Three dozen U.S. states are about to settle Android app store antitrust case with Google, leaving Epic Games and Match Group as two remaining plaintiffs: San Francisco trial starts in November

At 6 PM Pacific Time on Tuesday, Google, approximately three dozen state attorneys-general, and consumer class-action lawyers filed a "stipulation and [proposed] order re deadlines in consumers' and states' actions in light of tentative settlement" in connection with the Google Play (Android app store) antitrust litigation in the Northern District of California that resulted from the procedural consolidation of multiple parallel actions. The settlement was reached the same day and is subject to certain approvals (by the state attorneys-general, which should be a formality unless there was more political resistance than I can imagine, and Google parent Alphabet's board of directors, which should be even more of a formality), after which it needs to be blessed by the court, which is also unlikely to pose a major hurdle. The plan is for a long-form settlement agreement to be submitted to Judge James Donato in about a month.

The terms have not been announced yet, not even in broad lines.

The United States District Court for the Northern District of California will hold a trial starting November 6. With the states and the consumer plaintiffs out (and developer class actions--which achieved nothing of major value to the developer community at large--having settled long before), this means that there will be only two plaintiffs: Epic Games, which brought the complaint in August 2020 after Google ejected Fortnite from the Google Play Store, and Match Group (Tinder).

First, the notice of a tentative settlement (this post continues below the document):

In Re Google Play Store Antitrust Litigation: Stipulation and [Proposed] Order re Deadlines in Consumers' and States' Actions in Light of Tentative Settlement

It is not surprising that the class-action lawyers would settle with Google: in the end they just want to get paid. The far bigger win for Google here is that the three dozen U.S. states are also prepared to drop the case. Governmental support would have been very useful for Epic and Match at the trial. A settlement with only the class-action lawyers would have been of little value to Google if the state AGs had continued to sue on behalf of their citizens. The consumer class might not even have been certified in the end.

Given the fundamental problems surrounding app distribution on Android, it is hard to imagine that the settlement will solve the most pressing problems. But we will know for sure only when the exact terms have been announced. It's unlikely but not impossible that the state AGs negotiated something of value.

The only advantage this development has for Epic and Match is that the trial will be streamlined. The trial structure was threatening to become very complex, and now the focus at the pretrial conference on Tuesday will be on how to proceed with an Epic & Match v. Google trial. I don't think a trial that will be interrupted by the Thanksgiving holiday is a good idea, but it probably won't be postponed in light of the impending settlement.

Epic and Match may still government support: the DOJ, which supported and may continue to support (at the certiorari stage) Epic's appeal of the decision in the parallel Apple case, could file amicus briefs later on.

On Tuesday morning by Pacific Time, all the parties filed a joint pretrial statement highlighting the differences between their positions. There was no mention of a settlement in that filing: it was totally adversarial. But a settlement was mentioned as a hypothetical possibility in footnote 4:

"Further, while all Plaintiff groups expect to be at trial with the experts they disclosed to Google, there are circumstances that, at least theoretically, could change these plans (e.g., a settlement, a pending Daubert motion, etc.).

Here's that document:

In Re Google Play Store Antitrust Litigation: Joint Statement Regarding September 7, 2023 Pretrial Conference

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Microsoft filing with UK antitrust authority CMA indicates Fortnite on Xbox Cloud Gaming hasn't taken off, largely because of Apple and Google: Activision Blizzard merger review

Competition regulators in various jurisdictions are reviewing Microsoft's acquisition of Activision Blizzard King. Earlier today I already wrote about that topic: Forbes is spot-on that Sony doesn't want Microsoft to keep Call of Duty on PlayStation: it wants to do its own exclusive deals with an independent Activision Blizzard (as does Google!)

Today, the UK Competition & Markets Authority (CMA) released the public redacted versions of filings that Microsoft (PDF, 111 pages) and the only vocal critic of the deal--Sony (PDF, 22 pages)--made in late October. I've quickly digested them both and would like to share a few observations here, particularly arguments that looked new to me. First, a list with anchor links that can take you directly to any of the sections of this post:

• Fortnite more important than Call of Duty

• Fortnite is not a streaming success (yet)--and Apple and Google are to blame for large parts of the problem

• Blocked Facebook-Giphy deal involved high upstream and downstream market share

• Sony was not foreclosed when Call of Duty was exclusive to Xbox

• Steam never needed Call of Duty to succeed--and Nintendo Switch is not just the family platform the CMA believes

• Microsoft points to its track record after the Zenimax acquisition

• Sony falsely claims Microsoft's cloud software licensing practices are being investigated

Fortnite more important than Call of Duty

Epic Games' Fortnite is mentioned 41 times in Microsoft's submission. Microsoft explains that Fortnite is strategically more important to console makers than Activision's Call of Duty (no emphasis added below):

"Call of Duty does not drive platform adoption. Xbox data shows that between 2016 and 2022, only [REDACTED]% of gamers played Call of Duty as their first game on their new Xbox console [...] Fortnite is the most common first played game ...""

"Fortnite, the most popular game franchise in the world with over 400 million registered users. For[t]nite is the number one title on the Xbox console (across all genres) by hours played and is available on PlayStation and Nintendo Switch."

"Call of Duty is not the most popular franchise: Fortnite has consistently been the most popular game globally since its entry into the market in 2017. Call of Duty’s popularity changes significantly over time, depending on the relevant release."

"Call of Duty does not drive social media conversations: [...] no Call of Duty game made it to the top ten 'Most Talked About Video Games' on Twitter last year. Similarly looking across other widely used social media channels, Fortnite and [...] are really driving social media interaction.

The above is of particular importance because Sony is an Epic shareholder, making it impossible to imagine that Fortnite would be removed from the PlayStation anytime soon.

Fortnite is not a streaming success (yet)--and Apple and Google are to blame for large parts of the problem

Microsoft has previously said--and I don't think anyone can disagree--that cloud gaming is a rather nascent technology and of limited relevance for the foreseeable future. Now, what's very interesting in Microsoft's October 31 filing with the CMA is that even Fortnite hasn't really met expectations yet as an Xbox Cloud Gaming title on iOS and Android devices. The filing is heavily redacted, but I believe one can reasonably deduce from the publicly accessible parts (such as this headline: "Xbox’s experience with Fortnite highlights the challenges") that streaming is not the answer and Fortnite Mobile--i.e., native iOS and Android apps--must return to the App Store and the Google Play Store as soon as possible.

In that section of its response to the CMA's Issues Statement, Microsoft points to the CMA's own findings:

"Research published by the CMA [Mobile ecosystems Market Study Final Report] shows that, both worldwide and in the UK, where cloud gaming app users had a choice between a provider’s native or web app on Android, around 99% of users used the native app, with 1% using either the web app or a combination of the web and native app. Microsoft’s experience with adding Fortnite on Xbox Cloud Gaming illustrates these challenges."

In May 2022, "Fortnite was launched as a free-to-play game on Xbox Cloud Gaming in May 2022. As the game was free-to-play and available separately from Game Pass, Microsoft was relatively optimistic as to the number of potential users of the service." But it seems it hasn't met expectations. The results and the way Microsoft describes them are redacted out, but the two previous references to "challenges" show that it's not going smoothly, and the filing specifically explains that "there were significant issues with gamers being able to discover and access the game, particularly on mobile devices." The key issues Microsoft identified are:

• "Fortnite on Xbox Cloud Gaming is not available in the Apple App Store or Google Play Store. If gamers search for Fortnite on these stores, the search results refer to other games and not to the fact that Fortnite is available via the mobile browser on these devices;

• "Searches for Fortnite on the Google search engine do not bring up Xbox Cloud Gaming as a leading search result; and

• "Gamers looking to play Fortnite on a mobile device have to figure out for themselves that they need to go to the Xbox website Xbox.com/play. Gamers then need to know that they have to locate and download Xbox’s web-app in order to have full screen rendering of the game. However, the web-app can only be pinned to the gamer’s home screen in the Safari browser on iOS devices (but not in Chrome, FireFox or Edge). As is evident, this is a very involved process that most gamers will not be aware of, much less undertake."

Just yesterday, the very CMA launched a market investigation into mobile browser and cloud gaming. I will comment on that one (and the UK's renewed focus on its Digital Markets Unit legislation) later this week. On Twitter, Megan Gray--a lawyer with tremendous expertise in tech competition and policy issues--asked why the CMA combined these two topics. I defended the CMA's decision because even though the "web app" argument is made by Apple and Google in various contexts, cloud gaming is an extreme case of a thin client where only minimal functionality resides on the end-user device--and still the user experience is degrade massively because of the WebKit monopoly. On that basis, she agreed. Here's the related Twitter thread:

Excellent point

— Megan Gray (@megangrA) November 23, 2022

Blocked Facebook-Giphy deal involved high upstream and downstream market share

The CMA blocked Facebook parent Meta's acquisition of GIF platform Giphy, and as a result, Meta surrendered last month and announced that it would sell Giphy. Microsoft's filing explains that any vertical foreclosure theories relating to its acquisition of Activision Blizzard King are extremely distinguishable from the Facebook-Giphy situation if one looks at what really matters in merger control: market share.

First, Microsoft notes that input foreclosure has only resulted in a finding of a substantial lessening of competition in three Phase 2 cases, making it a rare exception ("accounting for less than 1% of the CMA’s merger decisions"), but input foreclosure "has never been found in a case where one merging party was the smallest player in the downstream market [Microsoft in consoles, where it is behind Sony and Nintendo] and the other merging party was one of more than a dozen suppliers [game makers] competing in the upstream market."

In the Facebook/Giphy case, "the CMA found that the target, Giphy, had a high market share in the upstream market for GIF provision (60-70%) and that the acquirer, Meta, had a high market share in the downstream market for social media (>70%)." This contrasts starkly with the situation in the Microsoft-ABK case:

"Activision is currently the fifth largest console game publisher with a share of [5-10]% globally in console game publishing.33 Following the Merger, the Merged Entity will be the third largest publisher with a share of only [10-20]% globally, reflecting the highly fragmented nature of game publishing.34 On the downstream market, Xbox is the third placed player (with a global share of [10-20]%), seeking to innovate and compete with two strong competitors, with much larger installed bases of consoles and strong content portfolios."

These two charts from Microsoft's filing show that the cases present different fact patterns. First, the Facebook-Giphy situation (click on the image to enlarge):

Second, Microsoft and Activision Blizzard King:

That's what a fragmented upstream market looks like. It's striking.

"Sony was not foreclosed when Call of Duty was exclusive to Xbox"

Sony says the sky would fall if Microsoft made Call of Duty an Xbox-exclusive title, but even if every CoD player migrated from the PlayStation to the Xbox, Sony would still be the market leader; Microsoft has no economic incentive to do that as a tech policy think tank explained; and it has offered a ten-year deal to Sony, which--as Forbes plausibly argues--Sony doesn't accept because it just wants to derail the transaction. By the way, the filings released today are almost a month old, and it appears that when the filings were made in late October, the offer was a contract that would have given Sony certain assurances until 2027. But by now we nowthey could have a ten-year deal.

In this context I find the following passage from the latest filing interesting. It explains that even some Xbox-exclusive CoD content wouldn't move the needle:

"Sony was not foreclosed when Call of Duty was exclusive to Xbox: There is no indication, based on Call of Duty’s prior history of differentiation between versions of Call of Duty on Xbox and PlayStation, that this could in any way affect rival consoles’ ability to compete effectively. Sony’s share of console sales grew in the period from 2005-2015 when Xbox had certain exclusive rights to Call of Duty content. There are many more popular games available in the market in 2022 than there were between 2005 and 2015 (including Fortnite, [...]). If anything, Call of Duty’s importance as a franchise was greater in 2005-2015. When Xbox decided not to continue with the Call of Duty co-marketing agreement in 2015, it simply found other ways to market and promote its platform. Sony, as the market leading console with an extensive first-party and third-party exclusive game catalogue, is even better placed to do the same."

Steam never needed Call of Duty to succeed--and Nintendo Switch is not just the family platform the CMA believes

A couple of other arguments about CoD's limited ability to be used for a vertical foreclosure strategy are also worth highlighting. Steam never needed CoD--and Steam is definitely the kind of platform that hard-core gamers use. The CMA argued before that the Nintendo Switch doesn't really count in the Microsoft-ActivisionBlizzard context because it's more of a family games platform. But Microsoft notes that Nintendo does compete with Sony and Microsoft (as opposed to a two-horse race between Sony and Microsoft):

"[...] more mature/adult games are available on the Switch and are actively marketed, including on Switch’s YouTube channel. These games include Apex Legends, The Witcher 3, Doom Eternal, Wolfenstein II: The New Colossus, Cult of the Lamb, NieR: Automata The End of YoRHa Edition, Alan Wake Remastered, Crysis Remastered, Outlast, Little Nightmares, Five Nights at Freddy’s and Life is Strange."

And various recent Switch-exclusive titles have received "mature" ratings by the Entertainment Software Rating Board (ESRB) "for violence, blood and gore, partial nudity and strong language," and similar reasons. In order to illustrate this, Microsoft's filing contains a screenshot from the latest Bayonetta 3 game.

Microsoft points to its track record after the Zenimax acquisition

It's never been doubted by anyone that Microsoft made Minecraft available on more, not fewer, platforms after acquiring its maker (Mojang). But there have been claims that Microsoft made ZeniMax titles exclusive to the Xbox. Microsoft's filing with the CMA, however, states that "Microsoft has not taken any existing ZeniMax titles which were shipping on PlayStation on 9 March 2021 (the date when it closed its acquisition of ZeniMax) off PlayStation or other platforms." The first Xbox and PC exclusives will be two entirely new games that are scheduled to be released next year (about two years after the acquisition closed). The following table shows Microsoft's track record with ZeniMax titles on PlayStation (click on the image to enlarge):

Sony falsely claims Microsoft's cloud software licensing practices are being investigated

The reason why I have little to say about Sony's filing is because it reiterates the same talking points everyone has heard for a while, and they just say that the CMA was right with the issues it identified in Phase 1. But now the hurdle is higher, and as Microsoft's filing explains, no "cogent body of evidence" exists in the Microsoft-ActivisionBlizzard case to warrant a blocking decision.

So I haven't found any substance in Sony's filing (though I will re-read it to be sure). What I did notice, however, is an untruthful representation: Sony says that "Microsoft is presently under investigation for leveraging practices involving Azure and Windows." However, the fact that someone brought a complaint doesn't mean that there are formal investigations. The European Commission certainly hasn't announced any formal investigations, and Sony's document cannot point to, or cite, any information to the contrary.

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Another look at Epic Games' argument in the Ninth Circuit as to why it proved lock-in of Apple's customers

This is a follow-up to yesterday's post on Epic Games v. Apple. I have listened for a second time to the appellate hearing with a particular focus on the question of whether Epic's proposal of a single-brand market is dead at this stage due to a "failure of proof." Epic's appellate argument is purely legal; they are not challenging any factual findings under the "clearly erroneous" standard (though they do disagree with some of them).

There are three reasons for which I didn't consider Circuit Judge Milan D. Smith's concern over a potential failure of proof, which he voiced toward the very end of the hearing, necessarily fatal to Epic's case:

• Especially during the first 10-15 minutes of the hearing, Circuit Judge Smith appeared inclined to hold that the district court had committed legal error in the market definition context, and that this would require a remand. Epic didn't deny that a new market definition would require a remand. Its counsel even acknowleged it, but argued that it would prevail anyway under the rule of reason. (However, both Epic and the DOJ faced tough questions regarding their position that a final balancing was required.)

• I had discussed Epic's and Apple's position on the aftermarket part of the single-brand market test in September, and large parts of the problem with the fourth aftermarket factor are requirements that the district judge thought Epic would have to meet, particularly a policy change and (which would obviously be the case in the event of a policy change) customers' complete unawareness, including their inability to find out even if they wanted to, of the aftermarket restrictions by the time they make their purchasing decision in the foremarket. An incorrect legal standard is different from a failure of proof at the factual level.

• The most important question here is whether one considers the district court's finding of Epic not having proved lock-in a legal or factual determination. Apple uses an overbroad definition of what is "factual" and accuses Epic of, conversely, describing actually factual determinations as legal conclusions. So let's look at this part more closely because that's what the appeals court is going to do in the months ahead.

What certainly does help Apple here is that Epic's expert on lock-in, Professor Susan Athey, "got blown up" as Apple's counsel described it: the district judge was "not impressed" by what she presented (as it was not based on consumer surveys or similar data). That is indeed bad for Epic, but not fatal: a party can prevail on a question even if its related expert testimony isn't considered reliable.

According to Apple's counsel, all that Epic has to show in terms of lock-in amounts to only two--and rather old--Apple documents. That is an exaggeration. Let me quote from Epic's opening brief first:

"[The district court] made supporting factual findings, including that there are significant obstacles to switching away from iOS, such as 'time to find and reinstall apps or find substitute apps; to learn a new operating system; and to reconfigure app settings,' [...] and unsurprisingly, 'very low switching rates,' [...] The court nevertheless determined that Epic 'failed to prove lock-in,' primarily because the court incorrectly believed Epic needed to quantify consumers’ switching costs."

"The [district] court's findings and undisputed record evidence prove high switching costs. [...] To switch to Android, consumers must abandon a considerable sunk cost—their smartphone and its apps. [...] But that’s not all; as the district court correctly found, 'it takes time to find and reinstall apps or find substitute apps; to learn a new operating system; and to reconfigure app settings. It is further apparent that one may need to repurchase phone accessories.' [...] The court also found that Apple sought to compete by making its platforms 'stickier,' and its executives touted the difficulties in switching in their internal correspondence. [...] These costs, which result in persistent lock-in to iOS past the lifespan of a single device, far surpass those in Kodak, where a buyer could readily switch to a different brand once its first Kodak photocopier became obsolete."

In its reply brief, Epic then countered Apple's suggestion that it was confusing customer satisfaction (voluntary) with lock-in (an unwanted consequence of a previous decision):

"Second, the [district] court complained that Epic 'ignor[ed] the issue of customer satisfaction,' [...] and noted that 'the features that create lock-in also make Apple’s products more attractive,' [...] Nothing in Kodak or its progeny suggests that if consumers like the features that create lock-in, switching costs should be discounted, and the district court provided no legal support for this position."

"Third, the district court said that it 'is left entirely in the dark about the magnitude of the switching costs and whether they present a meaningful barrier to switching in practice.' [...] That assertion contradicts the court's findings, which identified numerous barriers with which all modern smartphone users are familiar, [...] and confirmed there is no meaningful migration between platforms [...]. Moreover, Kodak does not require a plaintiff to quantify the magnitude of switching costs; in Kodak, it sufficed that plaintiffs 'offered evidence that the heavy initial outlay,' along with support and parts, made switching costs very high for existing customers."

Epic basically argued in its two appellate briefs that the district court found all the ingredients of lock-in, and just made the mistake of not determining that if it looks like a duck, walks like a duck, and quacks like a duck, it probably is a duck. The way Epic actually stated it in its reply brief is this:

"[T]his is a classic single-brand product aftermarket case. Kodak and Newcal are good law, and Epic has proved all facts required for such a determination."

If one agreed with that, it would mean that the district court erred in its application of Kodak and Newcal to the facts it found, unless one considers the finding of a failure of proof of lock-in a dispositive factual determination and ends the analysis there. But even if one just considered it a mixed question of fact and law, the standard for review would be de novo and the appeals court could easily reverse.

Epic also argued that Apple's monopoly power was shown (such as that Apple only reduce its App Store commission under regulatory or litigation pressure).

What's very important to consider--and could have been my fourth bullet point further above--is that Circuit Judge Smith, shortly after raising the question of a potential failure of proof, noted that the district court's ruling was inconsistent about these types of facts and the conclusions drawn from them.

I remain optimistic that there will be a partial reversal and remand. Even if one accepts the district court's factual findings (as Epic elected to do on appeal), the elements are in place for the appeals court to tell the district court to give market definition another try.

It became very clear yesterday that Circuit Judge Smith does not believe that the district court got everything right, and that the critical part on which this case turns is market definition. I know Epic says market definition doesn't matter, but that's where I disagree with them. I don't think the district court's market definition should be affirmed, but if it was (and the risk is obviously greater than zero), it would seem pretty reasonable to me (though not my preferred outcome) to affirm the fate of Epic's federal antitrust claims. Epic's counsel argued that he couldn't think of any market definition under which Apple's conduct should be accepted, and that's an extreme position I respectfully disagree with: in a broad enough market, no one has market power.

The hearing would have gone really bad for Epic if the appeals court had said that the decision looks correct in every outcome-determinative respect. That was not the case. Circuit Judge Smith wanted to explore the practical consequences of a remand centered around market definition. That Epic would be in a stronger position if its lock-in expert had been more persuasive does not mean that it's "game over."

There's also a potential Plan B here: if the appeals court indicated that something was wrong with the district court's market definition, the DOJ--which supports Epic on certain questions without taking a final position on how the case should be decided--would benefit from it if and when bringing its own case against Apple's App Store terms. But we're not there yet. I still consider affirmance of the Epic v. Apple district judgment much less likely than a remand.

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Apple on losing track against Epic Games: reversal of market definition and remand for further consideration most likely outcome of Ninth Circuit antitrust appeal

Today is "November Fortnite." The United States Court of Appeals for the Ninth Circuit just held its Epic Games v. Apple appellate hearing. It was incredible. Historic. Awesome.

If what the judge who was talking most of the time--Circuit Judge Milan D. Smith Jr.--said throughout the course of the hearing is any indication for what the per curiam opinion will say, the decision will be materially consistent with what I've been writing about this appeal all year long. Yes, I feel vindicated because even if the decision surprisingly deviated from how the hearing went, what Judge Smith just said shows that those were positions one reasonably can take.

The most senior judge on the panel, former Chief Judge Sidney R. Thomas, was mostly listening--like Justice Thomas until Justice Scalia's passing. But if he had fundamentally disagreed with Judge Smith, most likely he'd have made it clear. District Judge Michael McShane (Oregon) said more than Circuit Judge Thomas, but very little compared to Circuit Judge Smith. A couple of things that he said sounded a bit more deferential to Judge Yvonne Gonzalez Rogers, but that's a pattern I've seen in other cases, too: district judges sitting on an appeals court by designation are rather sympathetic to their peers. That typically doesn't affect the outcome. So my operating assumption is that Circuit Judge Smith will write the per curiam and it will most likely be a unanimous decision.

In theory, I could just refer you to my previous writings, such as this post which summed up the reasons for which I believed Epic was likely to win and links to my related writings, particularly the ones on the merits of the case. And--what's very important--my writings did not echo Epic's briefs. There are some notable differences.

Market definition

Epic's counsel, Tom Goldstein, stated his client's preference for the appeals court to resolve the matter on the basis of the rule of reason, without a remand. That's why even though Epic believes it is right on market definition, it would actually like the Ninth Circuit not even to resolve that question--or at least not to focus on it. Epic would like to take a shortcut--or, if one wants to disagree with Epic, one could criticize their proposal for shortcircuiting the whole analysis--to the rule of reason, where the focus is on whether Apple's procompetitive justifications (privacy and security) are in fact procompetitive justifications or, in other words, pretexts.

Circuit Judge Smith has a more systematic approach (as do I) and stressed that antitrust analysis begins with market definition, and everything depends on it. And just like me, he feels that if the appeals court reverses Judge Yvonne Gonzalez Rogers on that part, there should be a remand, though it appears that the Ninth Circuit is perfectly prepared to do more than the bare minimum and to provide further clarity and instructions. I, frankly, think Epic should be grateful for that. It's nothing to be taken for granted; quite often, appellate judges are minimalists and just kick the ball back into the lower court. I understand why Epic's counsel said that in this event, things would just take longer and they'd be meeting again in the same appeals court in two years from now. They don't want it; they want a solution as quickly as possible, and maybe they're uneasy about what the Supreme Court might do in the next step. But it would be incredibly beneficial if the appeals court resolved market definition, especially if one looks beyond just Epic's case: there are so many App Store issues.

Any plaintiff-appellant would prefer direct entry of liability over a remand. Epic is no different. But this is a complex case and various factual findings--as Apple's counsel, Weil's Mark Perry stressed (though he may have overstated it in part)--were against Epic, and Epic is not appealing any factual findings here as clearly erroneous. It's purely an appeal of legal determinations.

When Circuit Judge Smith asked asked Mr. Perry about how key market definition is, he also said so as he'd otherwise have had to contradict Apple's position that the rejection of Epic's market definition by the district judge is an independent reason for which Epic would lose the case.

Rule of reason

Regarding rule-of-reason balancing (the final part to which Epic would just like to skip), Circuit Judge Smith asked the DOJ--which supported Epic--just the right question: "When the district court makes factual findings, what does it say? It feels this way? Or [...] numbers?"

The problem with the district court's rule-of-reason analysis is that it doesn't really balance the anticompetitive effects of Apple's App Store monopoly against the attempted procompetitive justifications.

Circuit Judge Smith asked how the court of appeal could analyze a rule-of-reason decision without any quantitative amounts. In my opinion, this also counsels for a remand.

There are only two outcomes I cannot imagine based on how the hearing went: wholesale affirmance--and direct entry of liability.

In the rule-of-reason context, a key question is whether Apple's privacy and security arguments are indeed procompetitive justification in the first place. This was the context in which I felt Mr. Perry's made his weakest arguments, and Mr. Goldstein (also in his rebuttal) very effectively countered Apple's argument by saying that they can still offer a walled garden to consumers, but don't get to restrict competition from (for instance) an iOS version of the Epic Games Store. Apple can always tell consumers to use only Apple's App Store and only Apple's in-app purchasing system (the latter, of course, wouldn only apply to digital transactions, not when they buy physical goods from the likes of Amazon). But then it has to compete with--an example Mr. Goldstein mentioned repeatedly--a hypothetical Disney app store, the Epic Games Store, and others. He didn't mention Microsoft's plans for a competing app store, though he could have. Mr. Goldstein said: "you don't get to squash competition ... in order to differentiate your product." At the outset, Mr. Goldstein had already described as "the most significant" issue in this case that Apple cannot legitimately and procompetitively create a walled garden.

What Apple said about the differences between iOS and Android didn't convince me at all. Epic wouldn't be suing Google if Android gave developers all that they want (as Apple claimed). It's not like Android is a cesspool of malware and fraudulent apps and iOS is totally safe. It's not like only Apple does manual reviews: last time the headcounts were discussed in public, Google employed about four times as many app reviewers as Apple did. And while there are different Android app stores, there are reaons for which only the Google Play Store really matters.

Section 1 or 2 applicability

Epic would like the case to be decided under Sherman Act Section 1 (concerted action) as opposed to Section 2 (unilateral conduct) and made this one of its two key points at the beginning (the other was rule-of-reason balancing). Tellingly, Circuit Judge Smith instead wanted to discuss market definition first. Anyway, it seems that Epic's Section 1 argument may succeed, but there were also some skeptical questions and statements. I've said on previous occasions that I wouldn't mind if Epic prevailed on that one, but I view those unilaterally-imposed contracts of adhesion as unilateral conduct, though I recognize that Section 1 is also applied to tying.

California UCL (anti-anti-steering)

It seems to me that the appeals court isn't too interested in the California Unfair Competition Law part, but with the State of California participating in the hearing only for that part, the court inevitably had to spend some time on this, too. While I largely agree with Apple on that one, Mr. Perry said something that really makes zero sense to me. He said that the only anti-steering restriction that remains (after Apple allowed developers to communicate with users outside the app, such as by sending them emails about alternative options to purchase content) is that "Apple does not allow links and buttons because [Apple] cannot review them, track them, and protect users from malware, fraud, porn, hackers. It would be a breach in the wall that bad actors could exploit." The highlighted part makes no technical sense as long as there is an App Store monopoly, including that sideloading isn't possible. There is no way that iPhone users would end up installing malware or that hackers would take control of the iPhone unless there's a massive security issue that any website (regardless of whether people get there from inside an app or just with Apple's Safari browser) could exploit--and there's never been a security problem that allowed websites to practically enable sideloading.

It will take the appeals court some time to decide this huge case. Apple will most likely lose this appeal. If the Ninth Circuit reverses--as it rightly appears inclined to do--on market definition and--which would be really generous and beyond the call of duty, but appears to be the plan--resolves additional questions and provides valuable instructions, the first question is whether Apple will try an interlocutory appeal to the Supreme Court or content itself with an en banc petition. Anyway, just like Circuit Judge Smith, I believe this case should be remanded. Whoever loses on remand will appeal to the Ninth Circuit. And ultimately this case will presumably end up in the Supreme Court.

Words cannot express how much I'm looking forward to the Ninth Circuit opinion. I believe it will be worth the wait.

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Google appeals--but for now CLAIMS to comply with--Indian antitrust ruling, pauses enforcement of in-app billing rule: will Fortnite return to Google Play in India?

OutlookIndia.com--citing PTI (Press Trust of India)--reports that Google has decided to appeal the Competition Commission of India's (CCI) recent antitrust decisions:

• Indian antitrust ruling: "App developers are super dependent on Google" -- device makers choose "between signing a non-negotiable [contract] and commercial failure" -- consumers are "locked-in to [Android]"

• Competition Commission of India doubles down on Android antitrust enforcement, further protects app developers in IAP context and prohibits Google Pay self-preferencing

According to the OutlookIndia.com article, Google has "reportedly found three grounds, based on which the tech giant considers the ruling and fines faulty."

But for the time being, Google claims to act in compliance with those decisions:

"Following the CCI's recent ruling, we are pausing enforcement of the requirement for developers to use Google Play's billing system for the purchase of digital goods and services for transactions by users in India while we review our legal options and ensure we can continue to invest in Android and Play."

A major caveat: When Google announces compliance with respect to the Google Play app tax, it doesn't necessarily mean compliance-compliance. It could be the same sort of bad-faith as in the EU (where Google said it was about the Digital Markets Act, though in reality there already was a full-blown antitrust investigation underway) or in South Korea, where Google's rejection of the KaTalk chat app (which is ubiquitous in that country) has given rise to an investigation by the Korea Communications Commission.

I'm not saying that the Indian situation is the same and that Google may be charging developers a commission of almost the same amount even if they don't use Google Play Billing. The CCI also bars Google from imposing non-FRAND terms on developers that bypass Google Play Billing. Maybe that serves as a deterrent.

We may have to wait until we hear about complaints from the Indian app developer community that Google's compliance is just bad-faith compliance like we've seen in other places. There's actually a litmus test for whether Google really means to comply: whether they let Fortnite return to the Google Play Store in India (in case Epic Games so requests). They kicked out that app only because of its circumvention of Google Play's in-app payment system with the infamous 30% tax. Epic sued them immediately, and the case is at an interesting stage--about eight months prior to the U.S. trial--with Epic and Match Group (Tinder) asking the court for permission to amend their complaint with a claim of a per se antitrust violation.

Epic has been clear that it will return to the Google Play Store and Apple's App Store only when it will be free to offer alternative in-app payment options to its customers. If Google truly and genuinely means to comply with the Indian decision, then that would be a good test market now.

If Google refused to let Fortnite return to Google Play in India, it might risk non-compliance sanctions in India and undermine its credibility in the litigation in the Northern District of California.

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11/Fortnite/22: Epic Games v. Apple appellate hearing to take place on November 14 (originally scheduled for Friday)

Due to the unforeseen unavailability of a panel member, the United States Court of Appeals for the Ninth Circuit had to postpone the Epic Games v. Apple hearing that was originally scheduled for Friday (October 21). Fortunately, the delay is limited: the appeals court just gave notice of a new hearing date: Monday, November 14, 2022, at 2 PM Pacific Time. The location is still San Francisco, of course.

This has already been confirmed by counsel for the parties as well as the United States Department Of Justice. [Update] As expected, Joshua Patashnik for Amicus Curiae State of California has also confirmed. [/Update]

Here's a screenshot of the hearing notice and the three acknowledgments (click on the image to enlarge):

Much to my relief, the hearing is still going to take place this year. I was a bit worried because Apple appeared to be stalling when the Ninth Circuit was scheduling the original hearing date. On June 29, 2022, Epic formally objected to Apple's request to set a date later than the fourth-quarter court sessions for which the Ninth Circuit wanted to know counsel's availability. On October 31, a jury trial will (or was expected to) begin and Apple's appellate counsel, Mark Perry (formerly of Gibson Dunn, now Weil Gotshal), described that one as an "actual conflict." For this present week, he couldn't assert an "actual conflict" and merely "request[ed] that argument be set for a later date if possible" so as not to affect his "final pretrial preparations." Epic explained that this was just a "scheduling preference" and reiterated the urgency of the case given that an injunction has been stayed pending the appeal.

Apparently a mid-November hearing date now works for Mr. Perry as well (maybe the other case got settled).

In my previous post on this case I have summarized why I'm very optimistic for Epic.

I'm pretty sure the case will end up before the Supreme Court, but the question is which party will have to seek cert and on what basis.

11/Fortnite/22--that's my mnemonic for the new hearing date. But as I said in my previous post (on Microsoft's plans for a cross-platform app store) and on some earlier occasions, Epic v. Apple is not merely the Fortnite case. It's very much about the Epic Games Store. The world needs third-party app stores on iOS (and Android).

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POSTPONED: Epic Games v. Apple appellate hearing (originally slated for Friday) must be rescheduled due to unforeseen unavailability of panel member

No "Friday for Fortnite" in San Francisco--at least not this week's Friday (October 21), the day for which the Epic Games v. Apple appellate hearing had originally been scheduled.

I just checked the Ninth Circuit docket and found the following notice (click on the image to enlarge or read the text below the image):

10/15/2022   197   Filed clerk order (Deputy Clerk: SVG): Due to the unforeseen availability of one of the panel members, the hearing in these appeals scheduled for October 21, 2022 in San Francisco is postponed. The Clerk will reach out to the parties to reschedule. [12564274] [21-16506, 21-16695] (SVG) [Entered: 10/15/2022 11:01 AM]

10/15/2022   198   Case came on for submission before SIDNEY R. THOMAS, MILAN D. SMITH, JR. and MICHAEL J. MCSHANE SUBMISSION DEFERRED. [12564275] [21-16506, 21-16695] (SVG) [Entered: 10/15/2022 11:05 AM]

There could also be other reasons, but "the unforeseen availability" of a judge in recent years has had to do with COVID in well over 50% of all cases.

The panel (former Chief Judge Sidney R. Thomas, Circuit Judge Milan Smith, Jr., and--sitting by designation--District Judge Michael D. McShane) was going to hear five cases. Two of the three criminal cases (one of them a habeas corpus petition, which is by definition somewhat urgent) have been taken under submission. The calendar of the United States Court of Appeals for the Ninth Circuit still states that each side will get 10 minutes in the third criminal case; maybe another judge will fill in or they have some other solution.

Presumably the three judges to whom the case was assigned--and their clerks--have already spent a fair amount of time analyzing the case, and hopefully they will remain in charge.

For a civil law case, Epic Games v. Apple is a rather urgent one, also because it involves an injunction (the enforcement of which was stayed for the duration of the appeal). That's why I have hope that the appellate hearing is still going to take place this year. But the parties' appellate attorneys are among the most sought-after ones in the United States (with Epic's lead counsel on appeal having achieved the two most spectacular appellate successes in technology industry cases in recent years), which won't make it any easier to find a near-term date that works for everyone. And I suspect that Apple would rather delay things.

On Friday--the day before the postponement was notified--MacRumors' Joe Rossignol tweeted about Apple holding a pre-hearing brief with reporters that same day, telling them "that Epic Games faces an uphill battle" and reminding everyone of the district court deciding against Epic on 9 out of 10 counts:

FYI: Apple held a briefing with reporters today to argue that Epic Games faces an uphill battle with its appeal to the Ninth Circuit court next week. In September 2021, a U.S. district judge ruled in Apple's favor on 9 of 10 claims brought by Epic.

— Joe Rossignol (@rsgnl) October 14, 2022

That's just litigation PR. Don't believe it.

To begin with, the number of claims is irrelevant. Epic could theoretically prevail on just one and still be the winner. This is not a ball game where you count goals; it's not like Epic now needs to score X number of goals to equalize. The underlying reasons for which the district judge ruled against the nine claims were closely intertwined. For example, some state law claims necessarily failed because the related claims under federal law had been ruled against.

While Apple calls it an uphill battle for Epic, Judge Yvonne Gonzalez Rogers herself said at the outset of the case that the parties should please agree to a jury trial because in her observation the appeals court affords a lot more deference to jury verdicts than to judicial decisions.

No matter what Apple told the press on Saturday, I am sure they are very, very afraid in Cupertino:

• The law is on Epic's side.

  In a recent post on the case, I provided links to my writings on the merits of the case, and since then I have additionally explained why Epic should prevail on its tying claim.

• The facts are on Epic's side.

  As Epic clarified in its reply brief (and it was actually clear all along), Epic focuses on legal questions, where the standard of review is de novo: technically, that means zero deference--the opposite of an uphill battle. You take the facts and start the legal analysis from scratch. This even applies to mixed questions of law and fact. While Epic noted that it does disagree with some of the district court's factual findings, it believes it can win this appeal as a matter of law even with the facts being accepted as they were described by the court below. Apple tried very hard (but unconvincingly in my opinion) to portray Epic's legal argument as disagreement with the district court's factual findings.

  Psychologically, the district court's judgment doesn't inspire deference. It's extremely sloppy, with close to 300 typos, and stylistically not at a level with what you normally see from U.S. federal courts. The appeals court has probably already noticed the poor quality of the decision below, and identified some legal error of the kind that calls the entire ruling into question.

• Public policy is on Epic's side.

  Tim Cook's deposition toward the end of last year's trial made it clear that Apple can do to developers whatever it wants and doesn't even have to care about developer satisfaction. It's an unsustainable situation that developers' access to more than a billion users--roughly one billion out of the 1.2 or billion wealthiest people on the planet--depends on a single company's app review tyranny and arbitrary tax regime. Apple's monopoly abuse is causing macroeconomic damage.

• That's why Epic has an impressive group of amici--most notably the Department of Justice, 36 States, and "the Dean of American Antitrust Law"--while Apple is essentially just supported by shills.

  During the pendency of this appeal, two organizations supporting Apple have been exposed as astroturfers: ACT | The App Association receives the vast majority of its funding from Apple. It's an Apple Association. There is only one thing I'd have liked Epic to do differently during the appeal: I wish they had opposed ACT's amicus brief and later (after Bloomberg exposed ACT) sought sanctions. Hopefully they'll do so next time. Then there's the so-called Computer & Communications Industry Association--actually nothing more than a Cash & Carry Industry Association. Just last week, three influential EU lawmakers filed a formal complaint accusing CCIA of astroturfing (pretending to speak for small companies).

• Epic even has the better lawyers.

  It's counterintuitive as Apple is the world's richest corporation and facing a company with a valuation that amounts to only about 1% of Apple's market cap. But Tom Goldstein won Oracle v. Google (for Google) and FTC v. Qualcomm (for Qualcomm). Cravath, which masterminded and continues to manage this litigation, is America's most prestigious law firm. Benchmark Litigation named five Cravath partners to its Top 100 Trial Lawyers in America list, two of whom represented Epic at last year's trial: Gary Bornstein and Katherine Forrest.

  Apple has very good lawyers, too, but I'm really underwhelmed by the work they did on this appeal, though their primary problem is that Apple is wrong. They even conceded away the foremarket part of Epic's single-brand market definition. Apple's principal brief on appeal was all rhetoric and little substance.

"Advantage Epic" across the board.

The postponement is unfortunate. The app developer community, of which I'm a part, urgently needs change, and this case is so very important. I'm also a bit worried that Congress may not adopt the Open App Markets Act as we're approaching the end of the legislative term, and there is a risk of some Senators and United States Representatives preferring not to hold the decisive vote shortly before the Epic v. Apple appellate hearing. But this is a pressing problem, and I hope they'll do the right thing and #OpentheAppStores. Both Congress and the United States Court of Appeals for the Ninth Circuit.

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36 U.S. states, Epic Games, and consumer plaintiffs seek sanctions against Google for not preserving any relevant Google Chats: by default, all Google Chats are permanently deleted every 24 hours

A few months ago, Google came away unscathed from a discovery dispute with the United States Department of Justice and 36 U.S. states: Judge Amit Mehta of the United States District Court for the District of Columbia denied a motion to impose sanctions on Google over its "Communicate With Care" policy. Basically, Google told employees to keep lawyers in the loop on communications that might be relevant to a future antitrust case in order to be able to claim attorney-client privilege. What happened then was that hundreds of such emails were reviewed again, and that process may have strengthened the position of the governmental plaintiffs, but Google didn't get penalized.

Still, Google's antitrust woes are as substantive as they are manifold. See my previous post: European Commission authoring Statement of Objections (antitrust charges) against Google's ad business while DOJ is rumored to be preparing its second antitrust lawsuit and Google announces summary judgment against the pending one.

And now there's another major discovery dispute. Shortly before midnight Pacific Time, 36 U.S. states (to be precise, 35 states plus the District of Columbia), Epic Games, and consumer class action plaintiffs brought a joint motion for either an adverse inference against Google or alternatively for sanctions in the Google Play Store antitrust case in the Northern District of California:

Motion by 36 States, Epic Games, and consumer plaintiffs against Google for adverse inference under Rule 37(e)(2) or alternatively Rule 37(e)(1) sanctions based on spoliation of evidence

The key allegation is that "Google permanently deletes Google Chats every 24 hours—and did so even after this litigation commenced, after Plaintiffs repeatedly inquired about why those chats were missing from Google’s productions, and after Plaintiffs submitted a proffer on this exact issue at the Court’s direction." While Google apparently just blames this on an enterprise-wide default setting--"history off"--the governmental and private plaintiffs dismiss that excuse, arguing that "[a]ny administrator of Google Chats—an application developed by Google—could have changed this default setting at any point for all custodians." The emphasis on "by Google" is in the document itself. While it's a good thing when tech companies eat their own dog food (I wish someone could force all Apple employees to read their company-internal iMessage chats with the same poor contrast that users get when messages come in from Android users), they can't easily hide behind default settings and other properties of the services they create, control, and could change anytime.

The first footnote notes that Google Chats was not the only Google product they used, so the term "Google Chats" must be understood as a collective noun referring to all those services:

"To Plaintiffs’ knowledge, Google has employed different instant messaging platforms over time, including Google Hangouts, Google Meet, and, most recently, Google Chat. Plaintiffs refer to these platforms collectively as 'Google Chats' or 'Chats.'

Google has renamed and reshuffled its chat services. Most recently, Google Duo was merged into Google Meet.

Even the custodians (i.e., the Google employees who were specifically put under retention obligations due to this litigation) could have "changed this default setting on their own workstations," meaning that they wouldn't have needed any help from an admin and no one would have had to change the program code either. But according to the motion, Google "chose to do nothing to ensure" that those custodians changed the setting locally.

The first plaintiff in this set of Google Play cases was Epic's August 13, 2020 complaint. Less than a month later, "Google acknowledged that it was under an obligation to preserve evidence that could be relevant to the litigation by issuing an initial litigation hold notice."

The 36 states, Epic, and the consumer plaintiffs are convinced that "Google destroyed substantive information" as they found out through discovery and depositions "that Google employees use Google Chats on a daily or near daily basis, often for sensitive business communications" (emphasis in original) and "virtually every Google witness asked about the topic confirmed the pervasive use of Google Chats--and Google's failure to take sufficient steps to perserve those Chats." Google's position that those chats are "generally non-substantive" is revealing, as "generally" means there are exceptions.

The motion names Google's VP of Strategy & Operations for Platforms & Ecosystems, Jamie Rosenberg, its VP of User Expeirence and Product Management, Tian Lim, its Director of Play Partnerships, Strategy & Operations, Michael Marchak, and Senior Software Engineer Justin Mattson as examples of Google witnesses who testified on the use and non-retention of Google Chats.

Apparently, some chats were indeed produced by Google, and according to the heavily redacted motion, they "contain substantive post-litigation discussions of topics at the heart of the case."

It's a bit reminiscent of the "Communicate With Care" policy I mentioned further above that Google--according to the motion--"intentionally diverted sensitive communications to Chat, with the understanding that those Chats would be expunged daily."

What consequences should Google bear in the plaintiffs' opinion?

The plaintiffs have only one objective: to win the case. That's why their preferred remedy is an adverse inference instruction. The jury would be told that it "may or must presume the information [that Google deleted so it wouldn't be available as evidence in this litigation] was unfavorable" to Google.

The long-form order the plaintiffs propose says this:

"The Court will therefore instruct the jury that (1) Google had a discovery obligation to maintain Google Chats no later than August 13, 2020; (2) Google had a mechanism to do so; (3) Google failed to implement that mechanism; (4) Google automatically deleted relevant Google Chats for each custodian in this case; (5) this destruction prevented Plaintiffs and the jury from learning the contents of those Google Chats; and (6) the jury should assume that the information Google had destroyed would have supported Plaintiffs’ claims against Google."

Should Judge James Donato of the United States District Court for the Northern District of California considered that Rule 37(e)(2)(B) remedy overreaching, the plaintiffs at least want a Rule 37(e)(1) "curative jury instruction." That one would look more like items 1-5 of the above proposal, but would lack the adverse inference part (item 6).

As always, audiatur et altera pars. Let's see how Google seeks to justify its actions. And in the meantime, there'll be the big Epic Games v. Apple appellate hearing in the United States Court of Appeals for the Ninth Circuit. Here's my preview of that one.

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We now know the three judges who will decide Epic Games' appeal against Apple--and the composition of the Ninth Circuit panel, two of whose members ruled against the NCAA, likely favors Epic

It's no longer a secret to which three judges the United States Court of Appeals for the Ninth Circuit has assigned the Epic Games v. Apple App Store antitrust appeal. The hearing will take place in San Francisco in ten days (October 21), in the mid to late morning by local time. And these are the three judges:

S.R. THOMAS, and M. SMITH, Jr., Circuit Judges, and McSHANE (Oregon), District Judge

I'm thrilled! I want the fundamentally flawed ruling by the district judge overturned, and my initial resarch indicates that this panel is very unlikely to be hostile to Epic's case for political reasons.

While I consider myself more of a Republican than a Democrat on a number of important issues, I was a bit worried about the possibility of a Republican "antitrust minimalist" majority in this case (though things have changed: Justice Kavanaugh tipped the scales in favor of an iPhone user class action against Apple in the Pepper App Store antitrust case, and conservative justices strengthened antitrust law in NCAA v. Alston). The Ninth Circuit used to be very liberal until President Trump got to nominate a number of judges. So it took a bit of luck, and that's what Epic deserves because the district judge made some really bad and unnecessary mistakes that favored Apple.

Now that we have a complete cast of characters, I'll

• introduce the three appellate judges,

• compare the parties' support from amici curiae ("friends of the court")

• provide links to my writings on the merits of this case, and finally

• talk about the lawyers on both sides.

Spoiler: "Advantage Epic" in each of those four respects. That still doesn't mean that the outcome is a foregone conclusion. Anything can happen in a complex, high-stakes case like this. But the stage looks like it's set for a reversal (which Apple will then appeal to the Supreme Court, of course).

Panel composition

1. Former Ninth Circuit Chief Judge Sidney R. Thomas:

   Judge Sidney Thomas, a Democrat, was nominated by President Clinton to the Ninth Circuit in 1996, and served as the appeals court's chief judge from late 2014 to late 2021. He has heard well over 11,000 (!) appeals and authored more than 400 precedential opinions. He took senior status this year.

   Judge Thomas came close to a nomination for the Supreme Court: President Obama interviewed him in 2010 (but chose now-Justice Elena Kagan).

   The most important antitrust decision he authored was the 2020 per curiam in the NCAA case (In Re NCAA Athletic Grant-in-Aid Cap Antitrust Litig.) that the Supreme Court affirmed last year under the caption of National Collegiate Athletic Assn. v. Alston. That bodes well for Epic's appeal in multiple ways, including but not limited to the application of Sherman Act Section 1 and, especially, the rule of reason: NCAA distinguishes between truly procompetitive justifications and other excuses. That may make it harder for Apple to score points with its security and privacy pretexts.

2. Circuit Judge Milan D. Smith was appointed by President George W. Bush, but is neither a Republican nor a Democrat.

   Not only did he vote for then-Chief Judge Thomas's NCAA opinion, but he also filed a concurrence in which he even went beyond. In particular, Judge Milan Smith is concerned about precedent that permits "defendants to offer procompetitive effects in a collateral market as justification for anticompetitive effects in the defined market"--that is also an issue in Epic v. Apple. The final paragraph of his concurrence in NCAA is really interesting in this regard:

   "Lacking a robust justification, I fear that our cross-market Rule of Reason analysis frustrates the very purpose of the antitrust laws, in this case to the great detriment of Student-Athletes. I hope our court will reconsider this issue in a case that squarely raises it."

   Epic's case against Apple is an opportunity to clarify a number of things, and (apart from single-brand markets) the admissibility of certain "justifications" for anticompetitive conduct is an issue Epic and its amici raise.

3. Sitting on the Ninth Circuit by designation is District Judge Michael J. McShane. He was appointed to the United States District Court for the District of Oregon by President Obama in 2012. I haven't been able to research anything more specific about his political affiliation than the fact that he's an Obama appointee, a fact that Apple won't find encouraging.

Epic's amici are as good as it gets.
Apple has little more than astroturfers and shills.

Epic v. Apple is David v. Goliath in some ways, but when it comes to support for the parties' positions in the form of amicus curiae briefs, one would think that Epic, not Apple, is the world's richest corporation.

Epic's amici include, but are not limited to,

• the United States of America (i.e., the federal government, represented by the DOJ, which will actively participate in the hearing),

• 35 U.S. states supporting Epic's federal antitrust claims plus California focusing on its state law claims,

• 38 professors, most notably the "Dean of American Antitrust Law" (whom even Apple's amici recognize as the #1 U.S. antitrust scholar!), Professor Herbert Hovenkamp,

• the Electronic Frontier Foundation (EFF) (which surprised me in a very positive way because the EFF very often sides with Google, and Google is facing a similar Epic lawsuit), and

• Microsoft.

There was no way that Apple could have counterbalanced this even if the United Nations had filed a statement in its support following a vote by its General Assembly. Apple's App Store terms, policies, and practices are against the interests of the wider economy and of society, and nothing says it like the fact that Apple has almost no support beyond Roblox (another gatekeeper whose treatment of creators is highly controversial) and astroturfers and other lobbyists who are paid by Apple (and/or Google):

• The appeals court should actually sanction Apple because ACT | The App Association is largely funded by Apple (as Bloomberg reported): it's just ACT | The Apple Association. They do not represent small app developers like me, period. It's a disgrace that a lobbying front for the world's richest corporation shamelessly collected small business aid from the U.S. government at the start of the COVID-19 pandemic.

• CCIA calls itself the Computer & Communications Industry Association, but would more appropriately be called the Cash & Carry Industry Association. Looking at when Apple joined them (shortly before the Epic v. Apple district court ruling) and what CCIA has done since then, it's pretty clear that Apple primarily wanted another ally--or service provider--to defend its App Store monopoly abuse. CCIA deceptively claims to advocate open markets and fair competition, but is about the very opposite these days.

In its patent dispute with Ericsson, Apple is essentially telling the United States International Trade Commission that by virtue of its profitability, whatever is good for Apple is good for the United States: even patent infringement would be great--so long as it benefits Apple. But as an early-stage venture investor pointed out, Apple is harming small businesses (even outside the technology industry). Apple's App Store rules are even an inflationary force. And it ruthlessly cashes in on classism, which hurts many low-income American families. The Biden Admistration and three dozen U.S. states are absolutely right to support Epic against Apple.

Epic's appeal is clearly meritorious

Using chess terminology, the adjudication of an antitrust claim has an opening, a middlegame, and an endgame.

• Opening

  • Market definition: The district judge got the foremarket part of Epic's single-brand marekt definition wrong to a partly even absurd extent. Epic also has very strong aftermarket arguments.

  • On the applicability of Sherman Act Section 1 vs. Section 2, I'm torn. Philosophically, I'm sympathetic to the approach by the district court and Apple as well as some of its amici that unilaterally dictated agreements should be dealt with under Section 2 and Section 1 should be reserved for cases in which two players having a horizontal or vertical relationship voluntarily disable market forces, but I also see that tying is a Section 1 issue (that part is even undisputed).

• Middlegame: The key issue here is the standard for tying. One part of that overlaps with a question relevant to market definition: whether there can be a market for something Apple doesn't sell separately. (That's also an issue in the Apple Pay case I mentioned further above.)

  While I have a firm opinion that Apple engages in tying, I have yet to analyze that part more fully in order to elaborate on it, which I intend to do before the Ninth Circuit hearing.

• Endgame: rule-of-reason balancing. I discussed that part a few days ago, and would like to refer you to my analysis, which led me to conclude that Judge YGR failed to perform the balancing required under the rule of reason. The district court's judgment cannot stand in that regard either. The question is just whether the appeals court can directly enter a liability judgment or whether there will be a remand.

While even a sloppy judgment could be well-reasoned, the close to 300 typos and similar errors in the district court's judgment are symptomatic of a fundamentally flawed decision.

The lawyers: Tom Goldstein (plus the DOJ) v. Mark Perry

Epic will be represented by Goldstein & Russell founder Thomas C. "Tom" Goldstein. He's a machine and did an incredible job for Qualcomm against the FTC.

While Mr. Goldstein is going to be Epic's frontman, I wish to mention the brilliant strategic mastermind behind this case: Cravath Swaine & Moore's Gary Bornstein. He deserved to win in district court, but for the reasons I discussed in various other posts it didn't work out. Justice may now be done at the appellate level.

Nickolai Levin from the Antitrust Division of the United States Department of Justice will deliver oral argument on the Biden Administration's behalf. Deputy Solicitor General Joshua Patashnik will speak for the State of California.

Apple's counsel, Mark Perry, joined Weil during the pendency of this case. While I don't doubt for a second that he's outstanding, Tom Goldstein has an even more impressive track record in the nation's highest courts.

Apple's principal brief on appeal was replete with rhetoric (really too much for my taste, though I enjoy creative and persuasive writings), but very weak on substance, which--to be clear--is not the lawyers' fault, except that I consider it a surprising blunder on their part to concede away the foremarket part of Epic's proposed single-brand market definition by acknowledging that iOS competes with Android while claiming that there is no such thing as a smartphone operating system market for antitrust purposes. When I read that admission, I couldn't believe my eyes and immediately blogged about it.

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Ahead of Ninth Circuit hearing in Epic Games v. Apple, Coronavirus Reporter's opening brief in parallel case highlights censorship as another key App Store antitrust issue

As I reported on Tuesday, the United States Court of Appeals for the Ninth Circuit will hear the Epic Games v. Apple cross-appeal on October 21. Epic already received an impressive outpouring of support from amici curiae all the way up to the Biden Administration and 35 U.S. states (even 36 if one counts California's submission, though it addresses only the state Unfair Competition Law part of the case).

On the other end of the broad spectrum of Apple antitrust cases, there is a case that was brought last year by the team that developed a rejected iOS app named Coronavirus Reporter. One of the team members is a former NASA physician (famous astronaut John Glenn’s pre-mission cardiologist), but don't expect to find any major corporation or Big Law firm involved with that case. As I had my own issues with Apple's (and Google's) COVID app guideline, I naturally take an interest in this case regardless of the lack of firepower behind it. I found the original complaint and some of the subsequent pleadings unusually aggressive, to an extent that didn't serve those plaintiffs well. The case was dismissed. However, they have definitely tried hard to make a very factual and reasonable argument in their appellate opening brief:

Coronavirus Reporter v. App... by JeffreyIsaacs

I have not fully analyzed the order dismissing the complaint, and take no position here on the merits of this appeal, other than that this opening brief is a whole lot better than anything I had seen from them before, not only in style but also in substance.

But what I do hope is that the circuit judges who will hear Epic's appeal in a little over two months from today will also take a look at Coronavirus Reporter v. Apple. What that case shows is that Apple's App Store tyranny is not merely a matter of money. The 30% app tax is a serious issue--but if an app cannot be published at all, or not in the form in which it was designed and could have been more appealing to the market, the damages is far greater. It's 100%, not 30%.

Coronavirus Reporter's opening brief focuses on app review issues. That is a nice complement to Epic Games v. Apple, where Judge Yvonne Gonzalez Rogers simply assumed that some manual app review--no matter how imperfect--was better than none at all. There will never be a perfect plaintiff--even Epic isn't, though it undoubtedly has a lot going for it. But the issues surrounding app review are so fundamental that even a small plaintiff like Coronavirus Reporter is now in the position to tell an interesting story to the appeals court.

There's almost no time left to file an amicus brief, but this would be--or would have been--an opportunity for stakeholders to draw the court's attention to some new developments, even including the Wall Street Journal's revelation of revenue-sharing discussions in which Apple was trying to bully Facebook.

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Ninth Circuit will hear Epic Games v. Apple App Store antitrust appeal on October 21 in San Francisco

The technology industry's most important private antitrust lawsuit in history--Epic Games v. Apple--will be heard by the United States Court of Appeals for the Ninth Circuit on Friday, October 21, 2022. The Ninth Circuit conducts its hearings at different locations on the West Coast; this one will be held in Courtroom 3 of the James R. Browning U.S. Courthouse in San Francisco, just across the Bay Bridge from Oakland, where last year's Epic v. Apple trial took place.

It's a cross-appeal as Epic is appealing the dismissal of its federal antitrust claims under the Sherman Act, while Apple is appealing the consolation prize Judge Yvonne Gonzalez-Rogers handed Epic in the form of an anti-anti-steering injunction under California state law (Unfair Competition Law).

I think the correct outcome would be for Epic to prevail on market definition and some other issues, and the part under state law would then become pretty irrelevant. In any event, the losing party will certainly file a petition for writ of certiorari (request for Supreme Court review).

The district court's judgment is fundamentally flawed. It is symptomatic that there are hundreds (!) of typos in the unusually sloppy Rule 52 Order, which I've documented in a PDF file. With respect to the foremarket part of Epic's single-brand market definition, Judge YGR got everything wrong that she possibly could get wrong: the law, the economics, and the technology. Those misconceptions culminated in a sentence according to which Apple's market share in smartphones is smaller than in smartphone operation systems, though we all know that no iPhone is sold without iOS and iOS is never sold without an iPhone. There's a good chance now that the appeals court will identify some of the glaring defects of that decision, and afford the district court's judgment no more deference than it deserves.

After that erroneous decision, Apple was allowed to--and actually did--terminate all of Epic's developer accounts. A temporary restraining order that was subsequently converted into a preliminary injunction barred Apple from doing so in the summer of 2020, but was lifted as a result of the district court's judgment in September. On Twitter, Epic CEO Tim Sweeney recently mentioned that Epic can't even update Fortnite for the Mac anymore, though Mac app distribution was not an issue in that antitrust case. I'd love to see a massive Epic v. Apple damages lawsuit in a couple of years, but in order for that to happen, Epic firstly needs to convince the judges that Apple has violated the antitrust laws.

Apple will be represented at the hearing by Mark Perry, who already sported a ponytail at some of the Epic v. Apple hearings two years ago. Back then he was with Gibson Dunn; he has recently joined Weil, Gotshal & Manges. While Epic hasn't yet filed a notice of who will be its lead counsel, I presume--based on the appellate briefs--that Thomas C. Goldstein will be the chosen one. He defeated the Federal Trade Commission--before the same appeals court--on Qualcomm's behalf, and successfully defended Google against Oracle before the Supreme Court. He's quick-witted, forceful, and even though I found some of the points he made in Oracle v. Google more than questionable, I'm glad--as an app developer--that Epic has enlisted him.

Either side will get 20 minutes of oral argument time at the appellate hearing. Four other cases (three of them criminal) are presently on the list before the "Fortnite case" for that day, with the first one to be heard at 9&nsp;AM. Should it stay that way, the Epic v. Apple hearing would most likely start between 10:30 AM and 11:30 AM Pacific Time.

We may see requests from the DOJ and from state AGs to participate in oral argument:

• The Biden Administration formally filed a brief in support of neither party, but every single one of the numerous points it raised has the potential to help Epic turn the case around. Should the DOJ request to participate, there's no question that it will be allowed to do so. But knowing that a cert petition is guaranteed, and considering that this case does raise issues worthy of Supreme Court review, the DOJ may wait until then.

• 35 U.S. states filed an amicus curiae brief in support of Epic Games. Those are the three dozen states (one of which--the District of Columbia--is a state for all practical intents and purposes here, though formally it doesn't enjoy statehood) suing Google in parallel case, minus California, which filed a separate brief (next bullet point). If those 35 states agreed on one attorney to speak for them, they'd also likely be granted the right to participate.

• California decided to file at a later stage and focus on the cross-appeal, which involves its state UCL. With respect to that item, California might also deliver oral argument.

On top of raising some very important competition issues concerning Apple's treatment of app developers, Epic's case has brought to light a number of interesting facts relating to Apple's and even some other parties' practices. Take Google's #GetTheMessage campaign, which was just launched this week (and on which I commented yesterday): as a result of discovery in Epic Games v. Apple, Apple-internal communications were made public. Apple executives discussed the pro's and con's of bringing iMessage to Android, and a key reason not to do so was that parents might otherwise be more interested in buying their children less expensive Android phones. The problem is that social pressures (classism) force low-income families to buy their kids iPhones--a U.S.-specific problem due to Apple's market share.

In one of the next posts, I'll also talk about a document from Epic v. Apple that involves Sony and is interesting in the context of Microsoft's proposed acquisition of Activision Blizzard.

There is now another antitrust case against Apple pending in the Northern District of California that has the potential to be the perfect next step after Epic v. Apple: a group of French publishers represented by the Hausfeld firm are challenging not only the app tax and Apple's app review regime, but also the App Tracking Transparency (ATT) scheme. ATT is making a terrible impact on the economy at large. On Tuesday, the Financial Times' Patrick McGee reported on small businesses now "finding it prohibitely expensive to target likely consumers as they once did," and some small companies are really suffering.

Outside the U.S., various consumer class actions are also worth watching and have the potential to bring down Apple's (and Google's) app tax. The latest development in South Korea--a fact-finding inquiry by the Korea Communications Commission--may also yield significant results.

Getting back to the U.S. situation, it's possible that Congress will vote on the Open App Markets Act (OAMA) at around the time of the Epic v. Apple appellate hearing. Last week, CNBC and other media reported on the fact that while Congress passed a bill on chip manufacturing subsidies before its summer recess, "tech industry's critical policy issues" had yet to be addressed, among them the American Innovation and Choice Online Act (AICOA) and the OAMA. Now the end of the Congressional term is approaching fast. One expert--Paul Gallant, the managing director of investment bank Cowen's Washington Research Group--said that Congress might end up voting on the OAMA, which is more focused and "gained broader support in the Senate Judiciary Committee than the American Innovation and Choice Online Act." I consider both bills important, but as an app developer I'm naturally most interested in avoiding any further delay of the OAMA's passage into law.

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