Sunday, June 27, 2021

In its latest effort to dissuade Judge Gonzalez Rogers from allowing the Epic Games Store on iOS, Apple points to NCAA v. Alston Supreme Court opinion

On Friday, Apple filed the Supreme Court's recent NCAA v. Alston opinion in the Epic Games v. Apple case in the Northern District of California, as an exhibit to a statement of a recent decision. This is all that Apple says about why it considers NCAA v. Alston to strengthen its defenses of its App Store restrictions:

"The Supreme Court’s opinion provides guidance on several issues in this case, including the analysis of procompetitive business justifications, substantially less restrictive alternatives to challenged restraints, and remedies."

If the NCAA had won the case, or had at least achieved some improvement over the lower courts' decisions (Ninth Circuit and district court), that might have helped Apple at a high level: it would have been a partial or complete, in any event high-profile, success for an antitrust defendant in the nation's highest court. However, the Supreme Court unanimously decided the matter against the NCAA--and Justice Kavanaugh filed a concurrence only to note that multiple other NCAA rules than the one challenged in that particular case could also be meritoriously attacked on antitrust grounds.

Arguably, there hasn't been a similarly high-profile antitrust decision by the Supreme Court in a long time--and it may be the most significant one ever to have been made unanimously.

So what is Apple hoping to gain from this? That is unclear. The only thing that is very transparent here is that Apple--which has recently seen additional antitrust action being launched and Capitol Hill lawmakers taking aim at some fundamental App Store rules--is very afraid. Afraid of the remaining risk from Apple's perspective--and opportunity for app developers--that Judge Yvonne Gonzalez Rogers might order Apple to allow third-party app stores such as the Epic Games Store on iOS.

Apple mentions "procompetitive business justifications" in Friday's filing. It is true that the NCAA presented some. The Supreme Court affirmed the lower courts' rule-of-reason analysis to the extent it was challenged at all (the athletes who brought the case weren't trying to get a better outcome--they just wanted, and ultimately won, affirmance).

The other keywords Apple mentions in its filing are practically inseparable: "substantially less restrictive alternatives to challenged restraints, and remedies."

Apple's counsel stressed during the Epic Games v. Apple closing argument that "least restrictive means" was not the legal standard under the Sherman Act. Epic did not say that anyway. Epic's proposed conclusions of law even warn against elevating form over substance or focusing on "how the analysis is labeled." What Epic asks the court to do is to "weigh Apple’s procompetitive justifications in light of Apple’s alternatives." Epic does discuss, as any antitrust plaintiff would, "less restrictive" alternatives. Nowhere does Epic say "least."

In NCAA v. Alston, the Supreme Court "agree[s] with the NCAA’s premise that antitrust law does not require businesses to use anything like the least restrictive means of achieving legitimate business purposes." However, the district court in NCAA v. Alsto found the challenged restraints (relating to student-athletes' education-related benefits) "patently and inexplicably stricter than is necessary [to achieve the claimed procompetitive benefits)."

What's important to consider here is that the least restrictive means (which in the App Store case would mean opening up for third-party app stores and "sideloading") are not necessarily overreaching. It's just that the test is not whether the antitrust defendant has employed the least restrictive means. The test is whether there are restrictions that go too far. The result may very well be that the least restrictive means must be employed. That's going to be the outcome if any alternative would be "patently and inexplicably stricter than is necessary" (to quote the NCAA v. Alston trial court again).

Part of the concern that the Supreme Court also addresses in NCAA v. Alston is the risk of "judicial micromanagement": clarifications and potentially sanctions might be needed until an enjoined defendant actually implements the least restrictive means. That's why something that's within striking distance of "least restrictive" will be accepted--end of story. Epic Games v. Apple is a technology case, and Apple can always come up with something that renders an antitrust injunction much less effective than it is intended to be. By the standards of a major technology industry case, app store diversity and "sideloading" (direct installation) would actually be relatively easy to enforce. If Apple implemented anything that would discriminate against third-party app stores, such as APIs that only apps distributed through its own store could use (other than payment services that Apple elects to tie to its App Store), that could be proven.

Apart from Apple not being a cartel like the NCAA, there actually are some interesting parallels. I discussed the similarities from a competition perspective between app stores and sports leagues more than two months ago in connection with the European Super League (ESL). The ESL case is far from over. A Madrid commercial court referred to the CJEU (case no. C-333/21) several legal questions arising from the Super League's antitrust action against world soccer body FIFA and European soccer body UEFA. The Madrid court's April preliminary injunction is still in force and effect (UEFA is apparently appealing it now, after waiting until it was formally served in Switzerland before its counsel appeared in the Spanish case). A second preliminary injunction has been requested and will probably come down shortly and prevent UEFA from enforcing the material terms of the Club Commitments Declarations it obtained under the threat of even more draconian sanctions from the nine clubs that have publicly declared to "leave" the Super League but all of which are still formally shareholders of the Super League entity, as it would be extremely costly for them to breach that binding contract. UEFA's actions could be summed up as "monopoly maintenance"--but there's more room for procompetitive justifications than the NCAA enjoyed, as Article 165 TFEU gives sports bodies a special status under EU law ("specificity of sport").

The NCAA's defeat shows, if anything, that the current Supreme Court is more willing than at least in a long time to enforce the antitrust laws, and that ideological divides of the past, where conservative justices were prepared to incur a high risk of underenforcement in order to eliminate a calculable risk of underenforcement, do not stand in the way anymore. That does not bode well for Apple. NCAA v. Alston is like an "American antitrust revival." It doesn't doom its defenses either (as there are some fundamental differences between the cases), but NCAA v. Alston is clearly better news for Epic than for Apple. Seen in that light, it would have been more logical for Epic to file it with the court, but Epic might have assumed that Judge Gonzalez Rogers had heard of, and was going to read, that landmark decision anyway.

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