good morning your honor is may it please the court my name is mark rifkin on behalf of the plaintiffs and appellants i'd like to reserve three minutes if i may for rebuttal well for the plaintiffs in this case were customers of apple all four of them bought i phones from apple and then after they bought their i phones all four of them bought software applications called apps from apple on the app store which was created owned and operated entirely by apple all four of them paid prices for the applications that included a thirty percent markup that was demanded by apple all for the plaintiffs paid their money directly to apple which kept the thirty percent surcharge for the applications having forced the plaintiffs not by choice but by virtue of technological features that apple inserted into the  phone operating systems i mean force the plaintiffs to buy apps only on apple's app store they all paid their money to apple apple kept its thirty percent surcharge entirely and then to third parties who are not part of this case remitted the balance of the purchase price to those third parties the plaintiffs complain about the thirty percent surcharge that they pay to apple in a transaction between them and apple which apple makes them engage  store owned and operated by apple and which apple keeps entirely for itself notwithstanding all of those well played facts in the complaint the district court concluded that those direct purchasers lack standing under the illinois brick right right no respect for your honor i think the district court did not do that i think the district court misunderstood the legal standard that it needed to apply instead of following the us supreme court's decision in illinois break as this court has interpreted it for the last thirty years which is to say you look at the substance of the transaction and look to see if there's any one between the plaintiff and the monopolist to determine whether you are a direct or indirect purchaser the district court said well notwithstanding the fact that the plaintiffs dealt directly with the alleged monopolist paying the alleged monopoly price for the monopolized product notwithstanding that because there was a separate unrelated transaction between apple and the app developers the court said that made the plaintiffs in this case in direct purchasers we think the court misconstrued the clear bright line standard of illinois break as this court has interpreted it beginning in the sham are crimes cases which the court decided in one thousand nine hundred four continuing to the delaware valley surgical case which this court decided in two thousand eight the court this court as a virtually every other circuit court in the country has referred to the illinois brick standing requirement as a bright line rule it is a jurisprudential rule that simply keeps the court out of what would otherwise be difficult economic tracing problems to determine how much of the economic injury flows to the ultimate purchaser versus an indirect purchaser had there been one there wasn't here the plaintiffs dealt directly with the monopolist they paid the monopoly price which apple kept entirely for itself and so under thi physical goods it becomes more complicated but this case i think is less complicated for us because of our decision in the a t m case how was this case like why don't you lose case is not like a t m and then let me respond to the to the broader question of the only brick policy first with respect to why this case isn't like an a t m i think the answer is very simple in this case the plaintiffs complain about those surcharge they paid that was imposed by apple the party they dealt with so you have apple imposing a thirty percent surcharge on all the apps that were sold on its store and you have the plaintiffs paying apple that surcharge directly in the a t m case there were actually two different charges that were at issue one was the bank interest charge a fee that was negotiated between the members of the a t m network they were essentially the banks who all agreed among themselves that they would pay each other for transactions when foreign cards not foreign in the sense that we usually use the words but but not your own cards are used at your a t m that is what the plaintiffs alleged was monopolised that's the charge the bank interest feed that the plaintiffs say was price fixed the impact of that was felt by some but not all card users who when they used a foreign bank inserted their card and were charged an a t m fee by the bank that they used so there was a second fee that was in the issue in the a t m case the interchange fee which was the supposedly monopolised fee and the a t m fee which to which was the fee passed on to the card user and the court there said in eighteen and this court said under illinois brick we're not going to look at anything other than the fact that the plaintiff does the card holder pay the a t m feet well that's an interesting question because what happens is when you insert your card into a foreign machine the machine dispenses let's say you ask for one hundred dollars the machine dispenses one hundred dollars to you you take one hundred dollars the machine then says to the bank that you used to charge one hundred two dollars or so for this transaction which that foreign bank who has the machine then sends to your bank your bank charges your account your checking account or your savings account charges your account one hundred dollars which is what you were true plus the two dollars that the foreign bank says is charged except not always because we know for example some banks advertise that they let you use your a t m cards anywhere in any bank free of charge and other banks may have a policy where for their better depositors or larger depositors they say will wai the the broader policy issue was is answered by by this court's prior decision in an earlier case and forget forgive me i'm forgetting whether it was the delaware valley case or in the a t m itself where the court talked about the purpose for the rule and one of the purposes is to make the any trust was easier to enforce we're not trying to make the any trust was harder to enforce we're trying to make them easier to enforce and just to we're not going to make the court have to make those difficult kinds of decisions in terms of how much of this is passed off between different levels of distribution but here there wasn't any it was paid directly to apple it was kept entirely by  apple if the court has any more questions on that issue which was the only issue decided by the district court i'm happy to answer them if not i'll use some of my time remaining to address the alternate ground that apple has raised in its motion which is whether the point if have adequately alleged and appropriate after market antitrust violation under two cases in particular one the supreme court's case in kodak which was an appeal from this court's i believe it was your honor but as i sit here today i cannot honestly recall the answer but i know we addressed the court's issues in our briefs exhaustive only i don't recall that it was discussed during the oral argument on the motion but i believe all of the issues were addressed in in the briefs which were rather extensive in the district court forget forgive me for not being certain of that but that's primarily i think that the easy answer to this question is apply the the where the price is fixed at a level that is distant from the consumer for example if the apps manufacturers had all agreed to set prices for applications in the end they among themselves agreed we're not going to charge anything less than three dollars for apps on the app store we're just not going to do it and then they charge that to apple which then passes it on to the consumer then yes it's the words pass through might make sense because the charge is remote from the ultimate paper like for example in the a t m case it's remote the the payer is the customer who doesn't he's not in his bank that's why he has to pay this fee so there is something that's passed through or not pass through depending upon what the foreign bank decides to do but in this case there can't be a pass through there's but one transaction and there's but two parties to it there's the plaintiffs and apple to look beyond purchaser is the purchaser apple's willingness or because depending on what the person behind it may be easier or harder to figure out whether this is a pass through well i only answered the question honestly the purchasers buying the app purchaser has no choice if he if if somebody has an i phone and they pay five or six hundred dollars for and they want to put an application on the i phone they must they must go to the app store because apple makes them doesn't give them any choice in the matter apple forces them to do that and what apple gets in return for that not that there's any reason for it other than a successful business model is the ability to charge that thirty percent surcharge but the customer wants the looking at this sort of the the real economic substance of the transaction why do we not look at apple as just that's the convenient way to have the money changed hands but the subset of the transaction is i'm buying an ap i'm paying a dollar and apple gets thirty percent of an apple is just that's that's just a convenient way for me to send the money to the seller of the well again i think for for two reasons one the policy reason that number one and it misconstrues the the purpose for the standing requirement of illinois brick and it disregards thirty years of jurisprudence in this court that says we don't look behind the surface of the transaction to examine its substance because that might invite the kind of difficult standing analysis that the court wants to avoid but the second reason is the consumer doesn't care where he buys is his apps he's not going to apple for convenience he's not going to apple because he wants to he's not going to apple because he's greed to he's going to apple because apple makes him do that and the only reason apple does that is because they get to do what they've done they get to impose this thirty percent charge this is exactly what the any trust laws are intended to prevent and it's exactly why we should here we should simply follow illinois brick and literally we should look to the surface of the transaction and not try to parse apart its substance and say a direct purchaser who buys a monopolized product at a monopolized price and deals only with a monopolist plainly has standing to bring a claim now whether we can prove that claim or not we'll wait to trial to decide that but for the purpose of whether there's injury for which the for which the plaintiffs have standing undoubtedly the answer to that is yes your entire argument on this on the illinois brick issue this transaction literally as it has for thirty years if if the plaintiff deals directly with a monopolist and pays the monopoly price to the monopolist when it buys a monopolized product that is direct standing and anything else beyond that does exactly what it would only brick was intended not to do it unnecessarily invites judicial interference into very complicated transactions when it's not required here doctrine is not just about formalism and liberalism it is about trying to determine whether a plaintiff's theory of injury in the case involves passthrough or not that is the the question that justice white addressed the great length and it has been no doubt a controversial decision but it has been the federal rule without exception since illinois breck and in every one of this court's cases that it has focused in on the fundamental question of does the theory of the case involve passthrough economics because the plaintiff is saying that their injury is because something happened brick and mortar good that if it passes from a manufacturer to a wholesaler to a retailer is everything that you've just said and illinois brick is such a case and i dare say that the majority of the cases they can call it that it's not your normal that may be true but but if if i may i would suggest to you that while it is a different case it is actually as easy or easier and let me try to explain what what this model is about is it is that  apple x is the agent of the app developer the over a million apps there are over two hundred fifty thousand developers they set the price for their apps apple does not set the price for any apps except for the very very few that happen to be published by apple but that's by far the exception the vast vast majority of them are by independent developers those developers understand that if they charge for the app free a don't matter in this conversation but if they charge for the app that they will pay thirty percent of what they have decided to charge and absolutely they think they charge whatever they want apple has zero price setting role this is the defining feature of the agency model that is commonly used in electronic commerce in economic terms the economy would say that the pricing authority is delegated to the to get a clear cut answer from the plaintiffs as to whether they were claiming that apple sets the app price either because it sets the total price or because it takes a pre established developer price and add something to it or whether circumstance in which the developer sets its price knowing that there will be a commission if if it takes advantage of this opportunity and for the longest of time and respectfully i would say including the argument here today they're trying to hedge this but let's be clear there isn't the slightest doubt about this because they would you know if apple was setting the price of the apps some selves there would be hundreds of thousands of developer witnesses of this would absurd no no ambiguity about it whatsoever and so judgments are rogers the first time she dismissed this complaint said i see a tension in what you're saying you keep talking about this mock up but the complaint doesn't hold legit markup the complaint is alleging a passthrough theory and she says i'm not going to going to rule on the illinois brick issue while i see this dissonance between what you're arguing and what you're pleading something what apple is setting the price or whether this is the developer setting the price and apple taking this this commission that led to the second amended complaint and in particular to paragraph forty one which is that the are seventy and seventy one in which again the plaintiffs tried to hedge on this issue and so when we got to the final motion to dismiss hearing the very first thing the judge gonzales roger quoting she says those questions still weren't answered him perhaps it's because you don't want to answer them but it appears to me that the complaint is trying to skirt around the a t m case she they're after engaged but the economics of the situation is that the developer is going to increase its price to cover apple's demanded profit and that's when this was over because that's the moment that it's crystal clear that even though it may not be a traditional brick and mortar case this is how a non party the developer and in fact hundreds of thousands of them make independent pricing decisions cognizant of the fact that they're going to have to disputed fee and it was that fee that was disputed in that case and there's another big difference that you don't really address at all and that is that the a t m case was on summary judgment there was a record and in fact the a t m decision itself mentions this as a distinguishing fact the motion to dismiss an a t m was denied there was a summary judgment where they got into this and there their banks do and therefore are not directly harmed by it that's right all we're looking here as it is at this point in the in this case is at the face of the complaint do they allege that they are a direct was exactly this argument that we are paying the fee to conspiring defendants in the vast majority of the that was a price fixing case but it wasn't an awfully case but but for purposes of illinois brick  principle that destroyed from section four the clayton act in the requirement that a person be injured in their business and property it doesn't have different rules for price fixing versus monopolization cases and so forth i think i think it has different applications because the price fixer may be in an indirect seller to the plaintiff in a price fixing case whereas when you have a monopolize or an alleged monopolise and i think they've got a lot of of hurdles ahead of them should they go  ahead but when you when you allege that a party is a monopoly and you are buying directly from that party it seems to me you have a different situation than you have in a price that respects me i disagree and i'll give some examples and judge the sheema will will certainly remember one because in the kodak litigation which was monopolization litigation there was a consumer class action no illinois breck issue at all because kodak was setting the service price to its customers  fact susan elston was the was the plaintiff counsel in that case brought a broad a class action and even though it's a monopolization action you didn't have to worry about illinois brick because there is that there is there that you had the monopolist setting the allegedly monopolistic price here the alleged monopolist is not setting the monopolistic price it is that it would depend on what you mean by the monopolistic price it may well be true that the app developer gets to set the ultimate price that is to say what's the dollar amount right but apple is clearly setting the percentage price but that is a lie why is that a difference because that is the theory of that of both the a t m case and the ante was actually it it's also called interchange but it's a different entirely different fee in the credit card case kendall that it was a device to have the defendant bakes inflate their cost structure with a phony fe which they could collect from the consumers that they were in pretty simple essence in that case then i am in this one i think that's undisputed what apple does is say we want thirty percent yes and they've s that and if the dollar amount of the apple goes up to thirty percent goes up apple sets it apple gets to charge it right and apple charges directly to the purchase really yeah that amount so why is that a passthrough that analogous to the other a clear old fashioned pass through because what we need to to think about is the antitrust definition of an injury right and so the any trust definition of of an injury here is what is the super  competitive component of the price the part which isn't competition on the merit but has this in the competitive nature to it the theory of the case is that apps to developers in their profit maximizing selves hundreds of thousands of them choose different prices and prices depending upon what they have to pay for the distribution this theory is that the thirty percent is almost all super competitive if not one hundred percent super competitive so that that they'll they'll decide well i really would like to charge twelve dollars but in the church fifteen because i have this thirty percent the problem the only problem in a nutshell is that that decision will be made hundreds of thousands of times by different developers depending upon what they believe is profit maximizing for them given that cost and the demand for their products we need to record before we could reach that conclusion i don't i think that it is it is counsel said that you are sixty that the developer is going to set up a different price then it would set given that that thirty percent and the problem is theory that led to the directors but the illinois brick wall as this court put it in kendall is in tended not to go down that path that i would submit know there are certain doctrines like standing and statue of limitations which which need to be applied up front if they are going to have meaning here in the question here is is there any doubt in this complaint now that there is a pass through no judge gonzales rogers went through two rounds of this to try to get to the essence of that question when she got the answer that in fact the thirty percent is going to influence the developers price it was clear that even though it may be a nontraditional setting it's actually pretty common setting now any in e commerce but certainly different than the brick and mortar world that this was necessarily going to involve passthrough well if this is a pass through who is the direct purchaser the developers who could sue us tomorrow for saying that thirty percent is too high but there are likely to that well we think they're likely to do it because they love the system for the apps and and how can it not be a pass through when apple has no direct say in that the only way for that theory to make any sense is because the fee that apple charges to the developers influences their pricing which is what ultimately counsel acknowledged and that's what makes this an illinois bridge case i know i'm way over my time i'm happy to stay as long as  watched me that was what i just wanted answered judge gets a question about the injunction that it absolutely was not raised below and the reason we know that is because we're here there would have not been a final appealable order the developer is the seller and we all know that we all know what happens the suggestion that there is some pass through of any price through the developer it's just strange screwed ability by that by that reasoning  a thirty percent tax for for all the sales on it's own it's actually the state of california the direct purchaser in any transaction that for which they collect the sales tax i mean it just makes no sense  i think that to answer a couple of questions the same way we don't precisely know what happens between apple and the developers because we've not had one drop of discovery this was a motion to dismiss granted a motion to dismiss a second amended complaint but we allege a paragraph where the complaint what happens we have legend paragraph forty one of the complaint what happens when ledger paragraph forty of the complaint what happens the behind the scenes behind the curtain mechanics of it we don't know and so when my colleague mr schmidt answered the court's question at the oral argument he simply said it wouldn't matter whether apple paid the charge or set the fee or didn't set the fee it makes no difference because the transaction is between apple and the consumer and it is a transaction by which apple collects one hundred percent of its thirty percent tax on this one each and every one of these now billions of transactions if the court has any questions i would like very much to answer them but otherwise i'm satisfied that you've heard enough on this very very technical mission thank you your honors thank you both for your quite helpful arguments pepper versus apple now submitted for decision and that completes arguments for this morning we are now in a