Sunday, September 18, 2022

Biden Administration will support Epic Games at October 21 Ninth Circuit hearing--and may soon bring its own antitrust lawsuit against Apple

October 21 could--and in my view should--be a turning point in Epic Games v. Apple. That's the day on which the United States Court of Appeals for the Ninth Circuit will hear the parties' cross-appeal in San Francisco. Apple is supported only by its own astroturfers and by parties whose own treatment of app developers and content creators is controversial, while the United States Department of Justice will also deliver oral argument and make points that would--should the appeals court agree--result in a partial reversal of the district court's judgment and a remand for further proceedings.

When I reported on the scheduling of the hearing date, I already mentioned the possibility of government lawyers actively participating in the appellate hearing. Specifically, I mentioned the DOJ (which filed an amicus brief, formally in support of neither party but every single part of which strengthens Epic's case), the state of California (which limited its filing to questions under the state's Unfair Competition Law), and 35 other states. The DOJ and the Golden State will indeed speak. The DOJ gets 10 minutes; California gets 5; and Apple gets an extra 10 minutes for the sake of balance.

Here's the order (dated Friday, September 16) that granted those governmental interventions:

This is the DOJ's motion, which already states very specifically what aspects of the case the Biden Administration will address (every single one of which weighs in favor of at least a partial reversal of the district court's judgment):

I've also uploaded California's motion to DocumentCloud. I'm much less interested in what California will say, as the anti-anti-steering injunction was merely Epic's consolation prize while the strategically important battle here is over Epic's claims under federal antitrust law (Sherman Act).

DOJ officials attended every single day of the spring 2021 trial, and the DOJ is rumored to be preparing its own United States v. Apple antitrust lawsuit (over the App Store and related issues).

I don't think the district court's judgment can stand. It may not be possible for the appeals court to resolve the case on the merits, but at least there should be a reversal of parts of the decision (especially market definition) and a remand (ideally with pretty clear instructions).

Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California got the law (Kodak), the economics, and the technology wrong with respect to the foremarket part of Epic's proposed single-brand market definition (she also produced almost 300 typos and similar errors). Judge YGR ended up defining the relevant market as "digital mobile gaming transactions"--a wording that makes no sense because all mobile devices of the last two decades have been digital, but the worst part is that Google Play and Apple's App Store don't actually compete with each other as the European Commission correctly held in an antitrust decision that the EU General Court affirmed in this week's Google Android judgment.

One of the issues that the DOJ is also going to raise at the hearing is whether there can be an antitrust market for a product that is not sold separately--such as iOS, which Apple doesn't license separately (the only way to get a license is to buy an iPhone or iPad). Regardless of Apple's licensing practice, there obviously is a market for smartphone operating systems in which iOS competes with Android. Apple's own lawyers surprisingly blundered as they conceded that fact. The smartphone OS market is the foremarket part of Epic's proposed single-brand market definition. There is competition in that one, but not in the iOS app distribution and iOS in-app payment processing aftermarkets.