Apple wins antitrust battle with Epic Games, appeals court rules

Image credit: Emmanuel Dunand/AFP/Getty Images

Apple has won its antitrust-focused appeals court battle with Fortnite maker Epic Games over App Store policies, according to the opinion issued today by the US Ninth Circuit Court of Appeals. The court largely upheld the district court’s earlier ruling related to Epic Games’ antitrust claim in favor of Apple, but it also affirmed the lower court’s ruling in favor of Epic under California’s unfair competition law.

The mobile game maker had hoped to prove in its appeal that Apple had acted illegally by restricting app distribution on iOS devices to Apple’s App Store which required payments to go through its own processor, while developers could not communicate to customers about alternative ways to pay .

The court’s ruling was first reported by Bloomberg.

Apple has released the following statement:

Today’s decision confirms Apple’s resounding victory in this case, with nine out of ten claims decided in Apple’s favor. For the second time in two years, a federal court has ruled that Apple complies with antitrust laws at the state and federal level. The App Store continues to foster competition, drive innovation and expand opportunity, and we’re proud of its profound contribution to both users and developers around the world. We respectfully disagree with the trial court’s determination of the one claim remaining under state law and contemplate further review.

The ruling is a major setback for Epic Games and other developers who had hoped the ruling could set a precedent for further antitrust claims and require Apple to open up iOS devices to third-party app stores and payment systems.

Epic originally sued Apple in 2020, after forcing Apple to remove Fortnite from the App Store after it intentionally violated the App Store terms for in-app purchases. Although Apple had largely won the lawsuit as the judge declared that Apple was not acting as a monopolist, the court sided with the Fortnite maker on the issue of Apple’s anti-governance policy regarding restrictions on in-app purchases. It said Apple would no longer be able to prohibit developers from pointing users to other means of payment.

Both Apple and Epic appealed the ruling – Apple over the required changes to App Store policies related to external links and Epic to retry its antitrust case.

In today’s decision, the appellate panel affirmed the district court’s dismissal of antitrust liability and its corresponding dismissal of Epic’s illegality defense against Apple’s breach of contract counterclaim, the ruling said. However, it also noted that the district court had erred in defining the relevant antitrust market and in holding that Apple’s DPLA (Developer Program Licensing Agreement) fell outside the scope of the antitrust law known as the Sherman Act.

But it said those errors were ultimately “harmless” and that Epic had, in any event, “failed to establish, as a matter of fact, the proposed market definition and the existence of any substantially less restrictive alternatives for Apple to achieve the pro-competitive justifications that support iOS’s walled-garden ecosystem.”

In other words, while this type of contract may be within the scope of a Sherman Act claim, it was not relevant to the court’s decision in this case.

The panel also upheld the district court’s ruling in favor of Epic Games under California’s unfair competition law.

“The district court did not clearly err in finding that Epic was injured, err as a matter of law in applying California’s flexible liability standards, or abuse its discretion in fashioning equitable relief,” the ruling said.

This would mean that the anti-governance changes previously adopted by the district court would again be required.

Apple has yet to appeal this part of the decision. It will likely weigh the options before making that decision.

In another bright spot for Apple, the appeals court ruled that the district court had erred in ruling that Apple was not entitled to attorney’s fees related to the DPLA breach of contract claims.

Epic Games responded to a request for comment by pointing to founder and CEO Tim Sweeney’s statementshared on Twitter.

“Apple prevailed at the 9th Circuit Court,” Sweeney wrote. “Although the court upheld the ruling that Apple’s restrictions have ‘a significant anticompetitive effect that harms consumers,’ they found that we failed to prove the Sherman Act case. Fortunately, the court’s positive decision rejecting Apple’s antitrust provisions frees iOS developers to send consumers to online to do business with them directly there. We’re working on the next step.”

Updated 23/04/23, 16:35 and with Epic Games’ comment