Epic vs. Apple: If you read only one legal analysis…

Read the one that Six Colors’ Jason Snell recommends.

From John Voorhees’ “What Does It All Mean?: A Look at Judge Gonzalez Rogers’ Decision in the Epic Versus Apple Trial” posted Saturday by MacStories:

Before getting to the injunction issued against Apple, it’s worth pausing to consider what this first part of the Court’s decision means and what’s likely to happen as a result of the decision. With respect to payment processing and fees charged to developers, nothing will change. Building alternative storefronts or offering separate payment schemes are no more possible today than they were a week ago. In fact, the Court specifically concluded about the App Store and In-App Purchases, that Apple’s approach is valid:

Apple has shown procompetitive justifications based on security and the corollary interbrand competition, as well as generally with respect to intellectual property rights.

Nor does the Court’s decision affect the 30% commission that Apple charges for most paid apps, which is reinforced by the fact that the Court also ruled that Epic has to pay Apple for the App Store fees it avoided by offering its in-app currency outside Apple’s system because doing so violated Epic’s developer agreement.

The Court’s decision is also a blow for those who hoped Epic’s lawsuit would result in Apple being forced to permit the sideloading of apps, a topic we recently discussed on AppStories. Epic argued that users should be able to install apps from other storefronts and the web just like Mac users can. Epic also pointed to the enterprise app program and app signing as infrastructure already in place that could support sideloading. The Court disagreed…

If you’re Apple’s lawyers, you get to the bottom of page 158 of Judge Gonzalez Rogers’ decision, and you’re probably feeling pretty good about how things are going. You might even imperiously summon an intern to put some expensive champagne on ice. That is until you turn the page.

[Here Voorhees summarizes the Court’s finding that Apple violated California’s unfair competition law.]

Translation: “Not so fast, Apple. You may not be a monopolist, but I don’t like the way you run the App Store, and California has handed me a hammer that I’m not afraid to use.”

To top it off, Judge Gonzalez Rogers issued a nationwide injunction for a violation of a single state’s law. It’s a ruling that’s as aggressive an application of state law as the ruling on federal antitrust is careful to avoid being overturned on appeal.

My take: Having written an in-depth look at the issues going into the trial, Voorhees was in a better position than most to get to the core of the Judge’s 185-page decision.

16 Comments

  1. When law can do no right,
    Let it be lawful that law bar no wrong:
    Law cannot give my child his kingdom here,
    For he that holds his kingdom holds the law. — Shakespeare in King John, 3.1.189
    Mr. Sweeney is now having to answer to the iOS player base he sacrificed to make his point. Hell hath no fury like a gamer denied her platforms.

    7
    September 12, 2021
    • David Emery said:
      It will be interesting to see how that community reacts to the verdict.

      Me, I think Epic’s “conspiracy” sucked independent of what I think of their view of Apple. I wouldn’t want to send my money to a company that was so under-handed. (Same reason why I’ll never use Uber…)

      0
      September 12, 2021
    • Bart Yee said:
      Yep, you can see this in the responses to Sweeney’s Twitter post about how this wasn’t a win for consumers and developers.

      Vast majority of responders were Fortnite game players, most just want to play the game on Mobile iOS platform, many don’t care about the 30% cut, most don’t care about the court case, and most want Epic/Sweeney to comply with App Store rules so they can get to play the game again – “it’s been a year already!” “You’ve held us hostage” and you screwed all of us because of your ego.”

      Delicious and entirely predictable.

      2
      September 13, 2021
  2. Gregg Thurman said:
    Well thought out interpretation of the decision.

    Bottom line though is that nothing is going to change. The individual States may enact legislation mirroring California’s law, but they aren’t going to change human behavior.

    That’s because none of Apple’s alleged behaviors harmed consumers, only the firms that profited from consumer behavior using Apple’s platform. There is no room in pricing to alter those consumer behaviors, so we are left with consumers using the payment system they trust, operated by the firm they trust: Apple.

    Besides Apple consumers aren’t motivated by price, if they were they’d be using Android at a third the cost. Apple consumers are motivated by intangibles such as security, ease of use, useful life of product and quality builds, not just of hardware, but software as well.

    6
    September 12, 2021
  3. Troy Thoman said:
    The thing that is silly here is Apple is still incurring some expense to host the platform and provide the developer tools, so they likely will change things to ensure they are still recouping those costs. Secondly, how many folks are going to go to the effort of identifying a secondary means of collecting payment that will be significantly enough cheaper to justify the effort? If I still had an app on the store I wouldn’t go to the effort. But I guess for the in app purchase and monthly subscription model, maybe it makes more sense.

    5
    September 12, 2021
  4. Jerry Doyle said:
    “…. the Judge went out of her way to punish Apple under (California) state law for what she concluded was anti-competitive behavior. To top it off, Judge Gonzalez Rogers issued a nationwide injunction for a violation of a single state’s law. It’s a ruling that’s as aggressive an application of state law as the ruling on federal antitrust is careful to avoid being overturned on appeal.”

    Judges always strive to give each side something consequential, purposeful with which to walk away. Never have I heard in a civil matter a win/win for one side. Usually the parties walk away with something of consequence, but still a bad taste in their mouths. Apple should have had a “win/win” on all counts, but the judge had to find some way to placate the opposing side and she went out of her way to do so. Apple, hopefully will prevail on appeal as it deserves to prevail.

    4
    September 12, 2021
  5. Robert Paul Leitao said:
    Apple does not have a monopoly in mobile gaming or distribution. The judge’s decisions ring loud and ring clear. The rulings validate Apple’s business model as pro-competitive. All else is mostly background noise. In my view, Epic should have not used suspect tactics nor attempted anti-competitive claims on the scale alleged in its filing. Apple is a dynamic enterprise that will make impactful and strategic changes to its practices and policies when they are clearly in the best interests of the company’s customers, the company’s shareholders and the company itself.

    5
    September 12, 2021
  6. Darren DMW said:
    Well written and thought out article.

    I like his reference that the anti-steering rules were “overreach”.

    On the face of it anti-steering rules do look like they have the power to be anti-competitive. In reality as Gregg has pointed out, price is no where near the number one motivator of apple’s customers, so it is more of a bad look than competition being restricted.

    I see very little material impact to this decision, but it was a bad look and the judge has forced apple to offer links to outside payments. In 12 months when only fractional payments have moved off App Store, Apple will be able to say: See, we gave you links but it is the App Store itself which facilitates people handing over their $ – it is where people feel secure and comfortable.

    4
    September 12, 2021
  7. Kirk DeBernardi said:
    Puzzled as to how Apple will engineer the UI for handing off payments to an outside site?

    An itsy-bitsy-teeny-tiny button buried on the eighth page of the software license agreement legalese?

    (After all, Apple’s been known to be clever.)

    😉

    Geaux 

    1
    September 12, 2021
    • Kirk DeBernardi said:
      I’m with Sacto Joe from a previous comment.

      “Success is not illegal — ”
      — Judge Gonzalez Rogers

      Great bumper sticker.

      3
      September 12, 2021
    • John Konopka said:
      I guess they do it the way they do it now. The only thing that changed is that the developer can put in a message (maybe a link) inside the app telling the customer to go to the developer’s website to pay. You can download the Netflix app and go to the Netflix website to sign up, but Netflix can’t have a link in the app telling you to do this.

      0
      September 13, 2021
  8. Michael Goldfeder said:
    Epic and Sweeney will appeal this well grounded and reasoned decision, but get nowhere as the Judge applied the antitrust law as written, and did not abuse her discretion as the finder of fact in her very in-depth and precise decision entered as a final judgment.

    What is more interesting though is the nation wide injunction applying the State of California unfair competition statute. My initial thought is that Apple will certainly appeal that injunction as it’s unlikely that a Federal Judge can impose another state’s statutory law on any other jurisdiction.

    Given that the Judge isn’t imposing a statute under the U. S. C. (United States Codes), but instead an individual state statute nationwide, my hunch is the injunction will be vacated and dissolved by the Ninth Circuit Court of Appeals as it lacks jurisdiction to enforce an autonomous and individual state law on any of the other states.

    What is puzzling to me is why this judge would issue an injunction that is seriously flawed? The only logical possibility is to throw Epic a temporary bone of sorts that in the long run has no legal traction.

    However, given that Apple already entered into a class action settlement with other similarly situated developers that will have to be approved by this same Federal Judge, perhaps this was a strange way to include Epic and appear that they won the same relief that they ultimately declined by filing this legal action against Apple?

    Ironically, Epic won nothing, yet afforded Apple a well crafted legal ruling by a Federal Judge clearly establishing that Apple is NOT a monopoly.

    The talking heads and silly analysis’ I’ve read and listened to the past several days fail to understand the premise of what this ruling holds for both litigants.

    As an Apple long term investor, I’m quite pleased with this ruling.

    7
    September 13, 2021
  9. Steven Philips said:
    I think including the “California” ruling was wise (maybe not from a technical legal standpoint. IDK) but actually good for Apple as well. As noted, other states will probably pass similar legislation and this may preclude multiple other lawsuits. I think Apple would be wise to not appeal. (Unless there’s something I’m not seeing.)

    1
    September 13, 2021

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