Epic Games Argues for Reversal of Post-Trial Ruling for Apple

The video game creator, Epic, filed its appellate brief seeking to overturn a ruling for Apple in its antitrust case alleging that the company has unlawfully made itself the exclusive distributor for all apps usable on the iPhone (iOS apps) and wrongfully imposed on app developers its “in-app payment solution,” with a 30% commission to Apple, for all in-app purchases developers make available to consumers. Epic’s flagship game, Fortnite, for instance, offers users the option to make purchases in the game, including for character costumes and various actions. Epic must pay Apple a 30% commission on each such sale, even long after the consumer has downloaded the Fortnite app from Apple’s app store. Epic claims that Apple’s contractual requirements unlawfully prevent would-be competitors like Epic from developing alternative app stores or selling directly to consumers. 

After a closely watched trial last year, the district court issued an opinion ruling for Apple. It concluded that Epic did not establish its Section 1 antitrust claim because the licensing agreement between Apple and Epic—which contained the challenged restrictions—was not a “contract” under Section 1 of the Sherman Act. According to the district court, the licensing agreement fell outside the scope of Section 1 because it was a take-it-or leave-it “unilateral” contract. The court nevertheless applied the rule of reason to Epic’s claims and held that Apple did not violate Section 1. The district court also found for Apple on Epic’s claims under Section 2 of the Sherman Act, for which Epic had alleged that Apple unlawfully monopolized the iOS app distribution market as well as the in-app payment solution market. Apple did not, the court found, have monopoly power in the relevant market, as defined by the court. 

On appeal, Epic is now arguing that the district court erred in its holding that a contract of adhesion is not a “contract” for Section 1 purposes and that to hold otherwise would “upend established principles of antitrust law” and “undermine sound antitrust policy.” Epic further argues that the court erred in its analysis under the rule of reason and in defining the relevant market. 

Epic is not arguing this appeal on its own. Its case has drawn the support of a large and diverse set of third parties interested in the matter, including Microsoft, the Department of Justice, 35 states, and the American Antitrust Institute, among many others, each of which has filed an amicus brief with the Ninth Circuit Court of Appeals. These amici fear that if the decision is not reversed or corrected it could, as succinctly explained by the DOJ, “imperil effective antitrust enforcement, especially in the digital economy” and “leave many anticompetitive agreement and practices outside” the protections of Sections 1 and 2 of the Sherman Act. 

The case is Epic Games Inc. v. Apple Inc., No. 21-16506 and No. 21-16695, in the Ninth Circuit Court of Appeals.