Apple Mulls Options After ‘Resounding’ Antitrust Victory Against Epic

Despite its “resounding” victory against Epic Games Monday, Apple is exploring legal options in response to the one antitrust claim the company lost before the 9th U.S. Circuit Court of Appeals, the company said in a statement Tuesday (docket 21-16506) (see 2304240060).

The court ruled in Apple’s favor on nine of Epic’s 10 claims. Epic sued Apple in August 2020, claiming it engages in anticompetitive behavior and unlawfully maintains a monopoly over the app store market. Epic filed the lawsuit after Apple banned the company from its App Store in response to it launching its own payment system for its game Fortnite, effectively circumventing the App Store and Apple fees that can be as high as 30%. The U.S. District Court for the Northern District of California also ruled in Apple’s favor on nine of 10 claims. Both the district court and the 9th Circuit found Apple is in violation of California state law for preventing companies from steering app users to alternate payment methods.

The 9th Circuit’s decision reaffirms Apple’s “resounding victory,” the company said in a statement: “The App Store continues to promote competition, drive innovation, and expand opportunity, and we’re proud of its profound contributions to both users and developers around the world. We respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.” Additional action could include an appeal to the U.S. Supreme Court. Lower courts are expected to decide whether Epic will pay Apple attorney fees.

Epic is “working on next steps,” CEO Tim Sweeney tweeted Monday: The court’s “positive decision rejecting Apple's anti-steering provisions frees iOS developers to send consumers to the web to do business with them directly there.” Epic didn’t comment Tuesday.

The decision is a “win” for California consumer protection and competition law, California Attorney General Rob Bonta (D) said in a statement Monday. The decision forces Apple to allow developers to inform consumers about lower-priced options outside the App Store, his office noted. “I am pleased that the Ninth Circuit reaffirmed the strength of California’s consumer protection law and upheld our state’s important role in enforcing fair competition laws on behalf of consumers,” said Bonta.

Epic’s loss “shows how current antitrust law, and how courts apply it, is not always fit for the challenges posed by dominant digital platforms,” said Public Knowledge Legal Director John Bergmayer in a statement. He urged passing federal legislation like the Open App Markets Act, from Sens. Richard Blumenthal, D-Conn.; Marsha Blackburn, R-Tenn.; and Amy Klobuchar, D-Minn. The Senate Judiciary Committee passed the bill, which is intended to open app store competition to Apple and Google, in February 2022. The bill is “necessary” to protect users and developers, he said. This loss means DOJ will have a “much harder” time if it pursues a similar case it’s been contemplating against Apple, said Chamber of Progress CEO Adam Kovacevich.

The case highlights the need for Congress to pass legislation to plug gaps in antitrust law, said American Economic Liberties Project Legal Counsel Lee Hepner in a statement, urging support for the American Innovation and Choice Online Act: “The case illustrates how time-consuming and expensive disputes over market definition can bog down the courts, create uncertainty, and remove the focus from the actual harm to competition. On the federal law claims, the Court openly dodges the question of market harm by dominant online platforms like Apple.”

fix Thomas issued a partial concurrence and partial dissent, saying he agreed with “much of the majority opinion,” particularly on injunctive relief the district court granted under California competition law. He disagreed with the court’s findings on relevant markets.

Epic failed to establish its “proposed market definition and the existence of any substantially less restrictive alternative means for Apple to accomplish the procompetitive justifications supporting iOS’s walled-garden ecosystem,” the court said in its ruling. Epic failed to deliver any evidence showing “consumers are generally unaware of Apple’s app-distribution and [in-app payment processor] restrictions when they purchase iOS devices,” the court said. App store users are free to choose what app-transaction platform to use, the ruling said: Users who “value security and privacy” can opt for Apple’s “closed platform and pay a marginally higher price for apps.” Users who value low prices can opt for Android devices and select “several open app-transaction platforms, which provide marginally less security and privacy,” the court said. “Apple’s restrictions create a heterogenous market for app-transaction platforms which, as a result, increases interbrand competition -- the primary goal of antitrust law.”