Thursday, May 26, 2022

Epic Games to appeals court: the Government--not Apple--is in charge of national security and, like Epic, advocates opening up app markets: Ninth Circuit antitrust appeal

In the Epic Games v. Apple antitrust appeal before the United States Court of Appeals for the Ninth Circuit, the Fortnite maker (which obtained a significant concession from Google last week, though not with respect to Fortnite) has filed its reply brief. I may comment on that one in more detail some other time, but wish to quickly show it to you (and will share a very few observations further below):

To be very precise, it's Epic's second and final brief on appeal, and it is a reply brief in support of its own appeal of the rejection of its federal antitrust claims and a responsive brief to Apple's appeal of the state Unfair Competition Law injunction Epic had won. I basically agree with either appeal: Epic should prevail on the federal antitrust claims (though I only consider the "tying" part a Sec. 1 issue), but the California UCL stuff should be tossed.

At this stage let me highlight only two aspects of Epic's brief (again, I may write more about it some other time):

Footnote 10 is an appropriate response to that "national security" pretext I'm really getting tired of:

"Apple’s amici argue that removing Apple’s restrictions could risk national security. (See Former Nat’l Sec. Officials Br.) This fearmongering is based almost entirely on alleged facts outside the trial record and disconnected from the issues presented here. If true, the United States would have surely noted this risk in its amicus brief. The district court found that most protections against cyberattacks and malware 'are performed by the operating system or middleware independent of app distribution.'" (link to DOJ brief added)

The other part is that Epic also raises some issues I had previously raised here. I've criticized the terrible mistakes that Judge Yvonne Gonzalez Rogers made especially in connection with Epic's single-brand market definition, where she misrepresented what the Supreme Court said in Kodak as well as what Epic said in the case before her. And I actually just became aware of those inexcusable misconceptions because Apple's mistake to concede that iOS competes with Android (a blatant contradiction to its otherwise dogged denial of the existence of a smartphone operating system market) led me to re-read certain passages. Now, Epic's reply brief, too, says that Apple has conceded the existence of that market:

"Even Apple finally admits the obvious: iOS’s “‘main competitor’ in the relevant market [is] Android.” (Apple Br. 82 (quoting 1-ER-147).) These concessions confirm Epic’s foremarket."

Also, footnote 20 is worth noting in this context:

"Apple elsewhere concedes—as did the district court—that iOS competes with Google’s Android. (See Apple Br. 79 (quoting 1-ER-149).)"

Epic also notes that Judge YGR got Epic's foremarket wrong ("The district court misunderstood Epic’s foremarket theory"), and without saying anything like that, Epic also points to a sentence I found utterly nonsensical in the district court ruling. Just like what I wrote in March, Epic says "Apple’s share of the smartphone market is identical to its share of the smartphone operating system market." And beyond the "'main competitor' in the relevant market" part (which I highlighted shortly after reading Apple's brief and Epic refers to in the sentence I just quoted), Epic's footnote 20 points to another passage in Apple's brief that essentially says customers choose between iOS and Android devices based on certain criteria.

That's it for now, but I did want to share those observations immediately.

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