Wednesday, November 30, 2022

Epic v. Apple Appellate Hearing

Florian Mueller:

This is the DOJ’s motion, which already states very specifically what aspects of the case the Biden Administration will address (every single one of which weighs in favor of at least a partial reversal of the district court’s judgment).


One of the issues that the DOJ is also going to raise at the hearing is whether there can be an antitrust market for a product that is not sold separately--such as iOS, which Apple doesn’t license separately (the only way to get a license is to buy an iPhone or iPad). Regardless of Apple’s licensing practice, there obviously is a market for smartphone operating systems in which iOS competes with Android. Apple’s own lawyers surprisingly blundered as they conceded that fact. The smartphone OS market is the foremarket part of Epic’s proposed single-brand market definition. There is competition in that one, but not in the iOS app distribution and iOS in-app payment processing aftermarkets.

Juli Clover:

The ongoing legal battle between Apple and Epic Games resumed today, with lawyers for both companies meeting in the United States Court of Appeals to attempt to get the initial ruling from last year overturned.

Kyle Orland:

If the Mac App Store was the equivalent of a lap belt, the iOS App Store, with its costly human review system, is “a six-point racing harness,” Perry said. “It’s safer. They’re both safe, but it’s safer.” […] Those kinds of “pro-competitive” security features Apple offers with its App Store restrictions legally outweigh the “minor anti-competitive effects” iOS app developers face on the platform, Perry said.


By way of example, Goldstein brought up a potential Disney App Store on iOS that could provide even greater protections for families when it comes to potentially objectionable content. Competing iOS App Stores could also provide cheaper prices, Goldstein said, by competing on Apple’s 30 percent fees.

Blocking those kinds of alternative methods for app downloads creates a kind of circular definition of “product differentiation” for the iPhone, Goldstein said. He sardonically summed up Apple’s argument: “I have a better product. You know what makes my product better? That I have no competition! … You can’t block horizontal competition [among iOS App Stores] and then use as your excuse that I am now going to offer a product that is differentiated by the fact that it has no competition!”

Florian Mueller:

Circuit Judge Smith has a more systematic approach (as do I) and stressed that antitrust analysis begins with market definition, and everything depends on it. And just like me, he feels that if the appeals court reverses Judge Yvonne Gonzalez Rogers on that part, there should be a remand, though it appears that the Ninth Circuit is perfectly prepared to do more than the bare minimum and to provide further clarity and instructions. I, frankly, think Epic should be grateful for that. It’s nothing to be taken for granted; quite often, appellate judges are minimalists and just kick the ball back into the lower court. I understand why Epic’s counsel said that in this event, things would just take longer and they’d be meeting again in the same appeals court in two years from now. They don’t want it; they want a solution as quickly as possible, and maybe they’re uneasy about what the Supreme Court might do in the next step. But it would be incredibly beneficial if the appeals court resolved market definition, especially if one looks beyond just Epic’s case: there are so many App Store issues.


The problem with the district court’s rule-of-reason analysis is that it doesn’t really balance the anticompetitive effects of Apple’s App Store monopoly against the attempted procompetitive justifications.

Circuit Judge Smith asked how the court of appeal could analyze a rule-of-reason decision without any quantitative amounts. In my opinion, this also counsels for a remand.

Florian Mueller:

The most important question here is whether one considers the district court’s finding of Epic not having proved lock-in a legal or factual determination. Apple uses an overbroad definition of what is “factual” and accuses Epic of, conversely, describing actually factual determinations as legal conclusions. So let’s look at this part more closely because that’s what the appeals court is going to do in the months ahead.


In its reply brief, Epic then countered Apple’s suggestion that it was confusing customer satisfaction (voluntary) with lock-in (an unwanted consequence of a previous decision)[…]


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