Stacie Somers v. Apple, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

STACIE SOMERS, On Behalf of No. 11-16896
Herself and All Others Similarly
Situated, D.C. No.
Plaintiff-Appellant, 5:07-cv-06507-
JW
v.

APPLE, INC., OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of California
James Ware, District Judge, Presiding

Argued and Submitted
February 11, 2013—San Francisco, California

Filed September 3, 2013

Before: Dorothy W. Nelson, Stephen Reinhardt,
and Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.
2 SOMERS V. APPLE, INC.

SUMMARY*

Antitrust

The panel affirmed the district court’s dismissal of a
putative class action against Apple, Inc., alleging antitrust
violations in connection with Apple’s iPod and iTunes Music
Store.

The panel held that the plaintiff waived review of the
district court’s order denying certification of a class of
indirect purchasers of the iPod because she abandoned her
underlying individual claim under § 2 of the Sherman Act
based on inflated iPod prices.

The panel also held that the plaintiff failed to allege
sufficient facts to state antitrust claims for damages and
injunctive relief. The plaintiff alleged that Apple encoded
iTunes Music Store music files with its proprietary Digital
Rights Management (DRM), called FairPlay, which rendered
the music files and the iPod compatible only with each other.
She alleged that through certain software updates, Apple
excluded competitors and obtained a monopoly in the
portable digital media player and music download markets,
which inflated Apple’s music prices and deflated the value of
the iPod.

The panel held that a monopolization claim for damages
based on the theory of diminution in iPod value was barred
by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), because

*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 SOMERS V. APPLE, INC. 3

the plaintiff was an indirect purchaser of the iPod. In
addition, she lacked standing to bring this claim because she
alleged that she purchased her iPod after Apple’s purported
anti-competitive conduct began. The panel concluded that
because Apple used FairPlay from the beginning, when it first
launched the iTunes Music Store, its use of subsequent
software updates only served to maintain the status quo at the
time of purchase, and therefore could not plausibly be the
basis for diminishing the value of the iPod.

The panel held that the plaintiff failed to state a
monopolization claim for damages based on overcharged
music downloads because she failed to plead sufficient facts
to state a plausible antitrust injury. The panel concluded that
the fact that Apple continuously charged the same price for its
music irrespective of the absence or presence of a competitor
rendered implausible the plaintiff’s assertion that Apple’s
software updates affected music prices.

Finally, the panel held that the plaintiff failed to state a
claim for injunctive relief in the form of DRM-free music
files because her alleged inability to play her music freely, on
non-iPods, was not an “antitrust injury” that affected
competition.

COUNSEL

Craig Briskin (argued) and Steven A. Skalet, Mehri & Skalet,
PLLC, Washington, D.C.; Helen I. Zeldes, Alreen
Haeggquist, and Aaron M. Olsen, Zeldes & Haeggquist, LLP,
San Diego, California, for Plaintiff-Appellant.
4 SOMERS V. APPLE, INC.

Craig E. Stewart (argued), Robert A. Mittelstaedt, and David
C. Kiernan, Jones Day, San Francisco, California, for
Defendant-Appellee.

OPINION

M. SMITH, Circuit Judge:

Plaintiff-Appellant Stacie Somers (Somers) brought a
putative class action against Defendant-Appellee Apple, Inc.
(Apple), alleging federal and state antitrust claims. Somers
seeks to represent a class of indirect purchasers of the iPod,
Apple’s portable digital media player (PDMP), and a class of
direct purchasers of music downloaded from Apple’s iTunes
Music Store (iTS). She alleges that Apple encoded iTS music
files with its proprietary Digital Rights Management (DRM),
called FairPlay, which rendered iTS music and the iPod
compatible only with each other. She further claims that
through certain software updates, Apple excluded competitors
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 damages and injunctive
relief in the form of DRM-free music files.

Somers moved to certify a class of indirect purchasers of
the iPod under Federal Rule of Civil Procedure 23(b)(3),
which the district court denied. After giving Somers two
opportunities to amend her complaint, the district court also
dismissed Somers’ antitrust claims with prejudice under
Federal Rule of Civil Procedure 12(b)(6). Somers appeals
both rulings. We hold Somers waived review of the district
court’s class certification order. We further hold that Somers
 SOMERS V. APPLE, INC. 5

failed to allege sufficient facts to state antitrust claims for
damages and injunctive relief. Accordingly, we affirm.

FACTS AND PRIOR PROCEEDING

A. Background1

In January 2001, Apple introduced a software program
called iTunes for personal computers. iTunes enables
computer users to organize and play digital music files, and
upload or “sync” the files to a PDMP. The iTunes software
is pre-installed on Apple computers, and is also available to
non-Apple computer users by free download. In October
2001, Apple introduced the iPod, its first PDMP, which at the
time, was capable of playing only unprotected audio
downloads in MP3 format.

In April 2003, Apple launched iTS, an online music store
accessible only through iTunes. iTS began selling digital
music tracks from major record labels for 99 cents each. iTS
music files were encrypted with Fairplay at the point of
purchase through iTunes. DRM is designed to restrict a
consumer’s use and reproduction of digital files. Major
record labels required that digital music files sold by Apple
through iTunes be in a protected format, but did not require
Apple to restrict music files for use only with Apple products.
Both iTunes and the iPod were updated to be compatible with
Fairplay encryption. As a result, music purchased from iTS

1
The facts are drawn from the allegations in the operative Corrected
Second Amended Complaint (SAC), filed on January 25, 2011, which on
a Rule 12(b)(6) motion, we accept as true and construe in the light most
favorable to Somers. Moyo v. Gomez, 40 F.3d 982, 984 (9th Cir. 1994).
6 SOMERS V. APPLE, INC.

could only be played on the iPod, and the iPod could only
play music downloaded from iTS.

In November 2005, Somers purchased a 20GB iPod from
a Target store, and thereafter, purchased music from iTS that
was encoded with FairPlay.

B. Somers’ iPod Overcharge Claim and Motion for
Class Certification

In December 2007, Somers filed her complaint against
Apple on behalf of a class of indirect purchasers of Apple
products (Indirect Purchaser Action). In her original
complaint, Somers asserted a claim for unlawful tying under
section 1 of the Sherman Act, 15 U.S.C. § 1, and
monopolization claims under section 2 of the Sherman Act,
15 U.S.C. § 2, along with related state law claims. Somers
alleged that Apple’s FairPlay and software updates rendered
iTS music incompatible with non-iPod digital media players,
thereby increasing iPod demand and enabling Apple to charge
supracompetitive prices for the iPod. Somers sought
damages for the alleged iPod overcharge on behalf of herself
and other consumers who purchased their iPod from a
reseller.

In February 2008, the district court related this action to
a case making similar factual allegations and claims against
Apple on behalf of direct purchasers of Apple products
(Apple iPod iTunes AntiTrust Litigation, No. C 05-00037
(Direct Purchaser Action)). In the Direct Purchaser Action,
the district court concluded that the technological
interoperability between the iPod and media sold through iTS
did not constitute unlawful tying, and ordered the tying claim
dismissed.
 SOMERS V. APPLE, INC. 7

In February 2009, Somers moved to certify an injunctive
and damage class of indirect purchasers 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 under Rule 23(b)(3), on the ground
that Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977),
prohibits indirect purchasers from recovering for violations
of federal antitrust law. The district court further ruled that
even though 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 had failed to establish a reliable measure for
damages in an action on behalf of indirect purchasers. The
district court deferred ruling on Somers’ motion for
certification of the Rule 23(b)(2) injunctive class in light of
the pending Direct Purchaser Action.

In July 2010, Somers filed her First Amended Complaint
(FAC). Somers dropped her tying claim and brought
monopolization claims under section 2 of the Sherman Act,
as well as a claim under California’s Unfair Competition Law
(UCL), Cal. Bus. & Prof. Code §§ 17200, et seq. Somers
asserted a damage claim based on two new theories: (i)
inflated prices for music downloads and (ii) deflated value of
the iPod. The district court dismissed the FAC with leave to
amend.

2
Specifically, Somers sought to certify a class with the following
definition: “All persons and entities in the United States (excluding
federal, state and local government entities, Apple, its directors, officers
and members of their families) that from December 31, 2003 to the
present (“Class Period”) purchased an Apple iPod indirectly from Apple
for their own use and not for resale.”
8 SOMERS V. APPLE, INC.

C. Second Amended Complaint

In January 2011, Somers filed the SAC, in which she
dropped her damage claim based on the iPod diminution-in-
value theory, and otherwise renewed her federal antitrust
claims and UCL claim. In the SAC, Somers seeks to
represent a class of individuals who purchased music files
from iTS. Somers alleges that as a result of the FairPlay
encryption, Apple achieved a monopoly in the PDMP and
audio download markets. Specifically, Somers alleges that
shortly after the release of iTS in April 2003, (i) Apple
achieved and maintained a market share of over 70 percent of
the audio download market and (ii) increased its market share
of the PDMP market from 11 to 99 percent. Somers claims
that Apple achieved a monopoly in both the PDMP and music
downloads markets by 2004, at the latest.

Somers next alleges that Apple maintained and furthered
its monopoly in these markets “through the use of software
updates intended to prevent competitors from selling Audio
Downloads that were compatible with iPods.” SAC ¶ 90.
For example, in July 2004, Real Networks introduced a
technology known as Harmony, which enabled songs
purchased through its online stores to be compatible with
iPods and other digital media players, thereby offering an
alternative to iTS. Real Networks began selling its music as
low as 49 cents per track, compared to the 99 cents per track
charged by Apple. In October 2004, Apple responded by
updating its iPod and iTunes software to prevent songs
downloaded from Real Networks’ music store from being
played on iPods. Somers alleges that as a result of such
software updates, Apple was able to thwart Real Networks’
effort to compete in the audio download market, thereby
enabling Apple to continue to charge supracompetitive prices
 SOMERS V. APPLE, INC. 9

for digital music. According to Somers, “[h]ad Apple not
engaged in this anticompetitive action, it would have had to
price Audio Downloads on price with Real Networks.” Id.
¶ 66.

Somers then alleges that Apple continually issued
software updates from 2005 through 2009 to prevent
competitors from entering and threatening its monopolies.
Specifically, Somers claims that Apple issued software
updates to iTunes to block and neutralize computer programs
such as JHymn, QTFairUse, PlayFair, and Requiem, which
enabled users to play their iTS music on non-Apple devices.
Apple also introduced software updates to prevent syncing
functionality with certain non-Apple media players.

In January 2008, Amazon became the first music store to
sell music files without DRM restrictions. Amazon sold over
half of the more than 2 million songs in its initial catalog for
89 cents each. In January 2009, Apple announced that it
would begin selling most songs through iTS without FairPlay
restrictions. When Apple introduced variable pricing in 2009,
and offered top-sellers for $1.29, Amazon sold many of the
same tracks for 99 cents. Apple sold a few songs for 69
cents. Consumers who had previously purchased their music
through iTS could “upgrade” their files to a FairPlay-free
format, but only by paying 30 cents per file. By the end of
March 2009, all music sold through iTS was free of FairPlay
encryption.

Somers asserts that as a result of Apple’s software
updates and “the technological link created by FairPlay,
Apple was able to preserve its monopoly in both [the PDMP
and audio download] markets, charge supracompetitive
prices, and restrict consumer choices.” Id. ¶¶ 90, 94–95.
10 SOMERS V. APPLE, INC.

Somers claims that Apple has maintained the restriction on
DRM-encoded music purchased from iTS, thereby forcing
customers to pay Apple substantial sums to free their music
libraries or purchase an Apple product to play their music.

Based on these allegations, Somers asserts claims for
injunctive relief (Counts I, II) and damages (Count III) for
violation of section 2 of the Sherman Antitrust Act, as well as
a UCL claim (Count IV). The district court dismissed the
SAC with prejudice, and Somers timely appealed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction under 28 U.S.C. § 1291. We review
a district court’s denial of a motion for class certification for
abuse of discretion. Narouz v. Charter Commc’ns, LLC,
591 F.3d 1261, 1266 (9th Cir. 2010). A legal error is deemed
a per se abuse of discretion, Conn. Ret. Plans & Trust Funds
v. Amgen Inc., 660 F.3d 1170, 1175 (9th Cir. 2011), while
findings of fact are reviewed for clear error, Hester v. Vision
Airlines, Inc., 687 F.3d 1162, 1171–72 (9th Cir. 2012).

We review de novo the district court’s dismissal for
failure to state an antitrust claim under Federal Rule of Civil
Procedure 12(b)(6). Rick-Mik Enters., Inc. v. Equilon
Enters., LLC, 532 F.3d 963, 970 (9th Cir. 2008). Dismissal
under Rule 12(b)(6) is proper when the complaint either (1)
lacks a cognizable legal theory or (2) fails to allege sufficient
facts to support a cognizable legal theory. Mendiondo v.
Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.
2008). We have held that for pleading an antitrust claim, the
U.S. Supreme Court in Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007), “specifically abrogated the usual notice
pleading rule” under Rule 8(a)(2) and Conley v. Gibson,
 SOMERS V. APPLE, INC. 11

355 U.S. 41 (1957). Rick-Mik Enters., 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 contain
sufficient factual matter, accepted as 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 claim is facially plausible “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. at 678. Plausibility requires pleading facts, as
opposed to conclusory allegations or the “formulaic recitation
of the elements of a cause of action,” Twombly, 550 U.S. at
555, and must rise above the mere conceivability or
possibility of unlawful conduct that entitles the pleader to
relief, Iqbal, 556 U.S. at 678–79. “Factual allegations must
be enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555. “Where a complaint
pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678
(citation and quotes omitted); accord Lacey v. Maricopa
Cnty., 693 F.3d 896, 911 (9th Cir. 2012) (en banc). Nor is it
enough that the complaint is “factually neutral”; rather, it
must be “factually suggestive.” Twombly, 550 U.S. at 557
n.5.

Although a district court should grant the plaintiff leave
to amend if the complaint can possibly be cured by additional
factual allegations, 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 by
amendment,” Kendall, 518 F.3d at 1051. “We may affirm on
12 SOMERS V. APPLE, INC.

any basis supported by the record, whether or not relied upon
by the district court.” Hall v. N. Am. Van Lines, Inc.,
476 F.3d 683, 686 (9th Cir. 2007).

DISCUSSION

I. Class Certification of Indirect Purchasers of the iPod

Somers challenges the district court’s July 2009 order
denying her motion to certify a class of indirect purchasers of
the iPod under Rule 23(b)(3). Apple argues that this decision
is not properly before us because Somers abandoned her
underlying individual claim. Apple is correct.

In the original December 2007 complaint, Somers sought
to represent, inter alia, a class of indirect purchasers of the
iPod damages class. Somers’ class claim was predicated on
her individual claim for damages under section 2 of the
Sherman Act based on inflated iPod prices. Apple answered
the original complaint in February 2008. In her February
2009 motion for class certification, Somers sought to certify
a class of indirect purchasers of the iPod only. The district
court denied that motion. In the FAC, filed in July 2010,
Somers did not renew her individual damage claim based on
an overcharge iPod theory, but rather, asserted a new theory
based on the diminution in iPod value. Somers alleged that
Apple’s purported anti-competitive conduct “restricted the
iPod’s capability, and lessened its uses, usefulness and value
to Plaintiff and the Class.” FAC ¶ 141. Before Somers’
filing of the FAC, Apple did not move to dismiss her
overcharge iPod claim. Nor did the district court dismiss
Somers’ individual overcharge iPod claim. In her January
2011 SAC, Somers again changed her damage theory—this
time on the basis of supracompetitive music prices. Although
 SOMERS V. APPLE, INC. 13

Apple, twice, expressly asserted that Somers had dropped her
overcharge iPod claim, Somers did not pursue that claim or
challenge Apple’s assertion. See Mot. to Dismiss Appeal,
Exh. 8 [Mot. to Dismiss FAC], at 6 (“For iPod purchasers,
she drops the claim that iPod prices were supracompetitive—
which the Court had ruled was not a basis for class
certification.”) and Exh. 12 [Mot. to Dismiss SAC], at 1
(“She now has dropped the iPod overcharge claim with which
she began her suit four years ago.”).

Under these circumstances, Somers has voluntarily
abandoned her overcharge iPod claim. See Lacey, 693 F.3d
at 928 (“[F]or any claims voluntarily dismissed, we will
consider those claims to be waived if not repled.”); Walsh v.
Nev. Dep’t of Human Res., 471 F.3d 1033, 1037 (9th Cir.
2006) (“A plaintiff who makes a claim . . . in his complaint,
but fails to raise the issue in response to a defendant’s motion
to dismiss . . . has effectively abandoned his claim, and
cannot raise it on appeal.”). Somers had an obligation to
pursue her overcharge iPod claim on an individual basis to
obtain review of the district court’s denial of certification on
that claim. See Huey v. Teledyne, Inc., 608 F.2d 1234, 1240
(9th Cir. 1979) (finding the district court’s refusal to certify
the class unreviewable because plaintiff failed to prosecute
the underlying individual claim following denial); Marks v.
S.F. Real Estate Bd., 627 F.2d 947, 949 (9th Cir. 1980)
(“[P]laintiff must be willing to proceed to trial, albeit
reluctantly, on his individual claim in order to obtain eventual
review of the [class] decertification order.”).3 Because

3
Somers includes a section entitled “Preservation of Claims for Appeal”
in her amended complaints related to her tying and overcharge iPod
claims. However, these statements are not affirmative assertions of a
14 SOMERS V. APPLE, INC.

Somers has abandoned the individual claim for which she
sought class certification, the issue of whether the district
court erred in denying her motion to certify that claim for
class treatment is waived.

II. Damages Claim Based on Diminution in iPod Value

Somers also appeals the district court’s December 2010
order dismissing her monopolization claim for damages based
on the theory of diminution in iPod value, as alleged under
Count IV of the FAC. In the FAC, Somers sought to
represent a class on behalf of (i) direct purchasers of iTS
music, and (ii) indirect purchasers of the iPod. Somers
alleged that Apple “impaired the uses, usefulness and value
of iPods purchased by Indirect Purchasers,” and made iPods
“less valuable to Plaintiff and the Class, because they were
unable to download music tracks that would have been
available from competitors at lower prices.” FAC ¶ 101.
Somers sought “compensatory damages on behalf of herself
and all other indirect purchasers of iPods for the diminution
in value to their iPods caused by Apple’s restrictive
‘updates.’” Id. ¶¶ 16, 141–42.

The district court properly dismissed this claim on the
ground that it was barred by Illinois Brick Co. v. Illinois,
431 U.S. 720 (1977). The indirect purchaser rule bars suits
for antitrust damages by customers who do not buy directly
from a defendant, as explained by the Supreme Court in
Hanover Shoe, Inc. v. United States Machinery Corp.,
392 U.S. 481 (1968), and Illinois Brick. In Illinois Brick, the
Court held that allowing indirect purchasers to sue for

claim in a complaint, and therefore they do not serve to renew claims that
she previously dropped.
 SOMERS V. APPLE, INC. 15

damages, while refusing to allow a pass-on defense to direct
purchaser plaintiffs, would create the risk of double recovery
against defendants, and necessitate complex and costly
inquiries into the amount of injury passed on to the plaintiffs.
431 U.S. at 730–33; see also Del. Valley Surgical Supply Inc.
v. Johnson & Johnson Health Care Sys. Inc., 523 F.3d 1116,
1120–21 (9th Cir. 2008) (observing that “a bright line rule
emerged from Illinois Brick: only direct purchasers have
standing under § 4 of the Clayton Act to seek damages for
antitrust violations”); accord In re ATM Fee Antitrust Litig.,
686 F.3d 741, 748 (9th Cir. 2012). “The underlying purposes
for the rule are (1) ‘to eliminate the complications of
apportioning overcharges between direct and indirect
purchasers’; (2) ‘to eliminate multiple recoveries’; and (3) to
‘promote the vigorous enforcement of the antitrust laws.’” In
re ATM Fee Antitrust Litig., 686 F.3d at 748 (quoting Kansas
v. UtiliCorp United, Inc., 497 U.S. 199, 208, 212, 214
(1990)).

Here, while Somers requests compensatory damages on
the theory that Apple’s software updates deflated the value of
her iPod—rather than causing an inflation of initial iPod
prices—the rationale under Illinois Brick applies equally to
this type of damage claim. The plaintiff in the related Direct
Purchaser Action case is seeking damages based on the same
kinds of iPods that form the basis of Somers’ suit here, but on
the theory that the software upgrades inflated iPod prices.
Thus, allowing Somers to sue as an indirect purchaser would
lead to litigation on contradictory, duplicative theories of
recovery necessitating “evidentiary complexities and
16 SOMERS V. APPLE, INC.

uncertainties,” which the indirect purchaser rule was intended
to prevent. Illinois Brick, 431 U.S. at 732.4

But even if Illinois Brick did not apply, Somers lacks
standing to bring this claim under the facts alleged in the
FAC. Somers alleges that she purchased her iPod in
November 2005, but Apple’s purported anti-competitive
conduct (use of software updates) began in 2004. See FAC
¶¶ 12, 71–72. Apple’s software updates after 2004 thus only
served to maintain the status quo—i.e., music downloaded
from iTS can only be played on the iPod.

Somers’ diminution-in-value theory is also useless by any
other iPod purchaser because Somers alleges that Apple used
FairPlay from the beginning, when it first launched iTS in
2003, and that the iPod was incapable of playing music from
any other on-line store. See FAC ¶ 49 (“iPods were unable to
play any file encrypted with any DRM format other than
FairPlay.”), ¶ 59 (“From the beginning of iTS, Apple
designed the iPod’s software so it could only play a single
protected digital format, Apple’s FairPlay-modified AAC
format.”). Accordingly, Apple’s use of subsequent software
updates only served to maintain the status quo at the time of

4
We reject Somers’ argument that she can assert a damage claim under
California’s UCL. Somers only seeks compensatory damages, which are
not recoverable under the UCL. Alvarez v. Chevron Corp., 656 F.3d 925,
933 n.9 (9th Cir. 2011) (“Under the UCL, [p]revailing plaintiffs are
generally limited to injunctive relief and restitution.” (citation and quotes
omitted)); Cacique, Inc. v. Robert Reiser & Co., Inc., 169 F.3d 619, 624
(9th Cir. 1999) (“California law is clear that §§ 17200 et seq. do not
authorize a suit by a private party for damages.”); Korea Supply Co. v.
Lockheed Martin Corp., 63 P.3d 937, 943 (Cal. 2003) (“A UCL action is
equitable in nature; damages cannot be recovered.”).
 SOMERS V. APPLE, INC. 17

purchase, and therefore cannot plausibly be the basis for
diminishing the value of the iPod.

III. Damages Claim Based on Overcharged Music
Downloads

Somers next challenges the district court’s July 2011
order dismissing her music overcharge claim. In the FAC,
Somers alleged an antitrust claim based on the theory that
Apple’s use of software updates inflated iTS music prices.
The district court initially dismissed the claim with leave to
amend on the ground that Somers failed to allege sufficient
facts in support of her allegation that Apple’s iTS pricing was
supracompetitive or that the pricing of excluded competitors
were competitive. The district court noted that Somers had
only alleged that Apple’s competitor priced music lower than
did Apple. The district court also observed that Somers
alleged in contradictory fashion that the prices for iTS music
remained the same since Apple entered the market 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 dismissed the claim with prejudice because Somers had
not corrected the deficiencies identified in the FAC, and
because Somers’ claim was premised on the presumption that
Apple’s maintenance of its DRM-encrypted files constituted
an antitrust violation—a presumption that the district court
had already rejected. On appeal, Somers argues that the
district court erred by (1) applying an improper proof
requirement, and (2) ignoring allegations supporting her
monopolization claim. Neither argument has merit.
18 SOMERS V. APPLE, INC.

First, Somers contends that the district court erred by
requiring her to prove supracompetitive pricing. Somers is
mistaken. The district court did not require her to prove, but
rather, to plead the elements of a monopolization claim.
Section 2 of the Sherman Act provides: “Every person who
shall monopolize, or attempt to monopolize, or combine or
conspire with any other persons, to monopolize any part of
the trade or commerce . . . shall be deemed guilty of a
felony.” 15 U.S.C. § 2. To state a plausible monopolization
claim under this provision requires plaintiff to show: “(a) the
possession of monopoly power in the relevant market; (b) the
willful acquisition or maintenance of 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); accord Cost Mgmt.
Servs., Inc. v. Wash. Natural Gas Co., 99 F.3d 937, 949 (9th
Cir. 1996). Thus, contrary to Somers’ assertion, causal
antitrust injury is a substantive element of an antitrust claim,
and the fact of injury or damage must be alleged at the
pleading stage. See Kline v. Coldwell, Banker & Co.,
508 F.2d 226, 233 (9th Cir. 1974); Rebel Oil Co. v. Atl.
Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995).

At issue here is whether Somers has pleaded sufficient
facts to state a plausible antitrust injury. “Antitrust injury”
means “injury of the type the antitrust laws were intended to
prevent and that flows from that which makes defendants’
acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. 477, 489 (1977). Parsing the Supreme Court’s
definition of “antitrust injury,” we have held that antitrust
injury consists of four elements: “(1) unlawful conduct, (2)
causing an injury to the plaintiff, (3) that flows from that
which makes the conduct unlawful, and (4) that is of the type
the antitrust laws were intended to prevent.” Am. Ad Mgmt.,
 SOMERS V. APPLE, INC. 19

Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1055 (9th Cir.
1999); accord Glenn Holly Entm’t, Inc. v. Tektronix, Inc.,
343 F.3d 1000, 1008 (9th Cir. 2003). With respect to the
second element, “[a] plaintiff must . . . allege some credible
injury caused by the unlawful conduct. There can be no
antitrust injury if the plaintiff stands to gain from the alleged
unlawful conduct.” Am. Ad Mgmt., 190 F.3d at 1056. In
addition, we have imposed a fifth element—that “the injured
party be a participant in the same market as the alleged
malefactors,” meaning “the party alleging the injury must be
either a consumer of the alleged violator’s goods or services
or a competitor of the alleged violator in the restrained
market.” Glenn Holly Entm’t, 343 F.3d at 1008 (citations and
quotes omitted). A plaintiff can request treble damages for an
antitrust violation under section 4 of the Clayton 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 injury caused by
Apple’s anticompetitive conduct. 190 F.3d at 1055. Somers
alleges that she suffered injury in the form of inflated music
prices. The premise of her overcharge theory is that Apple
used software updates to thwart competitors (e.g., Real
Networks) and gain a monopoly in the music download
market, which permitted Apple to charge higher prices for its
music than it could have in a competitive market.
Specifically, Somers alleges that if Apple had not engaged in

5
We note that antitrust injury is also the threshold requirement for
antitrust standing, which is required for treble damages under section 4 of
the Clayton Act, 15 U.S.C. § 15(a). See Gerlinger v. Amazon.com, Inc.,
Borders Group, Inc., 526 F.3d 1253, 1256 (9th Cir. 2008); Knevelbaard
Dairies v. Kraft Foods, Inc., 232 F.3d 979, 987 (9th Cir. 2000) (discussing
the five elements of antitrust standing).
20 SOMERS V. APPLE, INC.

anti-competitive conduct to exclude Real Networks from the
market, “it would have had to price Audio Downloads to
compete on price with Real Networks.” SAC ¶ 66.

Unfortunately for Somers, her own allegations do not
square with her overcharge theory. Somers claims that the
price for music downloads remained the same (99 cents)
since it entered the market in 2003, before it obtained
monopoly in the audio download market, and after it
allegedly acquired monopoly in that market in 2004. See id.
¶ 35 (“iTS initially offered over 200,000 songs from the
major record labels for 99 cents each.”), ¶ 46 (“Apple
achieved a monopoly . . . by 2004 at the latest”), ¶ 57 (stating
that Apple charged 99 cents per track in July 2004 after
RealNetworks entered the market). Moreover, with the
exception of brief references to a few tracks and top-sellers,
Somers does not allege that Apple’s music price
changed—even after Apple’s alleged monopoly ended in the
beginning of 2008—when Amazon began selling DRM-free
music, and after Apple began selling Fairplay-free music in
January 2009. But Somers earlier alleged that if Apple had
not used software updates to thwart competition, it would
have had to lower the price of its music to compete with its
rivals. See id. ¶ 66. Accordingly, if Somers’ overcharge
theory were correct, then Apple’s music prices from 2004 to
2008 were supracompetitive as a result of software updates
that excluded competition, and the emergence of a large seller
such as Amazon would have caused iTS music prices to fall.
But Somers alleges no such price reduction. Somers’
overcharge theory is thus implausible in the face of
contradictory market facts alleged in her complaint. As
Somers herself acknowledges, under basic economic
principles, increased competition—as Apple encountered in
2008 with the entrance of Amazon—generally lowers prices.
 SOMERS V. APPLE, INC. 21

See Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S.
877, 895 (2007); Barr Labs., Inc v. Abbott Labs., 978 F.2d 98,
109 (3d Cir. 1992). The fact that Apple continuously charged
the same price for its music irrespective of the absence or
presence of a competitor renders implausible Somers’
conclusory assertion that Apple’s software updates affected
music prices. See Coalition for ICANN Transparency, Inc. v.
VeriSign, Inc., 611 F.3d 495, 501 (9th Cir. 2010) (“On a
motion to dismiss in an antitrust case, a court must determine
whether an antitrust claim is plausible in light of basic
economic principles.” (citation and quotes omitted)).6

Somers responds that price is only one aspect to consider
in the relevant economic calculus. We agree that price is only
one possible indicator in assessing competitive markets.
Monopoly power may be evaluated by other factors, such as
barriers to entry or structural evidence of a monopolized
market. See, e.g., Harrison Aire, Inc. v. Aerostar, Int’l,
423 F.3d 374, 381 (3d Cir. 2005); Blue Cross & Blue Shield
United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1412 (7th
Cir. 1995). But if Apple did not charge inflated prices for its
music, then this fact contradicts Somers’ overcharge theory,
and there would be no basis for damages in the first place.7
Somers nevertheless suggests that it is conceivable that
Apple’s music was not priced higher because of some other

6
While Somers alleges that Apple promised to sell “some songs” for 69
cents each after Amazon began selling online music, those tracks were
“few and far between.” SAC ¶ 84.
7
Somers suggests for the first time on appeal that regardless of what
Apple charged, she was damaged because she was not able to purchase
music at a lower price from Apple’s competitor. But Somers did not
assert this basis for damages below, and in any event, it is contrary to her
alleged overcharge theory.
22 SOMERS V. APPLE, INC.

factor, such as superior product or greater efficiency. While
this is certainly possible, to state a plausible antitrust injury,
Somers must allege facts that rise beyond 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 suggest facts she could allege to
correct the deficiency. We are only left to speculate on what
factors could have permitted Apple to charge 99 cents
continuously. Under the plausibility standard, Somers must
allege specific facts that raise an antitrust claim above the
speculative level. Twombly, 550 U.S. at 555.

Based on the alleged facts, there are also other “obvious
alternative explanation[s]” for the music pricing. Twombly,
550 U.S. at 567. For example, it might be conceivable that
Apple did not charge inflated music prices, but kept the music
prices low to incentivize customers to purchase the iPod, a
product with a much higher return, or to use Apple products.
Moreover, low pricing could be used to undercut Apple’s
rivals, who would then lose business, but this fact would also
contradict Somers’ alleged overcharge theory of antitrust
injury to consumers. See Brook Group Ltd. v. Brown &
Williamson Tobacco Corp., 509 U.S. 209, 222–23, 225
(1993) (discussing elements of predatory pricing); accord
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.,
Inc., 549 U.S. 312, 318–19 (2007). Accordingly, when these
explanations are considered, together with allegations of iTS
music pricing—construed in the light most favorable to
Somers—Somers’ music overcharge theory “stays in neutral
territory,” and “without some further factual enhancement it
stops short of the line between possibility and plausibility” of
antitrust injury. Twombly, 550 U.S. at 557.
 SOMERS V. APPLE, INC. 23

Second, in support of her overcharge theory, Somers
points to allegations that Real Networks and Amazon charged
lower prices when they first entered the music download
market. Specifically, in the SAC, Somers alleges that Real
Networks charged 49 cents per song when it first entered the
market in 2004. But the bare allegation that Real Networks
charged a lower introductory price does not mean that Apple
charged supracompetitive prices when such variations in
pricing exist even in competitive markets. Somers further
points to allegations that Amazon started charging 89 cents
for many of its songs in January 2008. But again, the fact
that Amazon started charging 10 cents less does not, in itself,
show that Apple’s music prices were supracompetitive during
the period of Apple’s purported monopoly. In fact, the
stability of Apple’s pricing in the face of increased
competition only undermines Somers’ allegation that Apple’s
music prices were supracompetitive. Thus, without more,
these allegations do not nudge Somers’ claim of antitrust
injury “across the line from conceivable to plausible.” Id. at
570.

Although Somers’ complaint leaves open the possibility
that she “might later establish some set of undisclosed facts”
supporting antitrust injury, that is not enough to permit the
SAC to survive a Rule 12(b)(6) motion to dismiss. Id. at 561
(quotes and bracket omitted). As the Supreme Court has
emphasized, its insistence on specificity of facts is warranted
before permitting a case to proceed into costly and protracted
discovery in an antitrust case, especially where, as here, the
potential expense of discovery is obviously great: Somers
seeks to represent a putative class of Apple music purchasers
in the entire United States over a ten year period, in a lawsuit
against one of the world’s largest information technology
24 SOMERS V. APPLE, INC.

companies, and involving billions of music purchases. See id.
at 557–59.

Accordingly, the district court properly dismissed
Somers’ claim for damages based on supracompetitive music
prices.

IV. Injunctive Claim for DRM-Free Music

Finally, Somers challenges the district court’s July 2011
order dismissing her claims for injunctive relief. In the SAC,
Somers asserts claims for injunctive relief for violation of
section 2 of the Sherman Act (Counts I and II). Specifically,
Somers requests “DRM-free versions of any audio downloads
. . . purchased from Apple.” SAC, Prayer ¶ F. Somers
alleges that, although Apple sold DRM-free music in 2009,
it charges 30 cents to “upgrade” previously purchased DRM-
encoded music to FairPlay-free format. The district court
dismissed Somers’ claims on the basis that her claim for
DRM-free music depended on an assertion of anti-
competitive conduct that it had previously rejected as
insufficient—namely, that Apple’s encryption of FairPlay
was unlawful in the first place.

Somers responds that the district court erred by narrowly
construing the alleged consumer injury. Somers maintains
that her claim for injunctive relief is not predicated on a tying
claim, but on Apple’s use of software updates, which caused
her to suffer “the loss of ability to freely play her digital
music purchases as she saw fit.” In the SAC, Somers alleges
that through the use of software updates, “Apple was able to
. . . charge supracompetitive prices, and restrict consumer
choices.” SAC ¶¶ 90, 94–95. But limitation of consumer
choice, in itself, does not amount to “antitrust injury.” See
 SOMERS V. APPLE, INC. 25

Hirsh v. Martindale-Hubbell, Inc., 674 F.2d 1343, 1349 n.19
(9th Cir. 1982) (“[I]ntru[sion] upon consumers’ freedom of
choice by compelling the purchase of unwanted products . . .
has been implicitly rejected by the Supreme Court as a
sufficient independent basis for antitrust liability.” (citing
Cont’l T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 n.21
(1977)).

Moreover, the SAC lacks any allegation suggesting that
Somers’ ownership of DRM-encoded music files, or her
inability to freely play them on non-iPods, harms competition
in the music download market. “Section 16 of the Clayton
Act provides, in part, that ‘[a]ny person, firm, corporation, or
association shall be entitled to sue for and have injunctive
relief . . . against threatened loss or damage by a violation of
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 at 1051. To obtain injunctive
relief, Somers must allege facts showing that the remedy she
seeks is needed to prevent a threatened “antitrust injury,”
meaning an “injury of the type the antitrust laws were
intended to prevent”—i.e., an injury to competition.
Brunswick, 429 U.S. at 489; see 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 Assocs.,
Inc. v. Mont. Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003)
(“Where the defendant’s conduct harms the plaintiff without
adversely affecting competition generally, there is no antitrust
injury.”).

Somers does not allege any facts in the SAC purporting
to show how limitation of personal choice inhibits Apple’s
competitors from entering the audio download market or
prevents competitors from selling music online. Nor does she
26 SOMERS V. APPLE, INC.

explain how requiring Apple to provide DRM-free copies of
music she previously purchased from iTS would enhance
competition among online music sellers. Finally, an inability
to freely play her DRM-encoded music is not comparable to
the loss of “free choices between market alternatives,” which
we recognize as antitrust injury, Glenn Holly Entm’t,
343 F.3d at 1011 (citation and quotes omitted), because
Somers’ alleged limited ability to play her music does not
relate to a restriction on her ability to buy music from
competing online music sellers. Somers also cannot
meaningfully claim that her ownership of DRM-encoded
music inhibits competition in the PDMP market, or that it
restricts her choices in that market because she only seeks to
represent music purchasers in the SAC. In sum, Somers’
alleged inability to play her music freely is not an “antitrust
injury” that affects competition, and thus cannot serve as a
basis for injunctive relief.

CONCLUSION

For the foregoing reasons, the district court’s denial of
class certification and dismissal of Somers’ complaint with
prejudice are affirmed.

AFFIRMED.