In a significant antitrust case involving Apple’s App Store policies, the U.S. Ninth Circuit Court of Appeals confirmed Apple’s victory over Fortnite creator Epic Games. Although Apple succeeded on nine out of ten claims, the court also upheld the lower court’s judgment in Epic’s favor under California’s Unfair Competition Law.
Epic Games aimed to demonstrate that Apple’s exclusive control over app distribution on iOS devices, along with the requirement for payments to be processed through its system, amounted to an illegal activity. However, the appeals court ruling, initially reported by Bloomberg, largely supported the lower court’s earlier decision, which favored Apple in the antitrust claims.
In response to the ruling, Apple issued a statement, stating, “Today’s decision reaffirms Apple’s resounding victory in this case, with nine of ten claims having been decided in Apple’s favor. For the second time in two years, a federal court has ruled that Apple abides by antitrust laws at the state and federal levels. The App Store continues to promote competition, drive innovation, and expand opportunity, and we’re proud of its profound contributions to both users and developers around the world. We respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.”
The ruling poses a significant challenge for Epic Games and other developers who hoped it might set a precedent for more antitrust claims, potentially compelling Apple to open up its iOS devices to third-party app stores and payment systems.
The lawsuit originated in 2020 when Epic Games deliberately breached the App Store terms regarding in-app purchases, causing Apple to remove Fortnite from its platform. While Apple mainly won the case, with the judge ruling that the company was not acting as a monopolist, the court sided with Epic Games on the issue of Apple’s anti-steering policies concerning in-app purchase restrictions. As a result, Apple could no longer prevent developers from guiding users to alternative payment methods.
Both Apple and Epic appealed the decision, with Apple objecting to the required alterations to App Store policies related to external links, and Epic seeking to retry its antitrust case.
The appeals court panel supported the district court’s refusal of antitrust liability and its corresponding dismissal of Epic’s illegality defense to Apple’s breach of contract counter-claim. Nonetheless, the panel also noted that the lower court made errors in defining the relevant antitrust market and determining that Apple’s Developer Program Licensing Agreement (DPLA) fell outside the scope of the Sherman Act, a crucial antitrust law.
Despite these errors, the court ruled that they were ultimately “harmless” since Epic still “failed to establish, as a factual matter, its proposed market definition and the existence of any substantially less restrictive alternative means for Apple to accomplish the procompetitive justifications supporting iOS’s walled-garden ecosystem.”
The court’s decision to uphold the lower court’s ruling in favor of Epic Games within the scope of California’s Unfair Competition Law means that Apple will once again be required to implement anti-steering changes. It remains uncertain whether Apple will appeal this part of the decision.
