The technology industry's most important private antitrust lawsuit in history--Epic Games v. Apple--will be heard by the United States Court of Appeals for the Ninth Circuit on Friday, October 21, 2022. The Ninth Circuit conducts its hearings at different locations on the West Coast; this one will be held in Courtroom 3 of the James R. Browning U.S. Courthouse in San Francisco, just across the Bay Bridge from Oakland, where last year's Epic v. Apple trial took place.
It's a cross-appeal as Epic is appealing the dismissal of its federal antitrust claims under the Sherman Act, while Apple is appealing the consolation prize Judge Yvonne Gonzalez-Rogers handed Epic in the form of an anti-anti-steering injunction under California state law (Unfair Competition Law).
I think the correct outcome would be for Epic to prevail on market definition and some other issues, and the part under state law would then become pretty irrelevant. In any event, the losing party will certainly file a petition for writ of certiorari (request for Supreme Court review).
The district court's judgment is fundamentally flawed. It is symptomatic that there are hundreds (!) of typos in the unusually sloppy Rule 52 Order, which I've documented in a PDF file. With respect to the foremarket part of Epic's single-brand market definition, Judge YGR got everything wrong that she possibly could get wrong: the law, the economics, and the technology. Those misconceptions culminated in a sentence according to which Apple's market share in smartphones is smaller than in smartphone operation systems, though we all know that no iPhone is sold without iOS and iOS is never sold without an iPhone. There's a good chance now that the appeals court will identify some of the glaring defects of that decision, and afford the district court's judgment no more deference than it deserves.
After that erroneous decision, Apple was allowed to--and actually did--terminate all of Epic's developer accounts. A temporary restraining order that was subsequently converted into a preliminary injunction barred Apple from doing so in the summer of 2020, but was lifted as a result of the district court's judgment in September. On Twitter, Epic CEO Tim Sweeney recently mentioned that Epic can't even update Fortnite for the Mac anymore, though Mac app distribution was not an issue in that antitrust case. I'd love to see a massive Epic v. Apple damages lawsuit in a couple of years, but in order for that to happen, Epic firstly needs to convince the judges that Apple has violated the antitrust laws.
Apple will be represented at the hearing by Mark Perry, who already sported a ponytail at some of the Epic v. Apple hearings two years ago. Back then he was with Gibson Dunn; he has recently joined Weil, Gotshal & Manges. While Epic hasn't yet filed a notice of who will be its lead counsel, I presume--based on the appellate briefs--that Thomas C. Goldstein will be the chosen one. He defeated the Federal Trade Commission--before the same appeals court--on Qualcomm's behalf, and successfully defended Google against Oracle before the Supreme Court. He's quick-witted, forceful, and even though I found some of the points he made in Oracle v. Google more than questionable, I'm glad--as an app developer--that Epic has enlisted him.
Either side will get 20 minutes of oral argument time at the appellate hearing. Four other cases (three of them criminal) are presently on the list before the "Fortnite case" for that day, with the first one to be heard at 9&nsp;AM. Should it stay that way, the Epic v. Apple hearing would most likely start between 10:30 AM and 11:30 AM Pacific Time.
We may see requests from the DOJ and from state AGs to participate in oral argument:
The Biden Administration formally filed a brief in support of neither party, but every single one of the numerous points it raised has the potential to help Epic turn the case around. Should the DOJ request to participate, there's no question that it will be allowed to do so. But knowing that a cert petition is guaranteed, and considering that this case does raise issues worthy of Supreme Court review, the DOJ may wait until then.
35 U.S. states filed an amicus curiae brief in support of Epic Games. Those are the three dozen states (one of which--the District of Columbia--is a state for all practical intents and purposes here, though formally it doesn't enjoy statehood) suing Google in parallel case, minus California, which filed a separate brief (next bullet point). If those 35 states agreed on one attorney to speak for them, they'd also likely be granted the right to participate.
California decided to file at a later stage and focus on the cross-appeal, which involves its state UCL. With respect to that item, California might also deliver oral argument.
On top of raising some very important competition issues concerning Apple's treatment of app developers, Epic's case has brought to light a number of interesting facts relating to Apple's and even some other parties' practices. Take Google's #GetTheMessage campaign, which was just launched this week (and on which I commented yesterday): as a result of discovery in Epic Games v. Apple, Apple-internal communications were made public. Apple executives discussed the pro's and con's of bringing iMessage to Android, and a key reason not to do so was that parents might otherwise be more interested in buying their children less expensive Android phones. The problem is that social pressures (classism) force low-income families to buy their kids iPhones--a U.S.-specific problem due to Apple's market share.
In one of the next posts, I'll also talk about a document from Epic v. Apple that involves Sony and is interesting in the context of Microsoft's proposed acquisition of Activision Blizzard.
There is now another antitrust case against Apple pending in the Northern District of California that has the potential to be the perfect next step after Epic v. Apple: a group of French publishers represented by the Hausfeld firm are challenging not only the app tax and Apple's app review regime, but also the App Tracking Transparency (ATT) scheme. ATT is making a terrible impact on the economy at large. On Tuesday, the Financial Times' Patrick McGee reported on small businesses now "finding it prohibitely expensive to target likely consumers as they once did," and some small companies are really suffering.
Outside the U.S., various consumer class actions are also worth watching and have the potential to bring down Apple's (and Google's) app tax. The latest development in South Korea--a fact-finding inquiry by the Korea Communications Commission--may also yield significant results.
Getting back to the U.S. situation, it's possible that Congress will vote on the Open App Markets Act (OAMA) at around the time of the Epic v. Apple appellate hearing. Last week, CNBC and other media reported on the fact that while Congress passed a bill on chip manufacturing subsidies before its summer recess, "tech industry's critical policy issues" had yet to be addressed, among them the American Innovation and Choice Online Act (AICOA) and the OAMA. Now the end of the Congressional term is approaching fast. One expert--Paul Gallant, the managing director of investment bank Cowen's Washington Research Group--said that Congress might end up voting on the OAMA, which is more focused and "gained broader support in the Senate Judiciary Committee than the American Innovation and Choice Online Act." I consider both bills important, but as an app developer I'm naturally most interested in avoiding any further delay of the OAMA's passage into law.
