Epic Games’ Apple appeal bolstered by huge show of support

To analyse Epic Games’ legal campaign to break Apple’s near-absolute control over its iOS ecosystem was bolstered this week by 35 US states, Microsoft, the Electronic Frontier Foundation, Public Citizen and more than 50 academics, among others.

In 2020, Epic Games flouted Apple’s iOS App Store rules by ordering players of its Fortnite game to purchase in-game currency and items directly from its website at a lower price rather than through Cupertino. .

Apple, stripped of its required 30% in-app sales cut, responded by removing Fortnite from its iOS App Store.

Epic Games responded with antitrust lawsuits in the US, Europe, UK and Australia, a legal campaign clearly intended as a way to loosen Apple’s control over its iOS platform.

On September 10, 2021, U.S. District Judge Yvonne Gonzalez Rogers issued a ruling that neither side liked. She found that Apple’s requirement that app developers not promote alternative payment mechanisms in their apps was anti-competitive, but did not conclude that Apple had unlawfully monopolized the game transaction market. mobiles.

Minimal impact

His decision represented the third crack in Apple’s walled garden in the space of two weeks. In early September 2021, Apple agreed to accommodate the Japan Fair Trade Commission by allowing reader apps to include in-app links to setting up an external account.

This was days after Apple agreed to settle an antitrust complaint filed by a group of app developers, Cameron et al against Apple Inc. [PDF]with relatively inconsequential concessions, including the ability for developers to communicate outside of apps, via email, about alternative purchasing options.

Epic Games won only one of its ten claims – the court found that the anti-riding provisions of Apple’s Developer Program License Agreement (DPLA) violated California’s unfair competition law.

But the game maker has yet to cash in on the decision. Last month, just before the deadline by which Apple was supposed to comply with Epic Games’ decision, the iPhone maker challenged the decision of the United States Court of Appeals for the Ninth Circuit, and that court granted Apple’s request to stay Judge Gonzalez Rogers’ order until his appeal can be heard.

Trust us, we know antitrust – Microsoft

Earlier this month, Epic Games submitted its own brief to the appeals court. Then on Thursday, the amicus briefs in support of Epic arrived. This particular set of “friends of the court” records come from various groups – public sector, private sector, academia and civil society – all of whom want to see Epic Games prevail. Taken together, they argue that Judge Gonzalez Rogers’ decision is flawed.

Microsoft, for example, believes the trial court failed to recognize the ways Apple’s conduct violates the law and wants the appeals court to look more carefully at the consequences of Apple’s dominance.

“If Apple is allowed to come between any company providing online services and iPhone users, few areas of the vast mobile economy will be safe from interference and eventual dominance by Apple,” he said. said the company. [PDF] said. “Consumers and innovation will suffer – indeed, they already have. The district court’s reasoning failed to give sufficient weight to these immense competitive risks and, if widely asserted, could isolate Apple from meritorious antitrust scrutiny and encouraging other harmful conduct.”

If Apple is allowed to come between any company offering online services and iPhone users, few areas of the vast mobile economy will be safe from Apple’s interference and eventual dominance.

Microsoft’s brief chooses to compare Apple’s conduct to that of AT&T before its dissolution in 1982 after an eight-year legal battle with the US Department of Justice. But he also references his own experience of antitrust intervention two decades ago, arguing that the court should assess Epic’s related claim – forcing developers to use Apple’s in-app payments as a condition of distribution – of the same way DC Circuit did to United. States v. Microsoft Corp, “another case that involved ‘the technological integration of additional functionality into software that serves as a platform for third-party applications’.”

Many pages of the various amicus briefs are devoted to the question of whether Apple’s conduct violates Section 1 or Section 2 of the Sherman Act, America’s first antitrust law.

“The Sherman Act prohibits (a) contracts, combinations, or conspiracies to restrict interstate commerce or foreign trade, and (b) monopolization, attempted monopolization, or combinations or conspiracies to monopolize interstate commerce or foreign trade,” according to the United States. Department of Justice.

Section 1 violations require trade restriction but not necessarily monopoly power, while Section 2 violations require monopolization. The district court found Apple guilty only of unfair competition under California law.

For Epic Games to prevail in its antitrust claim under Section 1 of the Sherman Act, Apple’s contract – its DPLA – must be found to unreasonably restrict competition in the relevant market.

Be reasonable

The court found that Apple’s rules had anticompetitive effects but also justified, making them not entirely unreasonable. The court also determined that Apple’s unilateral DPLA contract – a contract of adhesion in which one party has full power to dictate the terms – is not considered the type of mutually agreed contract contemplated by Article 1. of the Sherman Act.

The 35 US States Filing an Amicus Brief [PDF]led by Utah, argue that the District Court erred in excluding Section 1 liability. The DPLA is not a one-sided contract, states argue, because developers make promises in return so Apple’s conduct must be assessed under Section 1.

Moreover, they argue, exempting the DPLA from being a contract under Section 1 would make antitrust enforcement impossible.

“Companies with sufficient market power can unilaterally impose contractual terms,” the state brief asserts. “The District Court’s decision creates a chilling paradox: once a company gains market power and unilaterally imposes a contract, it is no longer subject to Section 1. Affirming this paradox would void the Sherman Act and prevent Amici states to enforce violations of antitrust laws by large corporations that harm their citizens.

Firms with sufficient market power can unilaterally impose contractual terms

A repository of 14 law professors [PDF] also takes aim at the idea that Apple’s coerced contract is not a contract worthy of antitrust scrutiny. They also argue that the District Court’s decision to consider the Marketplace as all mobile apps rather than just iOS apps is flawed.

“Yes [these findings] were true, Apple could not earn an extraordinarily high profit margin on iOS app transactions or charge excessive and unwarranted commission rates,” they state in their brief. “Competition would destroy its pricing power.

The EFF file [PDF] also challenges the district court’s decision to accept a market definition that includes all mobile apps rather than iOS apps. And he questions the alleged benefits of Apple’s oversight, noting the company’s “opaque, arbitrary, and byzantine enforcement of its App Store policies.”

As an example, the EFF brief cites a privacy-enhancing iOS feature introduced in 2020, App Tracking Transparency, which allows users to opt out of having their identity and activities tracked in third-party apps.

“But several of the biggest app developers, including Facebook and Snap, continue to harvest device-identifying data from Apple devices that could be used for cross-app tracking,” the memoir explains. ‘EFF. “Apple is reportedly aware of this practice and condones it, although it tells developers they must ‘anonymize’ the data.”

The other amicus filings make similar arguments, all in the hope that Epic Games’ claims and Apple’s behavior will be reassessed. Apple meanwhile wants the Ninth Circuit to overturn the unfair competition ruling and remove any requirement to support communication about external payments.

Despite winning nine of Epic Games’ ten claims in district court, Apple faces an increasingly uncertain road. His appeal to the Ninth Circuit has met with significant resistance, and an unfavorable outcome will almost certainly make the mega-corporation’s situation worse. It will be interesting to see if the iGiant can attract enough amicus curiae briefs to counter the arguments made by Epic’s allies.

And even that might not lift the siege of the App Store. The UK Competition and Markets Authority is investigating Apple over its App Store business practices. The Dutch Authority for Consumers and Markets (ACM) has asked Apple to allow developers of dating apps on the App Store in the Netherlands to inform users about additional payment processing options, a decision that ‘Apple appealed. The ACM then fined Apple €5 million for non-compliance. The EU also has an ongoing antitrust investigation into Apple’s App Store that could jeopardize the tech titan’s 30% commission.

Apple’s success and resistance to concessions may have made it too big not to nail down. ®

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