Epic Games suffers another defeat in antitrust battle against Apple

Apr 25, 2023, 7:22 AM UTC
4 mins read
Epic Games suffers another defeat in antitrust battle against Apple

Apple has emerged victorious in its antitrust-focused appeals court battle with Epic Games, the makers of the popular mobile game Fortnite, over its App Store policies. According to the recent opinion issued by the U.S. Ninth Circuit Court of Appeals, the court largely upheld the district court’s earlier ruling related to Epic Games’ antitrust claims in favor of Apple. However, it also upheld the lower court’s judgment in favor of Epic under California’s Unfair Competition Law.

Epic Games had hoped to prove in its appeal that Apple had acted unlawfully by restricting app distribution on iOS devices to Apple’s App Store, which required payments to go through its own processor while preventing developers from communicating to customers about alternative ways to pay. But the court largely sided with Apple, which argued that the App Store promotes competition, drives innovation, and expands opportunities for users and developers.

Apple issued a statement after the ruling, saying, “Today’s decision reaffirms Apple’s resounding victory in this case, with nine of ten claims having been decided in Apple’s favor. For the second time in two years, a federal court has ruled that Apple abides by antitrust laws at the state and federal levels. We respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.”

The ruling is a significant setback for Epic Games and other developers who had hoped that the ruling could set precedent for further antitrust claims and require Apple to open iOS devices to third-party app stores and payment systems.

Epic originally sued Apple in 2020, after forcing Apple to remove Fortnite from the App Store for violating the App Store terms over in-app purchases. Though Apple had largely won the lawsuit when the judge declared that Apple was not acting as a monopolist, the court sided with the Fortnite maker on the matter of Apple’s anti-steering policies regarding restrictions on in-app purchases. It said that Apple would no longer be able to prohibit developers from pointing users to other means of payment.

Both Apple and Epic appealed the ruling — Apple over the required changes to App Store policies related to external links and Epic to try its antitrust case again.

In today’s decision, the appeals court panel affirmed the district court’s denial of antitrust liability and its corresponding rejection of Epic’s illegality defense to Apple’s breach of contract counter-claim. However, it also noted that the district court had erred in defining the relevant antitrust market and in holding that Apple’s DPLA (Developer Program Licensing Agreement) fell outside of the scope of the antitrust law known as the Sherman Act.

But it said those errors were ultimately “harmless” and that Epic, regardless, had “failed to establish, as a factual matter, 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 panel also upheld the district court’s ruling in favor of Epic Games within the scope of California’s Unfair Competition Law. That would mean the anti-steering changes the district court previously decided on would once again be required.

Apple hasn’t yet issued an appeal for this part of the decision. It will likely weigh its options before making that determination.

In another bright spot for Apple, the appeals court ruled that the district court had erred when it ruled that Apple wasn’t entitled to attorney fees related to the DPLA breach of contract claims.

Epic Games responded to a request for comment by pointing to founder and CEO Tim Sweeney’s statement, shared on Twitter. “Apple prevailed at the 9th Circuit Court,” Sweeney wrote. “Though the court upheld the ruling that Apple’s restraints have ‘a substantial anticompetitive effect that harms consumers,’ they found we didn’t prove our Sherman Act case. Fortunately, 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. We’re working on next steps.”

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