Apple wins appeal in App Store legal battle with Epic Games

Apple once again has proven victorious in its ongoing legal battle with Epic Games. As reported by Bloombergthe US Ninth Circuit of Appeals has upheld the decision first handed down in November of 2021, which found that Apple is not a “monopolist under either federal or state antitrust laws.”

Apple’s statement on today’s decision

“Today’s decision reaffirms Apple’s resounding victory in this case, with nine out 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.”

Today’s decision

The battle between Apple and Epic Games began when Epic circumvented App Store policies and added a direct payment option to Fortnite for iPhone. Here’s a recap of where we stood in the Epic vs. Apple legal battle prior to today’s decision:

Epic Games sued Apple for not allowing it to use its own payment platform instead of in-app purchases through the App Store, with Apple taking a 30% cut.

The court ruled that Apple must allow developers to steer app users to external payment platforms, but concluded that the company did not meet the legal tests to be considered a monopoly – and thus did not have to permit competing app stores for iOS apps. Both Apple and Epic Games filed appeals on different aspects of the ruling.

Epic is appealing the ruling that the App Store is not a monopoly, arguing that there is no other way for developers to sell iPhone apps other than through Apple. The iPhone maker, in turn, is arguing that the court made a legal error when considering the anti-steering issue.

Today’s ruling explains:

On Epic’s appeal, the panel affirmed the district court’s denial of antitrust liability and its corresponding rejection of Epic’s illegality defense to Apple’s breach of contract counter-claim. The panel held that the district court erred as a matter of law in defining the relevant antitrust market and in holding that a non-negotiated contract of adhesion, such as the DPLA, falls outside the scope of Sherman Act § 1, but those errors were harmless. The panel held that, independent of the district court’s errors, Epic failed to establish, as a factual matter, its proposed market definition and the existence of anything substantially less restrictive.

The court also added that the App Store protects user privacy and data, while still giving users the freedom to choose a platform:

With Apple’s restrictions in place, users are free to decide which kind of app-transaction platform to use. Users who value security and privacy can choose (by purchasing an iPhone) Apple’s closed platform and pay a marginally higher price for apps. Users who place a premium on low prices can (by purchasing an Android device) select one of the several open app-transaction platforms, which provide marginally less security and privacy. Apple’s restrictions create a heterogeneous market for app-transaction platforms which, as a result, increases interbrand competition—the primary goal of antitrust law.

The court did, however, reverse the district court’s ruling that Apple was not entitled to attorney fees from Epic. Under today’s decision, that decision has been reversed and remanded for further proceedings.

On Apple’s cross-appeal, the panel affirmed as to the district court’s UCL ruling in favor of Epic, holding that the district court did not clearly err in finding that Epic was injured, err as a matter of law when applying California’s flexible liability standards, or abuse its discretion when fashioning equitable relief. Reversing in part, the panel held that the district court erred when it ruled that Apple was not entitled to attorney fees pursuant to the DPLA’s indemnification provision.

Finally, the original ruling in November 2021 also included the decision that Apple could no longer prohibit developers from directing users to third-party payment options. That decision was also upheld in today’s announcement from the US Ninth Circuit of Appeals.

In a statement when the initial ruling was announced, Apple praised the court’s decision and said the court had “reaffirmed what we’ve known all along: the App Store is not a violation of antitrust law.”

The full ruling from the US Ninth Circuit of Appeals can be found below.