Friday, January 28, 2022

Biden Administration backs Epic Games against Apple in Ninth Circuit #FreeFortnite antitrust appeal (though brief is formally filed 'in support of neither party')

Wow, this Epic Games v. Apple thing is getting better and better...

In my previous post I already described the tremendous support Epic Games got against Apple in its Ninth Circuit antitrust appeal from amici curiae (most notably, 35 U.S. states, Microsoft, and the Dean of American Antitrust Law) as an 8 out of 10, and said the following:

"It would only have made the case stronger if companies like Facebook or even Tesla (Elon Musk is clearly on Epic's side, though Tesla would have had to come up with a good explanation as to why it cares) had made submissions, and if the Biden Admistration had stepped in, though 35 states (red and blue ones alike) are a powerful political alliance and make this a bipartisan issue." (emphasis added)

My #1 wish was granted--I just didn't know it when I wrote the above sentence :-)

The Antitrust Division of the United States Department of Justice, speaking on behalf of the United States of America, has filed the following brief, formally in support of neither party but practically supporting some of the most important elements of Epic's appeal (this post continues below the document):

22-01-27 United States Acb ... by Florian Mueller

I'm so happy. But why is this great if the front page says "in support of neither party" instead of overtly backing Apple? Let me explain:

  • A brief in support of Epic has to urge reversal on the Sherman Act counts. The filing by the federal government on behalf of the United States says: "The Court should ensure that the Sherman Act is not unduly narrowed through legal error." In other words, the district court should have side with Epic on more legal questions than it did.

  • It's politically always easier in an inter-company conflict for the U.S. government to just focus on issues and not throw its weight behind one party.

  • Technically speaking, Apple could still win even if the United States Court of Appeals for the Ninth Circuit agreed with the United States government on all of the issues it addresses. A chain is a strong as its weakest link, and the U.S. government addresses almost everything that matters, but Apple would still have a path to victory under the rule-of-reason analysis (while all the amicus briefs in Epic's favor also urge reversal of that one). It's not, however, like the DOJ-ATR filing would automatically make Apple a winner: the government simply doesn't address certain other aspects, which doesn't mean it agrees with Apple on them (most likely, it doesn't).

Like others, the DOJ-ATR argues that Section 1 of the Sherman Act should apply even to contracts of adhesion that are unilaterally imposed by one player. I still don't agree, but I wouldn't mind if that was the ultimate outcome.

But the United States also helps Epic with respect to Section 2, disagreeing with the district court's market-power analysis.

And market definition comes up. That's the strategic battlefield here, really, also with a view to other App Store issues than just Epic's case. Now, one can reasonably read the federal government's submission as being--between the lines--sympathetic to even a single-brand market definition. That's because the very first step of the single-brand market analysis (Kodak, Newcal) also relates to whether Epic was right when it said there was an operating system (iOS) foremarket (and then an app distribution aftermarket). On this one, the United States supports Epic, though other hurdles remain and are not addressed by the brief. Furthermore, the DOJ supports Epic on tying.

Jonathan Kanter, the Assistant Attorney General in charge of the Antitrust Division, did not sign the brief in his own name. People working for him did. I attribute this to a simple fact: he used to be (until his appointment to his current post) counsel of record for the Coalition for App Fairness, an Epic-founded organization that supports Epic in this context. By becoming a signatory in his own name, he'd have invited allegations of a conflict of interests. Similarly, his predecessor Makan Delrahim didn't put his name on the DOJ's filings in support of Qualcomm (his former client). Apple is a bit out of luck with Antitrust AAGs: when their main rival was Qualcomm, Makan Delrahim was at the helm of DOJ-ATR; and now that Apple's primary rival is Epic, there's a former CAF counsel in charge.

What an incredible backing Epic has received. I upgrade my rating from 8/10 to 9/10. I'd still have liked to see companies like Facebook, Tesla, Activision-Blizzard chime in. But can't have everything. And there's still a couple more hours for more filings.

Apple should alter course. Why does it have to be the Evil Empire? The tyrant who makes app developers' lives miserable? Time for change, and I don't see why such change couldn't still happen under Tim Cook.

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