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Many people don’t know this, but Chicago is a city in a state called Illinois. Without Chicago, Illinois might be as popular as North Dakota. Back in the 1970s there was a quite popular company called the Illinois Brick Company. Simply put, they manufactured bricks. They then sold these bricks to masonry contractors —> who then sold them to general contractors —> who then sold them to the customers who’ve they won bids on. One particular customer was the actual state of Illinois. Illinois was not happy with the Illinois Brick Company though. The issue was that Illinois Brick Co. was accused of fixing the prices of these bricks along with their competitors. There are many problems with this as I’ve laid out in a previous post. However, this interesting part about this particular case was that
It actually was a case in the Supreme Court: Illinois Brick Co. v. Illinois
The outcome might very well surprise you
The State of Illinois sued Illinois Brick Co. alleging that the higher prices resulting from the price fixing had been passed on to the State of Illinois. The case was argued in late March of 1977 and in early June the Supreme Court decided that the state of Illinois had no ground to sue. In the simplest of terms, the state of Illinois was not a direct purchaser of the bricks.
Fast forward today and we see the very same activity going on. Epic Games, creator of FortNight, is suing both Apple and Google on very similar grounds. Let’s focus on Apple.
Apple charges apps users a 30% commission on each app sale, unless it’s free. The price paid by users for an app is the amount set by the apps developer, plus Apple’s 30% markup, both of which are paid directly to Apple, every time an app is purchased.
In this particular case there is one less pass-on party, but the economics are the same. The direct purchasers are the users (like the masonry companies), therefore Epic Games should have no ground to sue. Right?
The interesting part about this is that Epic doesn’t even want money (even though they should; Apple collected a $15B cut from $50B in app purchases last year), they just want the app store structure to cease from existence.
This begs the question of whether direct purchasers should bring this type of behavior to question. One would think that practices such as this should be watched over by some entity. Almost something like the Consumer Financial Protection Bureau, whose name clearly bears the very responsibility 🤷🏾♂️.
I can’t remember the last app I bought from an app store. But as a direct purchaser, it doesn’t bother me that I’m paying 30% more than I should. Apple vets all apps that come through to ensure it will work on its phone and is appropriate for its users. They constantly update their software, which makes app developers have to do the same. As a direct purchaser (who doesn’t really purchase much) I’d say this potential Supreme Court case, should be as quick as the Illinois Brick Co. case.