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Epic files appeal in its big battle over Apple’s App Store rules

By | Published on Friday 21 January 2022


Epic Games has filed a brief with the US Ninth Circuit appeals court as part of its ongoing battle against Apple’s App Store rules. A lower court got it wrong when considering the competition law implications of those rules, Epic reckons. Except in regards to that one aspect where the lower court judge agreed with the gaming company, of course.

Epic – like many app makers, not least Spotify – has long criticised Apple’s App Store rules, which it argues are anti-competitive. It has various grievances with the way Apple restricts app activity on its iOS devices. Though, like Spotify, one of its biggest complaints is that app makers are obliged to take in-app payments via Apple’s commission-charging transactions platform, and are not allowed to sign-post alternative payment options elsewhere on the internet.

Spotify has mainly pursued its beef with Apple over the App Store rules via a formal complaint it made with the European Commission. Meanwhile, Epic has gone the litigation route in multiple countries, with the highest profile lawsuit filed in California.

However, in that case the judge mainly rejected arguments that Apple’s App Store rules violate American competition law, aka antitrust law, mainly in relation to the US Sherman Act. Although the judge did conclude that the so called anti-steering rule – ie stopping apps from sign-posting alternative payment options – violated Californian unfair competition law. Epic is now appealing the main judgement, while Apple is trying to over-turn the ruling in relation to the anti-steering rule.

In the filing it made with the Ninth Circuit yesterday, Epic provides a pretty concise summary of its App Store grievances.

Noting how iPhone apps are great for “accessing social media, purchasing goods, playing games, watching movies, listening to music, ordering food, banking, reading the news, tracking exercise [and] hailing cars”, it then boldly states that: “Apps enable these activities under a dark cloud: contractual and technological restrictions that Apple imposes to maintain its monopoly position and restrain competition”.

“Apple has made itself the exclusive distributor for all apps by prohibiting distribution of apps outside Apple’s proprietary App Store”, it goes on, “deploying software that blocks any other apps, and threatening to evict developers that fail to comply. Additionally, Apple requires developers to use Apple’s payment solution to sell digital content through their apps, and charges a 30% commission on each sale”.

“These restrictions are unnecessary to further any legitimate pro-competitive purpose”, it argues, adding: “Apple does not even impose them on its Mac computers. Rather, Apple documents show it made a ‘policy decision’ to increase its own profits by restricting app distribution and payment solutions for iPhones”.

“Absent these restrictions”, it says, “iPhone users and app developers could use alternative app stores, and users could get apps directly from developers. Developers could procure payment mechanisms with additional features and lower costs for their apps”.

Turning to its legal arguments, Epic reckons that: “The district court’s factual findings make clear that Apple’s conduct is precisely what the antitrust laws prohibit”.

Specifically, “the court found that Apple’s contracts and policies have allowed it to collect many billions of dollars in ‘supracompetitive’ profits from developers and consumers. Apple has ‘increased prices’, ‘reduced innovation’, ‘reduced quality’ and ‘foreclosed competition’”.

Plus, “the challenged restrictions ‘unreasonably restrain competition and harm consumers’ and ‘Apple employs these policies so that it can extract supracompetitive commissions’. But the court nonetheless found no Sherman Act violation”.

Epic then runs through all its antitrust arguments in much more detail – the filing is 91 pages long – before concluding: “The district court’s judgment on Epic’s Sherman Act claims should be reversed and judgment of liability entered in Epic’s favour with a remand to determine the appropriate injunctive remedy. [Or] if … the court agrees with Epic that the district court erred but believes further analysis is required, the court should vacate and remand with instructions”.

And so the battle continues. Apple, meanwhile, will fight for the lower court ruling to be upheld, minus the decision on the anti-steering rule. An injunction forcing Apple to allow all app makers to start sign-posting alternative payment options was meant to come into force late last year, but Apple managed to get the Ninth Circuit to pause that injunctionpending the outcome of this appeal.

It remains to be seen if it can get that injunction cancelled permanently. Although – as a result of regulator intervention elsewhere in the world – Apple is already making some concessions regarding the anti-steering rule. But not a big enough concession to help Epic, so the gaming firm will be keen to keep that aspect of the original ruling in place.