Saturday, September 11, 2021

No, the Epic v. Apple injunction absolutely positively DOESN'T allow developers to incorporate 'buttons' for alternative IN-APP payment mechanisms

[Update] I've provided further information (specifically on the standard for contempt of court) in a September 13 post. [/Update]

This here is a follow-up to my commentary on the Epic Games v. Apple ruling that came down yesterday. I just visited my favorite IT news aggregator website and saw an article by The Verge's Nilay Patel with the following conclusion, which is off base:

"That means that a fair reading of the plain text of this injunction suggests that buttons in iOS apps can direct users to purchasing mechanisms in the app — if the button just kicks you out to the web, it would be an external link!"

Sorry, that's utter nonsense. On Twitter, Daring Fireball's John Gruber tried to convince Nilay Patel that he was wrong. In the end, Nilay Patel still stressed that it's up to the court to interpret its injunction. Well, John Gruber was right, and Nilay Patel arrives at the wrong result though he is right that the court--not Apple--will ultimately interpret the wording of the injunction. I've been rooting for Epic, and I wish everyone were as honest as Epic Games CEO Tim Sweeney after losing a court battle. But I'm absolutely committed to telling people the truth.

That article by The Verge (a website that actually did a great job covering the Epic Games v. Apple dispute) is simply what happens when one writes about a single-page document (the injunction per se) as if it existed in a vacuum--though it must actually be read against the background of the underlying 185-page Rule 52 post-trial order, just like patent claims are interpreted in light of the patent specification.

Nilay Patel's theory is absurd. It cannot possibly be reconciled with the part of the court ruling that deals with Apple's anti-steering provision. I'm wondering why no one in that Twitter debate (unless I missed it) brought it up. So I decided to write this post to put an end to that phantom debate.

Let's bear in mind that only Epic's tenth claim succeeded at all. Not only Epic's federal antitrust claims but also various state law claims failed. The failed state law claims include a couple that were very specifically about offering different IAP systems: Count 8 alleged unreasonable restraints of trade in the iOS IAP processing market under the California Cartwright Act, and Count 9 presented a tying claim related to IAP. Epic's tenth and last claim--based on California UCL--broadly raised the issue of Epic being "unreasonably prevented from freely distributing mobile apps or its in-app payment processing tool, and forfeit[ing] a higher commission rate on the in-app purchases than it would pay absent Apple’s conduct." But the court found for Epic under its tenth claim only with respect to the anti-steering provisions.

Section VI of the Rule 52 order addresses Epic's Count 10. Section VI.C ("Unfair Practices" is where Epic wins its consolation prize, so that's the part to focus on. The following sentence, found near the bottom of page 162 (PDF page 163), should end the debate:

"On the present record, however, Epic Games' claims based on the app distribution and in-app payment processing restrictions fail for the same reasons as stated for the Sherman Act."

Very clearly, this means that even the sole count on which Epic prevailed (in part) failed to do away with Apple's IAP rule, which is that you must use Apple's IAP system for accepting payments in your iOS native app.

Then, on the next page, the court distinguishes the IAP restrictions--which Nilay Patel erroneusly argued the injunction has annulled--from the anti-steering provisions:

"Epic Games did challenge and litigate the anti-steering provisions albeit the record was less fulsome. While its strategy of seeking broad sweeping relief failed, narrow remedies are not precluded."

The "broad sweeping relief" would have included both alternative methods of distributing apps to iOS users and alternative IAP systems. The "narrow remed[y]" the court gave Epic is just about providing information (including links) on external payment options (websites and apps for other platforms, such as Android, personal computers, or consoles).

The following sentence is the last one to start on that same page, and again clarifies what the court means by "anti-steering":

"Thus, developers cannot communicate lower prices on other platforms either within iOS or to users obtained from the iOS platform." (emphasis added)

Other platforms are key here because Apple does face competition from other device makers and platform operators, but--as Epic argued--not in the aftermarket of iOS app distribution.

The court goes on to explain the importance of "commercial speech, which includes price advertising" and, on page 164 (PDF page 165) says that "the ability of developers to provide cross-platform information is crucial."

Perfectly consistently, the court, when talking about the importance of users being able to make informed choices, recalls that "the Supreme Court has recognized that such information costs may create the potential for anticompetitive exploitation of consumers."

Information about lower prices on other platforms--not alternative IAP systems on iOS itself.

After the Tethering Test, the court performs a Balancing Test. In that one, the injunction ordered against Apple is distinguished from the one denied in the Amex decision by the Supreme Court:

"Here, the information base is distinctly different. In retail brick-and-mortar stores, consumers do not lack knowledge of options. Technology platforms differ. Apple created a new and innovative platform which was also a black box. It enforced silence to control information and actively impede users from obtaining the knowledge to obtain digital goods on other platforms. Thus, the closer analogy is not American Express’ prohibiting steering towards Visa or Mastercard but a prohibition on letting users know that these options exist in the first place." (emphases added)

Section VI.D (Remedies) is equally consistent in stressing that this is about information, not alternative IAP systems:

"Apple contractually enforces silence, in the form of anti-steering provisions, and gains a competitive advantage. Moreover, it hides information for consumer choice which is not easily remedied with money damages."(emphases added)

In summary, what Nilay Patel calls a "close read" and "fair reading" is nonsense because the Rule 52 order couldn't be clearer. In that one, the court made it unmistakably clear that the injunction it ordered is meant to be narrower than the permission of alternative IAP systems that Epic sought, and leaves no doubt that developers shall merely be allowed to provide users with information about prices on other platforms (WWW, Android, PCs, consoles...) to have at least a minimal competitive constraint on Apple. Just transparency. That's it.

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