F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

S T A C I E S O M E R S , On B ehalf of Herself and All Others Similarly Situated, Plaintiff-Appellant
,

v

.

A P P L E , I

N C

. , Defendant-Appellee

. N o. 11-16896

D.C. No. 5:07-cv-06507- J W

OPI NI ON

A ppeal from the United States District Court for the Northern District of California J ames W are, District J udg e, Presiding

Arg ued and Submitted F ebruary 11, 2013—San F rancisco, California

F iled September 3, 2013

B efore: Dorothy

W . Nelson, Stephen Reinhardt, and Milan D. Smith, J r., Circuit J udg es.

O pinion by

J udg e Milan D. Smith, J r.S O M E R S V

. A P P L E , I N C

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SUMMARY *

Antitrust

The panel affirme d t h e district court’s dismissal of a putative class action ag ainst A pple, I nc., alleg ing antitrust violations in connection with Apple’s iPod and iTunes Music Store.

T h e p anel held that the plaintiff waived review of t h e d i strict court’s order deny ing certification of a cla s s o f indirect p urchasers of the iPod b ecause she abandoned her underly ing individual c laim und e r § 2 of the Sherman A ct based on inflated iPod prices.

The panel also held that the plaintiff f a i l ed to a lleg e sufficient facts to state antitrust claims for damag es a nd injunctive relief. The plaintiff alleg ed that Apple e n c oded iTunes Music Store music files with its propri e tary Dig ital Rig hts Manag ement (DRM), called F airPlay
, which rendered the music files and the iPod c ompatible only with each other. She a lleg ed that throug h certain software updates, Apple

ex c luded competitors and obtained a monopoly i n the portable dig ital media play er and music download markets, which inflated Apple’s music prices and deflated the value o f the iPod.

The panel held that a monopoliz ation claim for damag e s based on the theory of diminution i n i P o d v alue was barred by Illinois Brick Co. v. Illinois
, 431 U.S. 720 (1977), because

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.S O M E R S V

. A P P L E , I N C

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the plaintiff was an indirect purchaser of the iPod. I n addition, she lacked standing to bring this claim because she alleg ed that she purchased her i P o d after Apple’s purported anti-competitive conduc t b e g an. The panel concluded that because A pple used F airPlay from the beg inning
, when it first launched t h e i Tunes Music Store, its use of subsequent software updates only served to maintain the status quo at the time of purchase, and therefore could not plausibl y be the basis for diminishing the value of the iPod.

The panel held that t h e p laintiff failed to state a monopoliz ation claim for damag es based on o v e r charg ed music d ownloads because she failed to p lead sufficient facts
to state a plausible a

ntitrust injury

. The panel concluded that the f act that Apple continuously c harg e d the same p rice for its music irrespective of the absence o r presence of a competitor rendered implausible the plaintiff’s assertion t h at Apple’s software updates affected music prices.

F inally
, the panel held that the plaintiff f ai l e d to state a claim f or injunctive relief in the f orm o f D R M-free music files because her alleg ed inability to play her music freely
, on non-iPods, was not a

n “antitrust injury ” that affected competition.

COUNSEL

Craig B riskin ( arg ued) and Steven A. Skalet, Mehri & Skalet, P L L C, W a shing ton, D .C.; Helen I

. Z eldes, Alreen Haeg g quist, and Aaron M. Olsen, Z eldes & Haeg g quist, L L P, San Dieg o, California, for Plaintiff-Appellant.S O M E R S V

. A P P L E , I N C

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Craig E. Stewart (arg

u ed), Robert A. Mittelstaedt, and David C. Kier n an, J ones Day
, San F rancisco, California, for Defendant-Appellee.

OP INION

M. SMI TH, Circuit J udg e :

Plaintiff-Appellant Sta cie Somers (Somers) broug ht a putative class action a g ainst Defendant-Appellee Apple, I nc. (Apple), alleg ing federal a nd state antitrust c la i m s

. Somers

s e e k s to represent a class of indirect purchasers of the iPod, Apple’s portable dig ital media play er (PDMP), and a c lass o f direct purchasers of music downloaded from Apple’s iTunes Music Store (iTS). She alleg es that Apple encoded iTS music files with its proprietary Dig ital Rig hts Manag e ment (DRM), called F airPlay
, which r endered iTS music and the iPod compatible only with each other. She further c l a i m s that
t h r o u g h c e r

t ain software updates, Apple ex cluded c o m p e t i t o r s and obtained a monopoly in the PDMP and music download markets, which inflated Apple’s music prices and deflated the value of the iPod. Somers requests damag e s a n d i njunctive relief in the form of DRM-free music files.

Somers moved to certify a class of indirect p u rchasers o f the iPod under Fe d e r a l Rule of Civil Procedure 23(b)(3),

w hich the district court denied. After g iving Somers t w o opportunities to amend her complaint, the district c o u rt also dismissed Somers’ antitrust claims with prejudice under Fe d e ral Rule o f Civil Procedure 1 2(b)(6). Somers appeals both rulin g s. W e hold Somers waived review of the district court’s class certification order. W e further hold that SomersS O M E R S V

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failed to alleg e suf

f i cient facts to state antitrust claims for damag es and injunctive relief. According ly , we affirm.

F ACTS AND P R IOR P ROCEEDING

A. Background 1

I n J anuary 2001, Apple introduced a software p r o g ram called iTunes for p e rsonal c o mputers. iTunes enables computer users to org aniz e and p l a y d ig ital music files, a nd upload o r “ sy

nc” the files to a PDMP. T he iTun e s s o f tware is pre-installed on Apple computers, and i s a l so available to non-A p p l e c o mputer u sers b y f ree download. I n October 2001, Apple introduced the iPod, its first PDMP, which at the time, was capable of p lay ing only unprotected audio downloads in MP3 format.

I n A pril 2003, Apple launched iTS, an online music store accessible o nly throug h iTunes. iTS b e ga n s e lling dig ital music tracks from major r ecord labels for 99 cents each. iTS music files were encry

pted with F airplay at t h e point o f
pu rc h ase throug h iTunes. DRM is desig ned to restrict a

c onsumer’s use and reproduction of dig ital files. M aj o r record labels requi r e d that dig ital music files sold b y Apple throug h iTunes be i n a protected format, but did not require Apple to restrict music files for use only with Apple p roducts. B oth iTunes and the iPod were updated to be compatible with F airplay encry

p t i o n. As a result, music purchased from iTS

1 T h e f acts are d raw

n f ro m th e alleg atio n s i n t h e o p erativ e Co rrected Seco n d A m en d ed Co m

p lain t (SA C), f

iled o n Jan u ary 2 5
, 20 1 1
, w h ich on

a Ru le 1 2 (b )(6 ) m o t i o n , w e accep t as tru e an d co n stru e in th e lig h t m ost f av o rab le to So m ers. Mo

yo v. Go mez , 4 0 F.3 d 9 8 2 , 9 8 4 (9 th Cir. 1 9 9 4 ).S O M E R S V

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could only be play ed o n the iPod, a n d the iPod could only play music downloaded from iTS.

I n N ovember 2005, Somers purchased a 20GB iPod from

a Targ et store, and thereafter, purchased music from iTS that was encoded with F airPlay

.

B. Som e rs’ iP od Overcharge Claim and Motion f or Class Certif

ication

I n December 2007, Somers fi l e d her complaint ag ainst Apple on behalf of a class of indirect purchas e r s of Apple produ c t s (I ndirect Purchaser Action). I n her orig inal complaint, Somers asserted a claim for u nlawful ty ing under

s e c t ion 1 of the Sherman Act, 15 U.S.C. § 1
, a n d monopoliz ation claims under section 2 o f the Sherman Act, 15 U.S.C. § 2, along with related state law clai m s

. Somers alleg ed that Apple’s F airPlay and software updates rendered iTS music incompatible with non-iPod dig ital media play ers, thereby increasing iPod demand and enabling Apple to charg e supracompetitive p rices for the i P o d

. Somers soug ht damag es for the a lleg ed iPod overcharg e on behalf of h erself and other consumers who p u r chased their iPod from a reseller.

I n F ebruary 2008, the d istrict court related this action to

a case m aking similar factual alleg ations and claims ag ainst Ap p le on behalf of direct purchasers of Apple products ( A pple iPod iTunes AntiTrust Litigati on , No. C 0 5-00037 (Direct Purchaser Action)). I n the Direct Purchaser A c tion, the district court concluded that the technolog ical interoperability between the iPod and media sold throug h iTS did not constitute unlawful ty ing
, and ordered the ty ing claim dismissed.S O M E R S V

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I n F ebruary 2009, Somers moved to certify an injunctive and d amag e c l a s s of indirect p urchasers of Apple’s iPod under Rules 23(b)(2) and 23(b)(3), respectively

. 2 The district
court denied Somers’ motion to certify a class of indirect purchasers of the iPod u n d er Rule 23(b)(3), on the g r ound that Illinois Brick Co. v

. Illinois
, 431 U.S. 720 (1977), prohibits indirect p urchasers f rom recovering f

o r violations of federal antitrust law. The district court f urther r uled that

even thoug h California has enacted statutes repealing the Illinois Brick rule of private actions under state antitrust laws, certification under Rule 23(b) ( 3) was still inappropriate because Somers h a d failed to establish a reliable measure for d a m ag es in an action on behalf o f indirect purchasers. The district c o urt deferred ruling on Somers’ motion for certification of the Rule 23(b)(2) injunctive class in l ig ht o f the pending Direct Purchaser Action.

I n J uly 2010, Somers filed her F irst Amended Complaint (F AC). Somers d

ropped her ty ing clai m and broug ht monopoliz ation claims under section 2 o f t h e Sherman Act,

as well as a claim under California’s Unfair Competition L aw (U C L ), Cal. B us. & Prof. Code §§ 17200, e t seq

. Somers
asserte d a damag e claim based on two new theories: (i) inflated prices for music d ownloads and (ii) deflated value o f the iPod. The district court dismissed the F AC with leave to amend.

2 Sp ecif i cally
, So m ers so u g h t to certif y a class w it h t h e f

o llo w in g d ef in i tio n : “Al l p erso n s an d en tities in th e Un ited States (ex clu d in g f ed eral, state an d lo cal g o v ern m en t en t ities, A p p le, its d irecto rs, o f

f icers

an d m em b ers o f th e i r f

am ilies) th at f

ro m Decem

b er 3 1
, 2 0 03 to th e p resen t (“ Class Perio d ”) p u rch ased an A p p le iP o d in d irectly f

ro m A pp le f o r th eir o w

n u se an d n o t f

o r resale.”S O M E R S V

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C. Second Am ended Com plaint

I n J anuary 2011, So m e r s filed the SAC, in which she dropped her damag e claim based on the iPod diminution-invalue theory
, and otherw i s e r enewed h er federal antitrust claims and UCL claim. I n the SAC, Somers s e eks to represent a class of individuals who purchased musi c f iles from iTS. Somers alleg es that as a result of the Fa irPlay
encry ption, Apple achieved a monopoly in the PDMP a nd audio download markets. Specifically
, Somers al leg es that shortly after the release o f i T S i n April 2003, (i) Apple achieved and maintained a market share of over 70 percent o f the audio download market and (ii) increased its market share of the PDMP market from 1 1 t o 9 9 percent. Somers c laims that Apple achieved a monopoly in both the PDMP and music downloads markets by 2004, at the latest.

Somers nex t alleg es that Apple maintained and furthered its monopoly in these markets “throug h t h e u s e of software updates intended to prevent competitor s from selling Audio Downloa d s t h a t were compatible w ith iPods.” SAC ¶ 90. F or ex ample, in J uly 2004, R ea l Networks introduced a tec h n o l og y known as Harmony
, which e nabled song s purchased throug h its online stores to be c o mpatible with iPods and other dig ital media pla y e rs , thereby offering an alternative to iTS. Real Networks beg an selling its music a s low as 49 cents p er track, compared to the 99 cents per track charg ed by Apple. I n October 2004, Apple responded b y updating its iPod and iTunes software to prevent song s downloaded from Real Networks’ music store from being
p lay e d o n iPods. Somers alleg es that as a result o f s u c h software updates, Apple was a ble to thwart Real Net works’ ef f o r t to compete in the audio download market, thereby enabling Apple to continue to charg e supracompetitive pricesS O M E R S V

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for dig ital music. A c c o r d i ng to Somers, “[ h] ad Apple not eng ag ed in t h i s a nticompetitive action, it would have had to price A udio Downloads on price w ith Real Networ ks.” Id. ¶ 66.

Somers then a lleg es that App l e continually issued softwar e updates from 2005 throug h 2009 to prevent competitors from entering a nd threatening its monopolies. Specifically
, Somers c laims tha t A p p le issued software updates to iTunes to block and n eutraliz e computer prog rams such as J H y

mn, QTF airUse, Play

F air, and Requi e m , which enabled users to play

their iTS music o n non-Apple devices. Apple also introduced software u p d a t es to prevent sy ncing functionality

with certain non-Apple media play ers.

I n J anuary 2008, Amaz on became the first music store to sell music f

iles without DRM restrictions. Amaz on sold over half of the more than 2 million song s in its initial catalog for 89 c ents each. I n J a

nuary 2009, Apple a nnounced that it would beg in selling most song s throug h iTS without F airPlay restrictions. W hen A pple introduced variable p r i c ing in 2009, and offered top-sellers for $1.29, Am a z o n sold many o f the

s a m e tracks f

or 99 c ents. Apple sold a few song s f o r 6 9
cents. Consumers who had previously purchased their music throug h iTS could “upg rade” their fi les to a F airPlay -free format, b ut o n l y b y p a y ing 30 cents per file. B y the end o f March 2009, all music sold throug h iTS was free of F airPlay
encry ption.

Somers assert s that a s a r esult of Apple’s software updates and “the te c h n o log ical link created by F airPlay
, Apple was able to preserve its monopoly in both [ the PDMP and audio d ownload] markets, charg e supracompetitive prices, and restrict con s umer choices.” Id. ¶¶ 90, 94–95.S O M E R S V

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Somers claims that Apple has maintained the restriction o n DRM-enc oded music purchased from iTS, thereby forcing
customers to pay Apple substant ial sums to free their music libraries or purchase an Apple product to play their music.

B a sed on these alleg ations, Somers asserts c laims for injunctive relief (Counts I
, I I ) and d amag es (C o u n t I I I ) for violation of section 2 of the Sherman Antitrust Act, as well a s

a UCL claim (Count I V). T he district court dismissed the SAC with prejudice, and Somers timely appealed.

JURISDICTION AND STANDARD OF REVIEW

W e have jurisdiction under 28 U .S.C. § 1291. W e r eview

a district court’s denial of a motion f or class certification for abuse of discretion. Naro u z v

. Charter Commc’ns, LLC
, 591 F .3d 1261, 1266 (9th Cir. 2 010). A leg al error is deemed

a per se abuse of discretion, Conn. Ret. Plans & Trust Funds

v. A mgen Inc.
, 660 F .3d 1170, 1175 (9t h C i r

. 2011), while finding s of fact are reviewed for clear error, Hester v. Vision Airlines, Inc. , 687 F .3d 1162, 1171–72 (9th Cir. 2012).

W e r e v iew de novo the d istrict c ourt’s dismissal for failure to state an antitrust claim under F ederal Rule o f Civil Procedure 12(b)(6). Rick-Mik Enter s

. , I nc. v. Equilon Enters., LLC
, 532 F .3 d 9 63, 970 (9th Cir. 2008). Dismissal under Rule 1 2(b)(6 ) is proper when the complaint e ither (1) lacks a c og niz able leg al theory or (2) fails to alleg e sufficient facts to support a cog niz able leg al theory

. Men d i o ndo v

. Centinela Hosp. M

e d

. Ctr.
, 521 F .3d 1097, 1104 (9th Cir. 2008). W e have held that for pleading an antitrust claim, the U.S. Supreme C o u r t in Bell Atlantic Corp. v. Twombly
, 550 U .S. 544 (2007), “specifically abrog ated the usual notice pleadin g r ule” u nder Rule 8(a)(2) and Conley v. Gibson
,S O M E R S V

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355 U .S. 41 ( 1957). Rick-Mik E nters., 532 F .3d at 971 (citation and quotes omitted); see also Kendall v. Visa U.S.A., Inc. , 518 F .3d 1042, 1047 n.5 (9th Cir. 2008).

“To survive a motion to dismiss, a complaint must c ontain sufficient factual matter, accepted a s true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal
, 556 U .S. 662, 678 ( 2009) ( quoting Twombly
, 550 U.S. at 570). A c laim is facially plausible “when the plaintiff pleads factual content that allows the c ourt to draw the reasonable inference that the defendant i s liable for the misconduct alleg ed.” Id. a t 678. Plausibility requires plea d i n g facts, a s opposed to c onclusory alleg ations o r the “ formulaic recitation

o f t h e e lements o f a cause of action,” Twombly
, 550 U.S. at 555, and must r ise abo ve the mere conceivability o r po s s ibility of unlawful conduct that entitles the pleader to relief, Iq b a l
, 5 56 U.S. at 678–79. “F actual alleg ations must be enoug h to raise a rig ht to relief a bo v e t h e speculative level.” Twombly
, 550 U .S. at 555. “W here a co m p l a i nt pleads facts that are merely consisten t w i th a defendant’s liability
, it stops short o f the line be t w e e n possibility a nd plausibility of entitlement to relief.” Iq b a l
, 556 U.S. at 678 (citati o n and quotes omitted); accord Lacey v

. Maricopa Cnty.
, 693 F .3d 896, 911 (9th Cir. 2012) (en banc). Nor is it
enoug h that the c o m p laint is “factually neutral”; rather, it
must be “factually sug g estive.” Twombly
, 550 U.S. at 557 n.5.

Althoug h a district court sho u l d g rant the plaintiff leave
to a mend if the complaint can possibly be cured by additional factua l a l l e g ations, Doe v. United States
, 58 F .3d 494, 497 (9th Cir. 1995), “[ d] ismissal without leave to amend is proper if it is clear that the complaint could not be saved b y amendment,” Kendall
, 518 F

. 3 d at 1051. “W e may a ffirm onS O M E R S V

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any basis supported by the record, whether or not r elied upon by the district court.” Hall v. N. Am. V an L ines, Inc.
, 476 F .3d 683, 686 (9th Cir. 2007).

D ISCUSSION

I. Class Certif

ication of Indirect P urchasers o f the iP od

Somers c halleng e s the d istrict c o u r t’s J uly 2009 order deny ing h er motion to certify a class of indirect purchasers o f the iPod under Rule 23(b)(3). Apple arg ues that this decision is not properly before us because Somers abandoned h er underly ing individual claim. Apple is correct.

I n the orig inal December 2007 complaint, Somers soug ht
to represent, inter alia
, a c lass of indirec t p u rchasers of the iPod damag es class. Somers’ class claim was predicated on her individual claim for damag es unde r section 2 of the Sherman Act based on inflated iPod prices. Apple answered the orig inal complaint in F ebruary 2008

. I n her F ebruary 2009 motion for class certification, Somers soug ht to certify

a class of indirect purchasers of th e i P o d only

. The district
court denied that motion. I n the FAC, filed in J uly 2010, Somers did not renew her individual damag e claim based on

an overcharg e iPo d theory
, b ut rather, asserted a n ew theory based on the diminuti o n i n iPod value. Somers alleg e d that Apple’s purported anti-competit i v e conduct “restricted the iPod’s capability
, and lessened its uses, usefulness a nd value
to Plaintiff a n d t h e Class.” F AC ¶ 1 41. B efore Somers’ filing of the F AC, Apple did n ot move to dismiss her overcharg e iPod claim. Nor d i d the district court dismiss Somers’ individual o vercharg e iPod claim. I n her J anuary 2011 SAC, Somers ag ai n c h ang ed her damag e theory —this time on the basis of supracompetitive music prices. Althoug hS O M E R S V

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Apple, twice, ex pressly asserted that Somers had dropped her

o v e r c h arg e iPod claim, Somers did not pursue that claim o r challeng e Apple’s a sse r t i o n

. See Mot. to D ismiss Appeal, Ex h. 8 [ Mot. to Dismiss F AC]
, at 6 (“F or iPod purchasers, she drops the claim that iPod prices were supracompetitive— which the Court had ruled was not a basis for class

cer t i f ication.”) and Ex h. 12 [ Mot. to Dismiss SAC]
, at 1 (“She now has dropped the iPod overcharg e claim with which she beg an her suit four y ears ag o.”).

Under these cir c u mstances, Somers has voluntarily abandoned her overcharg e iPod c l a i m. See Lacey
, 693 F .3d
at 928 (“[ F ] or a

ny c l a i m s voluntarily dismissed, we will consider those claims to be waived if not repled.”); W a lsh v. Nev. Dep’t of Human Re s

. , 4 7 1 F .3d 1033, 1037 (9th Cir. 2006) (“A plaintiff who makes a claim

. . . in his complaint, but fails to raise the issue in r esponse to a defendant’s motion
to dismiss

. . . has effectively abandoned his claim, a nd
cannot r aise it on appeal.”). Somers h a d an oblig ation to pursue h er overcharg e iPod claim on an i ndividual basis to obtain review of the d istrict c o u rt’s denial of certification on that claim. S

ee Huey v. Teledyne, Inc. , 608 F .2d 1234, 1240 (9th Cir. 1979) (finding the distri ct c o urt’s refusal to c ertify the class unreviewable b e ca use plaintiff failed to prosecute the underly

ing individua l claim following denial); Marks v

. S.F. Real Estate Bd.
, 6 2 7 F .2d 947, 9 49 (9th Cir. 1 980) (“[ P] laintiff must be willing to proceed to tr i a l
, albeit reluctantly
, on his individual claim in order to obtain eventual review o f th e [ class] decertification order.”). 3 B ecause

3 So m ers in clu des a sectio n en titled “ P reserv atio n o f Claim s f o r A p p eal” in h er am en d ed co m

p l ain t s related to h e r t y i ng an d o v erch arg e iP o d claim s. H o w ev er, t

h ese statem en ts are n ot a ffi rm ativ e assertio n s o f aS O M E R S V

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Somers h a s abandoned the individual claim for which she
soug h t c lass certification, the issue of whether th e district
court erred in deny ing her moti on to certify that claim for class treatment is waived.

II. Dam ages Claim Based on Dim inution in iP od Value

Somers also appeals the district court’s December 2010 order dismiss i n g h e r m o n o p oliz ation claim for damag es based

on the the o r y of diminution in iPod value, as alleg ed under Count I V of the FAC. I n the F AC, Somers soug ht to represent a class on behalf of ( i) d irect purchasers of iTS music, and (ii) indir e ct purchasers of the iPod. Somers alleg ed that Apple “ impaired the uses, usefulness and val ue of iPods purchased by

I ndirect Purchasers,” and made iPods “l e s s v a luable to Plaintiff a n d the Class, because they were unable to download music tracks that woul d have been available from competitors at lower p r ices.” F AC ¶ 101. Somers soug ht “compensatory damag es on behalf of h erself and a ll other indirect purchasers of iPods for t he diminution in value to their i P o ds caused by Apple’s restrictive ‘updates.’” Id. ¶¶ 16, 141–42.

The district c o u rt p roperly dismissed this claim on the
g round that it wa s b a rred by Illinois Brick Co. v. Illinois
, 431 U.S. 720 ( 1 9 7 7 )

. The indirect purchaser rule bars suits for antitrust damag e s by custom e r s who do not buy directly fr o m a defendant, a s ex plained by the Supreme Court in Hanover S

hoe, Inc

. v

. U

nited States Machinery Corp.
, 392 U.S. 481 (1968), and Illinois Brick

. I n Illinois Brick
, the Court held that a llowing indirect purchasers to s ue for

claim in a co m

p l ain t , an d th eref

ore th ey d o n ot serv e to ren ew claim s th at sh e p rev io u sly

d ro p p ed

.S O M E R S V

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damag es, while refusing to allow a pass-on defense to direct purchaser plaintiffs, would create the risk of double r e covery ag ainst defendants, and necessitate complex and costly inquiries into the amount of injury passed on to the plaintiffs. 431 U.S. a t 730–33; see also Del. Valley Surgical Supply Inc.

v. J ohnson & Johnson Health Care Sys. Inc.
, 523 F

. 3d 1116, 1120–21 (9th Cir. 2 0 0 8 ) ( o bserving that “a b r ig ht line rule
emerg ed from Illinois B rick : o nly direct purchasers have standing under § 4 of the Cl ay ton A ct to seek d amag es for antitrust violations”); accord I n re ATM Fee Antitrust Litig.
, 686 F .3d 741, 748 (9th Cir. 2012). “The underly ing purposes for the r u l e a re (1) ‘to eliminate the complications o f apportioning overcharg es between direct and indir e ct purchasers’; (2) ‘to eliminate multiple recoveries’; and (3) to ‘promote the vig orous enforcement o f the antitrust laws.’” I n

re ATM Fee Antitrust Litig.
, 6 86 F .3d at 7 48 (quoting Kansas

v. UtiliCorp United, Inc.
, 497 U. S

. 1 99, 208, 212, 214 (1990)).

Here, while Somers requests compensa t o r y damag es on the theory that Apple’s software u pdates deflated the value o f her iPod—rather than causing an inflation o f initial iPod prices—the rationale under I llinois Brick applies equally to this ty pe of damag e claim. The plaintiff in the related Direct Purchaser A ction case is seeking damag es based on the same kinds of iPods that form the b asis of Somers’ suit here, but on the theory that th e software u pg rades inflated iPod prices. Thus, allowing Somers to sue as an indirect purchaser would l ead to litig ation on contradictory
, duplicative theories o f
recovery necessitating “evid e ntiary complex ities a ndS O M E R S V

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uncertainties,” which the indirect purchaser rule was intended to prevent. Illinois Brick , 431 U.S. at 732. 4

B u t even if Illinois B rick did not apply
, Somers l acks standing to bring this cl a i m under the facts alleg e d in the F AC. S o m er s alleg es that she p urchased her iPod in N ovember 2005, b ut Apple’s purported anti-competitiv e conduct (use of software up d ates) beg an in 2004. See F AC ¶¶ 12, 71–72. Apple’s software u pdates after 2004 thus only served to maintain the status q uo— i.e.
, music downloaded from iTS can only be play ed on the iPod.

Somers’ diminution-in-value theory is also useless by any other iPod purchaser b ecause Somers alleg es that Apple used F airPlay from the b eg inning
, when it first l a u nched iTS in 2003, and that the iPod was incapable of play ing music from
any other on-line store. See F AC ¶ 49 (“iPods were unable to play any file encry

pted with any DRM for m a t o t h er than F airPlay .”)
, ¶ 59 ( “F rom the beg inning of iTS, Apple desig ned the iPod’s software so it coul d only play a sing le protected dig ital format, Apple’s F airPlay -modified A AC format.”). A ccording ly
, Apple’s use o f subsequent software updates only

served to maintain the status quo at the time of

4 We rej ect S o m ers’ arg u m en t th at sh e can assert a d am ag e claim u n der Calif o rn ia’ s U CL

. So m ers o n ly seek s co m p en sato ry d am ag es, w

h ich are

n o t reco v erab le u n d er th e UCL

. Alva rez v. Ch evro n Co rp

. , 6 5 6 F.3 d 9 2 5
, 9 3 3 n .9 (9 t

h Cir. 2 0 1 1 ) (“ Un der t

h e UCL
, [p ]rev ailin g p lain t i f f s are g en erally lim ited to in

j u n ctiv e relief an d restitu

tio n .” (citatio n an d q u otes

o m itted )); Ca ciq ue, In c. v. Ro b ert Reiser & Co ., In c. , 1 6 9 F.3 d 6 1 9, 6 2 4 (9 th Cir. 1 9 99 ) (“ Calif

o rn ia law is c l e a r t

h at §§ 1 7 20 0 et seq

. d o n o t

a u th o rize a su i t b y a p riv ate p arty f o r dam ag es.”); Ko rea S

u p p ly C o

. v

. Lo ckh eed M

artin Co rp

. , 6 3 P .3 d 9 3 7
, 9 4 3 (Cal. 2 0 0 3 ) (“ A UCL actio n is
eq u itab l e in n atu re; d am ag es can n ot b e reco v ered .”).S O M E R S V

. A P P L E , I N C

. 17

purchase, and theref

o r e cannot plausibly be the basis for diminishing the value of the iPod.

III. Dam ages Claim Based o n Overcharged M usic Dow nloads

Somers n e x t challeng es the district court’s J u ly 2011 order dismissing her music o v e rc h arg e claim. I n the F AC, Somers alleg ed an antitrust claim based on the th e o ry that Apple’s use of software updates inflated iTS mus i c prices. The d istric t c o urt initially dismissed the claim w ith leave to amend on the g round that Somers failed to alleg e sufficient facts in support of her alleg ation that Apple’s iTS pricing was supracompetitive or that the p ricing of ex cluded competitors

were competitive. The d istrict court n oted that Somer s h ad only alleg ed that Apple’s competitor priced music lower than did Apple. The district court al s o o b s erved that Somers alleg ed in contradictory fashion that the prices for iTS music remained the same since A pple entered t h e m arket in 2003, including prior to purportedly obtaining a monopoly in the market, and after Apple’s share declined.

Somers renewed the same claim in the SAC. The district
court d ismissed the claim with prejudice because Somers h ad
not corrected the deficiencies identified in t h e F AC, a nd because Somers’ claim was premised o n the presumption that Apple’s maintenance of its D RM-encry p ted files constituted

an a n t i trust violation—a presumption that the district court had already r ejected. On appeal, Somers arg ues that the district court e rr e d by (1) a pply ing an improper proof requirement, and ( 2 ) i g noring alleg ations supporting her monopoliz ation claim. Neither arg ument has merit.S O M E R S V

. A P P L E , I N C

. 18

F irst, S o mers contends that the district court erred b y requiring h er to prove supracompet itive pricing

. Somers is mistaken. The district court did n ot require her to prove, but rather, to plead the elements of a monopoliz a tion c laim. Section 2 of the Sherman Act provides: “Every person w ho shall monopoliz e, or atte m p t to monopoliz e, or c ombine o r

c onspire with any other p ersons, to monopoliz e any p ar t o f the trade o r commerce

. . . shall be deeme d guilty of a felony .” 15 U.S.C. § 2. To state a plausible monopoliz ation claim under this p rovision requires plaintiff to show: “(a) the possession o f monopoly p ower in the r elevant market; ( b) the willful acquisition o r maintena n c e o f that power; and (c) causal antitrust injury .” Allied Orthopedic Appliances Inc. v

. Tyco Health Care Group LP
, 592 F .3d 991, 998 (9th Cir. 2010) (citation and quotes omitted); a ccord Cost Mgmt. Servs., Inc. v. W

a sh. Natural Gas Co.
, 99 F .3d 937, 949 (9th Cir. 1996). Thus, contrary to So m e rs’ assertion, causal antitrust injury is a substantive e lement of an antitrust c laim, and the fact of injury o r damag e must be a l l e ge d a t the pleading s t ag e. See Kline v. Coldwell, Banker & Co.
, 508 F .2d 2 26, 233 (9th Cir. 1974); Rebel O il Co. v. Atl. Richfield Co. , 51 F

. 3d 1421, 1433 (9th Cir. 1995).

At issue h ere is whether Som e r s h a s pleaded sufficient facts to s t a t e a plausible antitrust injury

. “Antitrust injury ” means “injury of the ty

pe the antitrust laws were intended to prevent a n d that flows from that which makes defendants’

ac t s u n lawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.
, 429 U .S. 477, 489 (1977). Parsing the Supreme Court’s definition of “antitrust injury ,” we h a ve held that antitrust injury c onsists of four elements: “(1) unlawful conduct, (2) causing an injury to the plaintiff, ( 3) th a t f l o ws from that which makes the conduct unlawful, and (4) that is of the ty pe the antitrust laws were intended to prevent.” Am. Ad Mgmt.,S O M E R S V

. A P P L E , I N C

. 19

Inc. v. Gen. Tel. C o

. of Cal.
, 190 F .3d 1051, 1055 (9th Cir. 1 9 9 9); accord Glenn Holly Entm’t, I nc. v. Tektronix, Inc

. , 343 F .3d 1000, 1008 (9 t h C ir. 2003). W ith respect to the second eleme n t , “[ a ] plaintiff must

. . . alleg e some credible injury caused by the unlawf u l c o nduct. There can be no antitrust injury if the plaintiff stands to g ain from the alleg ed unlawful conduct.” Am. Ad M gmt. , 1 90 F. 3d at 1056. I n addition, we have imposed a fifth element—that “the injured party be a p ar t i c ipant in the same market as the alleg ed malefactors,” meaning “the party alleg ing the injury must be either a consumer of the alleg e d violator’s g oods or services

or a competitor of the alleg e d v i olator in the restrained market.” Glenn Holly Entm’t
, 3 43 F

. 3d at 1008 (citations a nd quotes omitted). A p laintiff can r equest treble damag es for an antitrust violation un d er section 4 of the Clay ton Act. 15 U.S.C. § 15(a). 5

A key issue in this appeal is whether under American Ad ’s second requirement, Somers suffered an inj u r y caused b y Apple’s anticompetitive conduct. 190 F .3d at 1055. Somers alleg es that she suffered injury in the f orm of inflated music prices. The premise of her overc h arg e theory is that Apple used so ftware updates to thwart competitors ( e.g. , Real Networks) and g ain a monopoly in the music download market, which permitted Apple to c harg e hig her prices for its music than it could have i n a competitive market. Specifically
, Somers alleg e s that if Apple had not eng ag ed in

5 W e n o t e th at an titru st in j u ry is also th e th resh o ld req u irem en t fo r

an titru s t stan d in g , w

h ich is req u ired f

or treb le dam ag es u n d er sectio n 4 of th e Clay to n A ct, 1 5 U.S.C. § 1 5 (a). S ee G erlin g er v. Ama zo n .co m, In c., Bo rd ers Gro u p , In c. , 52 6 F.3 d 12 5 3
, 1 25 6 (9 th C ir. 20 0 8 ); Kn evelb aa rd Da iries v. Kra

ft Fo o d s, In c. , 2 32 F.3 d 9 7 9
, 9 8 7 (9 th Cir. 2 0 0 0 ) (d iscu ssin g th e f iv e elem en ts o f

an t itru st stan d in g ).S O M E R S V

. A P P L E , I N C

. 20

anti-competitive conduct to ex clude Real Networks from the market, “it would have had to price A u d i o Downloads to compete on price with Real Networks.” SAC ¶ 66.

Unfortunately f

o r Somers, her own alleg ations do not square w ith her overcharg e theory

. Somers claims th a t t he price for music downloads remained the same (99 cents) since it entered the market in 2003, befor e it obtained monopoly in the audio download market, and a ft e r it alleg edly acquired monopoly in that market in 2004. See id. ¶ 35 (“iTS init i a l l y offered over 200,000 song s from the

m a j o r r ecord labels f

or 9 9 cents each.”), ¶ 46 (“App l e achieved a monopoly

. . . by 2 004 at the latest”), ¶ 5 7 (stating that Apple charg ed 99 ce n t s p er track in J uly 2004 a fter RealNetworks enter e d the market). Moreover, with the

ex c e ption of brief reference s t o a few tracks and top-sellers, So m e r s does not alleg e that Apple’s music price chang ed—even after Apple’s alleg ed monopoly ended in the beg inning of 2 008—when Amaz on beg an selling DRM-free music, a nd after Apple beg an selling F a i r p l a y -free music in J anuary 2009. B ut Somers earlier al l eg ed that if Apple h ad
not used software u

pdates to thwart compe t i tion, it would have h ad to lower the price o f its music to compete with its rivals. See id. ¶ 66. According l y , i f Somers’ overcharg e theory were correct, then Apple’s music prices from 2004 to 2008 w ere supracompetitive as a r e s u l t of software updates that ex cluded c ompetition, a n d the emerg ence of a larg e seller such as Amaz on would have caused iTS music p rices to f all. B ut Somers alleg es n o s uch price reduction. Somers’ overcharg e theory is thus im p l au s ible in the face o f contradictory marke t facts alleg ed in her complaint. A s Somers herself acknowledg es, under basic economic principles, increased competition—as Apple encountered in 2008 with the entrance of Amaz on—g enerally lowers prices.S O M E R S V

. A P P L E , I N C

. 21

See Leegin Creative Leather Prods. v. PSKS, Inc.
, 551 U.S

. 877, 895 (2007); Barr Labs., Inc v. A b bott Labs.
, 978 F .2d 98, 109 (3d Cir. 1992). The f

a c t that Apple continuously charg ed the same price for its music i r r e spective of the absence o r presence o f a c ompetitor renders implausible Somers’ conclusory assertion t h at Apple’s software updates affected music p rices. See Coalition for ICANN Transparency, Inc. v

. VeriSi g n , Inc.
, 611 F .3d 495, 501 (9th Cir. 2010) (“On a motion to dismiss in a

n antitrust c a se, a court must determine whether an antitrust claim is p l a u s i ble in lig ht of basic economic principles.” (citation and quotes omitted)). 6

Somers responds that price is only one aspect to consider in the relevant economic calculus. W e ag ree that price is only

one p o ssible indicator in as s e s sing competitive markets. Monopoly power may

be evaluated by

other factors, such a s barriers to e ntry or structural e vidence of a monopoliz ed market. See, e.g. , H

arrison Aire, Inc. v. Ae r o s tar, Int’l
, 423 F .3d 374, 381 (3d Cir. 2005); Blue Cross & Blue Shield United of W

is. v. Marshfield Clinic
, 6 5 F .3d 1406, 1412 (7th Cir. 1995). B ut if Apple did not charg e inflated prices for its music, then this f

act contradicts Somers’ overcharg e theory
, and there w ould be no basis f o r damag es in the first place. 7 Somers nevertheless sug g ests that it is conceivable that Apple’s music was not priced hig her b ecause o f some other

6 W h i le So m ers alleg es th at A pp le p ro m ised to sell “ so m e so n g s ” f o r 6 9

cen ts each af

ter A m azo n b eg an sellin g o n lin e m u sic, th o se t

rack s w ere

“ f ew an d f ar b etw een .” SA C ¶

8 4

.

7 So m ers su g g ests f

o r th e fi r st t im e o n ap p eal th at reg ard less o f w h at A p ple ch arg ed
, sh e w as d am ag ed b ecau se s h e w a s n o t ab le to pu rch ase

m u s i c a t a lo w er p rice f

ro m A p p le’ s co m

p etito r. B u t So m ers d id n o t assert th is b asis f

o r d am ag es b elo w , an d in an y ev en t, it is co n trary to h er alleg ed o v erch arg e th eo ry

.S O M E R S V

. A P P L E , I N C

. 22

factor, such a s superior product or g reater efficiency . W hile this is c ertainly possible, to state a plausible antitrust injury
, Somers must alleg e facts that rise b e y ond mere conceivability

or possibility

. Iqbal
, 556 U.S. at 678–79; Twombly
, 550 U.S.
at 555. Moreover, Somers did not request further opportunity
to amend her complaint or sug g est f acts she c ould alleg e to correct the deficiency

. W e a re only left to speculate on what factors c o u l d have permitted Apple to charg e 99 cents continuously

. Under the plausibility standard, Somers must

a l l eg e specific facts that raise an antitrust claim abov e t h e speculative level. Twombly , 550 U.S. at 555.

B a sed on the alleg ed facts, ther e a re also other “obvious alternative ex p lanation[ s] ” for the music pricing

. Twombly
, 5 50 U.S. at 567. F or e x ample, it mig ht be conceivable t h at Apple did not charg e inflated music prices, but kept the music prices low to incentiviz e customers to purchase t h e iPod, a product with a much hig her return, or to use Apple p roducts. Moreover, low pricing c ould be used to u nd e r c ut Apple’s rivals, who would then lose business, but this fact would also contradict Somers’ alleg ed overcharg e th eory o f antitrust injury to consumers. See B r o ok G roup Ltd. v

. B rown & W illiamson Tobacco Corp.
, 5 0 9 U.S. 209, 222–23, 225 (1993) (discussing elements of predatory pr i cing ); accord W eyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc.
, 549 U.S. 312, 318–19 (2007). According ly
, when these

ex p lanations are considered, tog e ther with alleg ations of iTS

mu s ic p ricing

—construed in the lig ht most favorable to Somers—Somers’ music overcharg e theory “stay s in neutral territory ,” and “without some f urther factual enhancement it stops short of the line between possibility and plausibility ” o f antitrust injury

. Twombly , 550 U.S. at 557.S O M E R S V

. A P P L E , I N C

. 23

Second, in support of h er overcharg e theory
, S omers points to alleg ations that Real Networks a nd Amaz on charg ed lower prices when t h ey first entered the music download market. Specifically
, in the SAC, Somers alleg es that Real Networks charg ed 49 cents per song when it first entered the market in 2 004. B ut t h e b a re a lleg ation that Real Networks charg ed a lower introductory price does not mean that Apple charg ed supracompetitive prices when such v ariations in pricing ex ist even in competitive markets. Somer s f u r ther points to a l l e gations that A maz on started charg ing 89 cents for man y o f i t s song s in J anuary 2008. B ut ag a in, the fact that Amaz on started charg ing 10 cents less does not, in itself, show that Apple’s music p rices were supracompetitive during the period of App l e ’ s p u rported monopoly

. I n fact, the stability of A pple ’s p r i cing in the face of increased competition only undermines Somers’ alleg ation that Apple’s music prices were supracompetitiv e

. Thus, without more, these a lleg ations do not nudg e Somers ’ c l a im of antitrust injury “across the line from conceivable to p lausible.” Id. at 570.

Althoug h Somer s ’ complaint leaves open the possibility that she “mig ht later establish some set of undisclosed facts” supporting antitrus t i n

j ury , that is not enoug h to permit the SAC to survive a Rule 12(b)(6) motion to dismiss. Id. at 561 (quotes and b racket om i t t e d ). As the Supreme Court has emphasiz ed, its insistence on specificity of facts is warranted before permitting a case to proceed into costly a nd protracted discovery in an antitrust case, esp e cially where, a s h ere, the potential ex pense of discove r y is obviously g reat: Somers seeks to represent a putative class of Apple music purchasers in the entire United States over a ten y e ar period, in a lawsuit
ag ainst one of the world’s larg est information technolog yS O M E R S V

. A P P L E , I N C

. 24

companies, and involving billions of music p urchases. S ee id. at 557–59.

According ly
, the district court properly dismissed Somers’ claim for damag es based on supracompetitive music prices.

IV. Injunctive Claim f or DRM-F ree Music

F inally
, Somers c halleng es th e d istrict court’s J uly 2011 order dismissing her claims for injunctive relief. I n the SAC, Somers asserts claims f

o r injunctive relief for violation o f section 2 of the Sherman Act (Counts I and I I ). Specifically
, Somers requests “DRM-free version s o f any a udio downloads

. . . purchased fro m A p p l e.” SAC, Pray e r ¶ F

. Somers alleg es that, althoug h Apple sold DRM-free music in 2009, it charg es 30 cents to “upg rade” previously purchased D RMencoded music to F airPlay -free format. T h e d istrict court dismissed Somers’ claims on the basis t h a t her claim for DRM-free music depended on an assertion of a nticompeti t i v e conduct that it had previously rejected a s insufficient—namely
, that A pple’s encry ption of F airPlay was unlawful in the first place.

Somers responds that the district court erred by narrowly construing the alleg e d consumer injury

. Some r s maintains that h er claim for injunctive r elief is not predicated on a ty ing claim, b u t o n Apple’s use of software updates, which c aused her to suffer “ the loss o f ability to freely p l ay h er dig ital music purchases as she saw fit.” I n the SAC, Somers alleg e s that throug h the use of software updates, “Apple was able to

. . . c harg e supracompetitive prices, and restrict consumer choices.” SAC ¶¶ 90, 94– 9 5. B ut limitation of consumer choice, in itself, does not amount to “antitrust inj u r y

. ” SeeS O M E R S V

. A P P L E , I N C

. 25

Hirsh v. Martindale-Hubbell, Inc.
, 674 F .2d 1343, 1349 n.19 ( 9th Cir. 1 982) (“[ I ] ntru[ sion] upon c onsumers’ freedom o f choice by compelling the purchase of u nwanted products

. . . h a s been implicitly rejected by the Supreme Court a s a suf ficient independent basis for antitrust liability .” (citing Cont’l T.V., Inc. v. G TE S ylvania, Inc. , 433 U.S. 36, 53 n.21 (1977)).

Moreover, the SAC lacks any all e ga t ion sug g esting that Somers’ ownership of DRM-encoded music files, o r her inability to freely play them on non-iPods, harms competition in the music d ownload market. “ Section 16 of the Clay ton Act provides, in part, that ‘[ a] ny person, firm, corporation, o r association s h al l b e entitled to sue for and have injunctive relief

. . . ag ainst threatened loss or damag e by a violation o f the antitrust laws

. . . . ’” Cargill, Inc. v. Monfort of Colo., Inc.
, 479 U.S. 104, 110–11 (1986) (quoting 15 U.S.C. § 26); accord Kendall
, 518 F .3d a t 1051. To o b t a in injunctive relief, Somers must alleg e f acts showing that the remedy she seeks is needed to prevent a threatened “antitrust injury
, ” meaning a n “ injury o f the ty pe the a ntitrust laws were intended to prevent”— i.e.
, an injury to comp e t ition. Brunswick
, 429 U.S. at 489; se e also State Oil Co. v. Khan
, 522 U.S. 3, 15 ( 1997) (“[ T ] he primary purpose of the antitrust laws is to protect interbrand competition.”); Paladin A ssocs., Inc. v. Mont. Power Co.
, 328 F .3d 1145, 1158 (9th Cir. 2 003) (“W here the defendant’s conduct harms the plaintiff without adversely affecting competition g e nerally
, there is no antitrust injury .”).

Somers does not alleg e a n y facts in the SAC p urporting
to show how limitation of p e rsonal choice inhibits Apple’s competitors f

rom entering the a

u dio d o wnload market o r prevents competitors from selling music online. Nor d oes sheS O M E R S V

. A P P L E , I N C

. 26

ex p lain how requiring A pple to provide DRM-free copies o f music s h e previously purchased from iTS would enhance competition among online music sellers. F inally
, a n inability to freely play

her DRM-encoded music is not comparable to the loss of “free choices between market alternatives,” which

we r ecog niz e as antitrust injury
, Glenn Holly Entm’t
, 343 F .3d at 1011 ( citation and quotes o m i tted), because Somers’ alleg ed limited ability to play her music d oes not relate to a r e s triction o n her ability to buy music from competing online music sellers. Somers a lso cannot meaning fully claim that h er o w nership of DRM-encoded music inhibits competition in t h e PDMP market, o r that it restricts her choices in that market because she only seeks to represent music p u rchasers in the SAC. I n sum, Somers’

a lleg ed inability to play her music freely is not an “a n t i t r u s t injury ” that affects competition, and thus cannot serve as a basis for injunctive relief.

CONCLUSION

F or the foreg oing reasons, the district c o u rt’s denial o f class certification and dismissal o f Somers’ complaint with prejudice are affirmed.

AF F IRMED.