Northern District Of California Dismisses App Developer’s Antitrust Claims Against Apple
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  • Northern District Of California Dismisses App Developer’s Antitrust Claims Against Apple

    On January 7, 2022, Edward M. Chen of the United States District Court for the Northern District of California dismissed an app developer’s claim that Apple, Inc.’s operation of the Apple App Store had violated both state and federal antitrust laws.  Reilly v. Apple, Inc., No. 21-cv-04601 (N.D. Cal. Jan. 7, 2022).  The developer alleged that Apple had monopolized the market for iOS-app distribution (iOS is Apple’s operating system).  The district court dismissed the case, holding that the app developer had failed to plausibly allege either a relevant market or an antitrust injury.

    In June 2021, Thomas Reilly—the developer of a currency-exchange app called Konverti—sued Apple alleging antitrust violations under the Sherman Act and California state law.  Reilly alleged that, although Apple had initially allowed Konverti on the App Store, a scant two weeks after its launch, Apple took Konverti down.  Apple cited violations of the Developer Program License Agreement as the reason for the removal of the app.  Although Konverti is available both through the Google Play Store (which is used on Android devices) and as a web-based app, Reilly alleged that Apple’s refusal to sell Konverti on its storefront severely damaged his ability to market the app.  Apple asked the Court to dismiss Reilly’s claims under Federal Rule of Civil Procedure 12(b)(6), arguing that Reilly had failed to allege key elements of a federal antitrust claim.

    The Court first held that Reilly had failed to allege a proper product market.  Reilly’s proposed product market, the iOS app distribution market, essentially was the App Store.  Explaining that single-brand markets were extremely rare, the Court rejected Reilly’s proposed market definition for several reasons.  First, the few cases that had recognized an alleged single-brand market as a potentially valid antitrust market had relied on an aftermarket theory, but Reilly had not alleged that the App Store was an aftermarket without competitive alternatives.  Second, the single-brand definition was implausible given the viable alternatives for accessing Konverti through Google Play or a web browser.  Finally, Reilly had failed to provide any discussion about the cross-elasticity of demand that would justify limiting the relevant product market to a single brand.

    The Court also held that Reilly had failed to allege a proper geographic market.  Reilly’s proposed geographic market was the entire world.  But he had not alleged facts to support a global market.  For example, he had not claimed that all users of the App Store in every country will access the App Store in the same manner or with the same app options.  Concluding that Reilly had failed to allege a relevant product or geographic market, the Court held that his antitrust claims had to be dismissed.

    Separately, the Court also held that Reilly had failed to allege a plausible antitrust injury.  Reilly had alleged only that he had been injured; yet he failed to plausibly allege an injury to competition more broadly, as is required.  Moreover, Reilly had failed to sufficiently connect his alleged injury (the removal of his app from the App Store) with the alleged anticompetitive conduct (e.g., preventing app stores other than Apple's App Store from operating on iOS devices).  The Court concluded that the lack of plausible antitrust injury separately justified dismissal.  The Court did grant Reilly the opportunity to amend his complaint but noted that “it appear[ed] doubtful that [Reilly would] be able to cure [its] fundamental flaws.”
    CATEGORIES: Sherman ActTechnology