Thursday, January 27, 2022

The 'Dean of American Antitrust Law' signs amicus brief backing Epic Games against Apple, as do 37 other profs: Ninth Circuit appeal

Earlier this week I expressed my view that even superstar appellate lawyer Tom Goldstein may not be able to turn Epic's case against Apple around unless there's a lot of support for Epic Games in the form of amicus curiae briefs to be filed with the United States Court of Appeals for the Ninth Circuit. The spectacular turnarounds Mr. Goldstein achieved for Qualcomm (against the FTC) and Google (against Oracle) depended in no small part--the latter to a hugely greater extent than the former--on such dynamics.

The first amicus curiae brief filed in support of Epic's appeal is a great start. That's because the most famous and influential U.S. antitrust scholar of our times, Professor Herbert Hovenkamp, is among the 38 law, business, and economics professors who signed a brief submitted by Professor Michael Carrier. I don't know if I've ever seen a pleading or judgment in a U.S. antitrust case that doesn't cite to the following book:

Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application

The New York Times dubbed him "the Dean of American Antitrust Law." Not even an exaggeration.

Here's the professors' brief with Professor Hovenkamp being the most prominent one of more than three dozen signatories (this post continues below the document):

22-01-27 Amicus Brief ISO E... by Florian Mueller

While the brief does not address market definition (which I consider the key battlefield), it's still helpful even from my perspective, as Apple will undoubtedly argue that even under a single-brand market definition (rare, but the only appropriate one in this context), Epic would lose. The professors' brief is all about rule-of-reason balancing:

"In applying the Rule of Reason after the first step, the court below committed three fundamental errors. First, it accepted business rationales that do not promote competition or economic efficiency and are, as a matter of law, not cognizable antitrust justifications. Second, it failed in its legal conclusions to credit a less restrictive alternative to Apple’s restraints that it recognized in its factual findings. And third, in dismissing the case based on its conclusion that the plaintiff failed to show such an alternative, it never engaged in the required analysis of net competitive effects."

What the brief does very persuasively is to draw parallels between how Judge Yvonne Gonzalez Rogers applied the Rule of Reason and the behavior of certain antitrust violators (such as the NCAA in the Alston case).

There are some interesting statistics: Epic's ability to show substantial anticompetitive effects was no small achievement. Epic took the hurdle that was too high for the vast majority of all U.S. antitrust plaintiffs:

"Since 1977, courts have decided 90% (824 of 915) on this ground, with the figure rising to 97% (406 of 420) after 1999."

As the professors note, it's not just pricing but even innovation that the court actually (and accurately from my perspective as an app developer) found to have been affected by Apple's conduct.

In the second part the amicus brief says that Apple's security and privacy arguments were whatever they were, but cognizable antitrust justifications they were not.

The third part supports Epic's view that the availability of less restrictive alternatives was not properly taken into consideration by the district court:

"Such an alternative ensures that there is nothing to balance and that the court need not reach an assessment of net competitive effects. The existence of a less restrictive alternative disposes of the case."

And like Epic, but in a different way, the professors highlight some of the contradictions in the court's factual findings.

The fourth and final part, like Epic, criticizes the district court's judgment for not performing the kind of balancing (harms vs. claimed benefits) that would have been necessary if the court--contrary to what the professors would have considered correct--did not consider the less restrictive alternatives acceptable.

It's a strong brief signed by credible people--and one living legend among them. Hopefully this will make an impact. Let's see what support Epic will get in total, as amici can make all the difference in this case.

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