations, including such things as patent infringement and breach of contract.