States are siding with Epic Games as the developer appeals a lower court ruling in its antitrust lawsuit against Apple over app store fees and payment processing.
The attorneys general for 34 states and the District of Columbia have filed an amicus brief on behalf of Epic. Utah led the brief, claiming that “Apple’s conduct has harmed and is harming mobile app developers and millions of citizens.”
Epic sued Apple in 2020, alleging anticompetitive behavior. Apple pulled Fortnite from the App Store after Epic covertly updated the game to include an “Epic Direct Payment” option, a move that ran afoul of the App Store’s developer agreement.
In September, US District Judge Yvonne Gonzalez Rogers ruled in favor of Epic’s claim that Apple violated California’s Unfair Competition Law and granted a permanent injunction that forced Apple to let developers use external websites to take payments for in-app purchases. That would allow Epic and other developers to sidestep App Store fees of up to 30 percent for such purchases.
With the appeal, Epic is hoping to overturn the lower court’s ruling that Apple does not have a monopoly with its App Store. “Apple’s conduct is precisely what the antitrust laws prohibit,” the company said in its opening brief.
The states’ amicus brief has a relatively narrow focus compared with the arguments Epic is making in its appeal. The bulk of it hinges on Apple’s contract with developers. The attorneys general say that the lower court “erred in deciding that Section 1 of the Sherman Act does not apply to a ‘unilateral contract.’” They argue that “excluding contracts like Apple’s simply because Apple ‘unilaterally imposed’ the terms makes bad antitrust public policy.”
Including unilateral contracts under Section 1 of the Sherman Act, though, is contested in cases like this since it would imply that Apple is conspiring to restrain trade. The problem is that Apple hasn’t been accused of conspiring with another company. The states are arguing that the problem isn’t the contract, per se, but rather Apple’s conduct.
The states also argue that the lower court didn’t fully account for the positive and negative effects of Apple’s conduct in the context of antitrust law. Essentially, they’re asking the appeals court to redo that analysis.
“As Epic points out, Apple amassed billions in supracompetitive profits from one billion iPhone users,” the brief says. “Without balancing, this type of immense harm to consumers can go unanswered with just the slightest showing of procompetitive benefit. The Court should require Apple to account for its conduct under a complete rule of reason analysis.”
Deciding those two issues will be a matter for the appellate judges, of course. Apple is “optimistic” that Epic will lose its appeal. “We remain committed to ensuring the App Store is a safe and trusted marketplace for consumers and a great opportunity for developers,” an Apple spokesperson told Bloomberg. The company is expected to reply to Epic’s appeal in March.