After more than a year of legal wrangling, the landmark App Store case launched against Apple by Epic Games last August has come to an end, with the court conceding a relatively minor point to Epic while dismissing the other claims.
Specifically, Judge Yvonne Gonzalez-Rogers ruled that Apple was not a monopoly under federal or state antitrust laws, although she acknowledged that Apple had engaged in “anti-competitive behavior under California competition laws “.
Specifically, Judge Rogers challenged Apple’s “anti-leadership” rules – those that prevent app developers from even mentioning the capability of alternative payment methods within their applications.
The judge had focused on this issue several times during the trial, so it should probably come as no great surprise that the most significant outcome of his final decision was a permanent injunction which will prevent Apple from blocking links to other payment methods.
Nonetheless, the lawsuit found that Apple was engaging in anti-competitive behavior under California competition laws. The Court finds that Apple’s anti-leadership provisions hide critical information from consumers and illegally stifle consumer choice.
Judge Yvonne Gonzalez-Rogers, Rule 52 Merits Post-Trial Order, Epic Games v Apple.
Apple also likely saw the writing on the wall here, as the company boldly announced last week that it would start allowing “reader” apps – those that “allow a user to access content previously. purchased or subscriptions to content, such as magazines, newspapers, books, audio, music and video “- to start including links allowing users to sign up for subscriptions outside of the App Store .
However, Judge Rogers’ injunction goes beyond the relatively minimal concession made by Apple, as it applies to all apps on the App Store – not just those like Netflix and Spotify – and it effectively prevents Apple limit the type of links or buttons. that can be used.
Apple Inc. and its officers, agents, servants, employees and any person in concert or active participation with them (“Apple”), are hereby permanently prohibited and enjoined from prohibiting developers (i) from including in their apps and metadata buttons, external links or other calls to action that direct customers to purchasing mechanisms, in addition to in-app purchases and (ii) communication with customers through touchpoints obtained voluntarily from customers through account registration in the app.
Permanent injunction, United States District Court, Northern District of California, in Epic Games vs Apple.
While the injunction is not effective until December 9 – 90 days from the date it was issued – once it goes into effect, Epic may be able to revert. Fortnite to the App Store mainly on its own terms.
The text of the injunction suggests that applications will be limited to linking to external payment pages, however, rather than providing their own payment processing right in the app, which Epic has done with Fortnite. Whether this will satisfy Epic Games remains to be seen.
To be clear, while any ground gained might be seen as a small victory, Epic ultimately only prevailed over one count – something that is arguably the App Store’s most egregious rule in the first place.
On all other points, Judge Rogers ruled strongly in favor of Apple, stating that it was not a monopoly in the “digital mobile game transactions” market and that “a considerable market share “And extraordinarily high profit margins” do not automatically translate into antitrust conduct.
“Success is not illegal,” adds Judge Rogers.
After defining the relevant market as digital mobile game transactions, the Tribunal then assessed Apple’s behavior in that market. Based on the trial record, the court ultimately cannot conclude that Apple is a monopoly under federal or state antitrust laws. While the Court finds that Apple enjoys a sizable market share of over 55% and extraordinarily high profit margins, these factors alone do not indicate antitrust behavior. Success is not illegal.
Judge Yvonne Gonzalez-Rogers, Rule 52 Merits Post-Trial Order, Epic Games v Apple.
That said, Judge Rogers made it clear that it was not impossible to argue that Apple is a monopoly, but simply that Epic Games “failed in its onus” to argue this case. For example, Epic has presented no evidence of “other critical factors, such as barriers to entry and decreased production or decreased innovation in the relevant market”.
Epic does not get by without tape
Epic made a pretty brazen move last summer in an attempt to argue its case against Apple, sneaking into its own in-app purchasing system. Fortnite in direct violation of the rules of the App Store.
While it was Epic’s whole case that these rules shouldn’t exist, the reality is they did exist at the time, and Epic had a contractual obligation to follow them. As a result, Apple officially terminated Epic’s developer account, and when Epic sought an injunction to force Apple to reinstate it, Judge Rogers flatly denied Epic’s request, stating that the company had to. live with the mess she had chosen to create.
It was, as Judge Rogers put it, “a move calculated to violate” and Epic “cannot do irreparable harm when [it] create evil [itself]. “
In the midst of that, Apple also hit back with a counter-suit against Epic for breach of contract, and in today’s ruling Judge Rogers ruled in favor of Apple, stating that Epic must pay Apple. 30% of the money they earn through their own in-app purchase system.
To be fair, Epic admitted in his statements that he had violated its Developer Product License Agreement (DPLA) with Apple, and even admitted that Apple would be entitled to compensation – “to the extent that the court finds the DPLA to be enforceable.”
Of course, the whole Epic thing was that the DPLA wasn’t enforceable in the first place, which made it a meaningless concession. Essentially, the company was admitting to violating a contract that it had never considered legal in the first place.
Epic Games maintains that all of Apple’s counterclaims are prohibited despite its acknowledged violation of the DPLA because the provisions of the DPLA it violated are unenforceable (i) under the doctrine of illegality; (ii) because they are void against public order; and (iii) because they are unreasonable.
Judge Yvonne Gonzalez-Rogers, Rule 52 Merits Post-Trial Order, Epic Games v Apple.
However, since Rogers J. ruled that Apple was not considered a monopoly under federal or state antitrust laws, and more specifically that “no provision of the DPLA at issue in this action is illegal under of the Sherman Law or the Cartwright Law “, contracts are not” illegal and unenforceable “.
In fact, it seems Epic was too cocky for his own good here. Judge Rogers admitted that Apple’s 30% commission rate may not be justifiable, but adds that Epic has not argued it should pay less – he tried to argue that he shouldn’t pay anything at all.
Although the court found that the evidence suggests that Apple’s 30% commission rate appears inflated and is potentially anti-competitive, Epic Games did not dispute the rate. On the contrary, Epic Games has challenged the imposition of any commission whatsoever.
Judge Yvonne Gonzalez-Rogers, Rule 52 Merits Post-Trial Order, Epic Games v Apple.
Indeed, Rogers J. ruled that Apple had the right to some commission, and since the commission rate was not in dispute, declined to comment on whether 30% was considered fair or not.
Instead, she ordered Epic to pay Apple the commissions it should have earned from in-app payments in Fortnite players that were made outside of Apple’s systems.
The remedy to which Apple is entitled is that to which Epic Games has stipulated in the event that the Court has found it liable for breach of contract, namely: (1) damages in an amount equal to (i) 30% of the $ 12,167,719 of Epic Games revenue collected from Fortnite app users on iOS via Epic direct payment between August and October 2020, plus (ii) 30% of such Epic Games revenue collected from November 1, 2020 to the date of the judgment.
Judge Yvonne Gonzalez-Rogers, Rule 52 Merits Post-Trial Order, Epic Games v Apple.
While 30% of $ 12,167,719 equates to just $ 3,650,316 – pocket currency for Apple and Epic – there is obviously a principle at stake here. Ironically, the end result is that Epic loses more money than if he had just left him pretty well alone.
Since Epic was trying to make his point by selling in-game currency by Fortnite with a 20% discount, and he’s now forced to pay 30% of the income he earned from those already discounted purchases, he ended up losing $ 1.40 more on every $ 10 transaction than if he had simply given Apple its 30% cut in the first place.
Judge Rogers also ruled that Epic is required to declare that “Apple’s termination of the DPLA and related agreements between Epic Games and Apple was valid, lawful and enforceable”, and that Apple “has the contractual right to terminate its DPLA with any or all of the subsidiaries, affiliates and / or other entities wholly owned by Epic Games under the control of Epic Games at any time and in Apple’s sole discretion.
Given Judge Rogers’ rather pointed comments at Epic Games last fall, when the company sought a preliminary injunction to force Apple to restore Fortnite on the App Store, it’s no surprise that Epic was slapped pretty hard on the breach front. The courts generally have a bad opinion of plaintiffs who play games like this, and we can’t help but wonder if Epic would have been better off had it simply gone for a quieter trial.
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