Court issues permanent injunction in Epic vs. Apple case
It&#x27;s worth noting that this ruling was not particularly great for Epic as their ultimate goal was to run their own app store under the theory that Apple was unfairly monopolizing app distribution on iOS devices.<p>The court fully rejected Epic&#x27;s argument that Apple held a monopoly over the iOS app distribution market, concluding that the relevant antitrust market did not consist only of iOS devices:<p>&gt; <i>&quot;As demonstrated with respect to the relevant market, Apple does not have substantial market power equating to monopoly power. While considerable, Epic Games has failed to show that Apple’s market power is durable and sustaining given the current state of the relevant market. For that reason, the Court finds that Epic Games failed to prove the first element of a Section 2 claim: the possession of monopoly power in the relevant market.&quot;</i> (Page 152)<p>Consequently all of Epic&#x27;s Sherman Act claims and California Cartwright Act claims were rejected by the court because Epic failed to prove Apple held monopoly power in the relevant market.<p>With specific regards to Epic&#x27;s specific claim that blocking alternative app stores was an unreasonable restraint of trade, the way the court analyzes these types of claims is as follows:<p>1. The plaintiff first has to show that the restraints have an anti-competitive effect.<p>2. The defendant is then given the opportunity to show a pro-competitive justification for the restraint.<p>3. The plaintiff then has to show that those pro-competitive justifications could have been achieved via less restrictive alternatives.<p>In this case, the court agreed with Epic that the constraint was anti-competitive. However, they then accepted Apple&#x27;s pro-competitive justification with regards to security of the platform (page 145):<p>&gt; <i>&quot;Here, the Court finds Apple’s security justification to be a valid and nonpretextual business reason for restricting app distribution. As previously discussed, see supra Facts § V.A.2., centralized app distribution enables Apple to conduct app review, which includes both technical and human components. Human review in particular helps protect security by preventing social engineering attacks, the main vector of malware distribution. Human review also helps protect against fraud, privacy intrusion, and objectionable content beyond levels achievable by purely technical measures. By providing these protections, Apple provides a safe and trusted user experience on iOS, which encourages both users and developers to transact freely and is mutually beneficial. As a result, Apple’s conduct “enhance[s] consumer appeal.” See Qualcomm, 969 F.3d at 991.&quot;</i><p>They also accepted that the difference in approaches between iOS and Android promoted competition between the two platforms (page 146):<p>&gt; <i>&quot;As a corollary of the security justification, the app distribution restrictions promote interbrand competition. The Supreme Court has recognized that limiting intrabrand competition can promote interbrand competition. Leegin, 551 U.S. at 890. For example, restricting price competition among retailers who sell a particular product can help the manufacturer of that product compete against other manufacturers. Id. at 890–91. It is this interbrand competition that “the antitrust laws are designed primarily to protect.” Id. at 895. Here, centralized app distribution and the “walled garden” approach differentiates Apple from Google. That distinction ultimately increases consumer choice by allowing users who value open distribution to purchase Android devices, while those who value security and the protection of a “walled garden” to purchase iOS devices. This, too, is a legitimate procompetitive justification.&quot;</i><p>Epic tried to argue that a less restrictive alternative was possible via enterprise certification or notarization, but this argument was rejected by the court (pages 148-149):<p>&gt; <i>&quot;However, missing from both the enterprise and notarization models is human app review which provides most of the protection against privacy violations, human fraud, and social engineering. These proposed alternatives would require Apple to either add human review to the notarization model or leave app review to third-party app stores. Apple executives suggested that the first option would not scale well. Under the second option, Apple could in theory set minimum guidelines for app stores to provide a “floor” for privacy, security, and quality. However, security could increase or decrease depending on the quality and diligence of the store. Evidence shows that at least on Android, the experiment shows less security.<p>...<p>&gt; In short, Epic Games has not met its burden to show that its proposed alternatives are “virtually as effective” as the current distribution model and can be implemented “without significantly increased cost.”<p>...<p>&gt; Here, Apple’s business choice of ensuring security and protecting its intellectual property rights through centralized app distribution is reasonable, and the Court declines to second-guess that judgment on an underdeveloped record.<p>...<p>&gt; Accordingly, the Court finds that Apple’s app distribution restrictions do not violate Section 1 of the Sherman Act.&quot;</i><p>While this decision will no doubt be appealed by both sides, it&#x27;s not looking particularly good for Epic&#x27;s goal of forcing open alternative app stores on the iOS platform.<p>Finally, the court also affirmed Apple&#x27;s right to permanently ban Epic from the App Store for violation of the developer agreement (page 179):<p>&gt; <i>(2) a declaration that (i) Apple’s termination of the DPLA and the related agreements between Epic Games and Apple was valid, lawful, and enforceable, and (ii) Apple has the contractual right to terminate its DPLA with any or all of Epic Games’ wholly owned subsidiaries, affiliates, and&#x2F;or other entities under Epic Games’ control at any time and at Apple&#x27;s sole discretion.</i>