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Antitrust Matters Episode 9: Epic v. Apple Ninth Cir. Appeal: Reactions to and Analysis of the Oral Argument

Posted  November 22, 2022

Antitrust Matters provides engaging and timely conversations about competition policy in the digital age. Antitrust has always mattered to consumers and businesses, and to antitrust lawyers and economists, but today it also is in the political and public discourse more than ever. From the prices we pay for food, travel, financial services, payments to the way we interact daily using digital apps and platforms, antitrust touches each and every one of us in ways we may not even realize. Antitrust Matters brings you you perspectives of experts and visionaries in the field who discuss where antitrust law has been, where it is going and why it is so important to our current political discourse.

In this episode of Antitrust Matters, Matt Cantor, Ankur Kapoor, and David Golden analyze and react to the recent oral argument before the Ninth Circuit Court of Appeal in the Epic Games v. Apple case.  Both Epic and Apple appealed the district court’s bench trial decision, which ruled against Epic on its antitrust claims but nevertheless issued an injunction against Apple’s iOS antisteering rules under California’s Unfair Competition Law.

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Episode Transcript and Show Notes:

Jeff Shinder:

Welcome to Antitrust Matters, a Constantine Cannon podcast where we have engaging and timely conversations about competition policy in the digital age. My name is Jeff Shinder and I’ll be your host. Antitrust has always mattered to consumers and businesses, but today it is also in the public discourse more than ever. From how we get our food on our plates to how we travel to the way we interact daily using digital apps and platforms, antitrust touches each and every one of us in ways we may not even realize. In Antitrust Matters, we bring you perspectives of experts and visionaries in the field who discuss where antitrust law has been, where it is going and why it matters today more than ever before.

David Golden:

Welcome back, everyone. I’m David Golden, a partner in Constantine Cannon’s antitrust practice. I’m filling in for Jeff Shinder today. We’re here to discuss the recent Ninth Circuit oral argument in the Epic Games, the Apple case. This case has received considerable press coverage and many people in the technology industry are following it closely, and not just antitrust lawyers. Competition issues in the technology industries are a hot button issue now with bills pending in congress, cases and investigations by the DOJ, FTC and other competition authorities as well as recent legislation in the European Union and other areas around the world.

To set the stage, Epic v. Apple concerns competitive restraints in Apple’s iOS platform, specifically the App Store and in app payments. Apple does not allow competing app stores or competing in-app payment systems for digital goods and services on iOS. Epic Games is a video game company that makes the popular Fortnite game among other products. Fortnite was available on iOS via the App Store until it enabled its own in-app payment system. Apple kicked Fortnite out of the App Store, and shortly thereafter Epic filed an antitrust suit against Apple in the Northern District of California.

After events trial, judge Yvon Gonzalez Rogers ruled against Epic on all of its antitrust claims but did rule for Epic under California’s unfair competition law and issued an injunction against some of Apple’s anti-steering rules. We’ll be discussing a few of the issues raised with oral argument, but I first wanted to introduce two of my colleagues, Ankur Kapoor and Matt Cantor. Ankur and Matt are partners in the antitrust practice as well.

Ankur co-chairs the ADA antitrust law sections media and technology committee and his practice has involved antitrust litigation and counseling on many digital platforms. Matt has been at Constantine Cannon for 23 years and is a partner that leads its healthcare practice. He has tried a number of antitrust cases, both bench and jury trials, and argued several times in the various courts of appeal. He has litigated antitrust cases concerning healthcare, payments and media and telecommunications and is currently lead counsel for a certified class in an antitrust case concerning hospital services that is currently on appeal in the Ninth Circuit, in which Matt will argue before a Ninth Circuit panel next year.

Welcome gentlemen. So the couple of years, antitrust cases did not exactly capture public imagination, but this case and others continue to generate public interest in competition law. Matt, let’s start with you. What do you view as important about the Epic case?

Matthew Cantor:

Well, I think it’s important because there has been such an emphasis lately placed on the antitrust laws application to technology providers. Clearly there is a lot of chatter concerning the subject in the press, on social media and in the Congress. There’s been cases brought by the Federal Trade Commission against Facebook by the Justice Department, against Google and by state’s Attorney General. So there is an overall concern that some of the technology players have violated antitrust law.

Let me just say that it’s not necessarily true that they have. Some may have, some may not have. All of them may have, none of them may have. The one issue that needs to be thought of though very, very specifically is just because these entities are big doesn’t mean that they have offended antitrust law. You can become a monopolist because you have better skill or better business acumen. You just built a better mouse trap that consumers wanted. So just because these entities are big doesn’t mean that the antitrust law has been violated. Not withstanding that, there are certain practices that they’ve engaged in that have caused a substantial concern, particularly for antitrust enforcers. And this is the first case that has really generated significant appellate opinion as well as a trial record. I know that that’s something that Ankur has thought on.

Ankur Kapoor:

Yeah. I was just going to say that thinking about the major enforcement actions against some of the large digital platforms that have come under antitrust scrutiny, Amazon, Apple, Facebook, Google, some people include Netflix, Microsoft is certainly one as well. This is the first fully developed trial record that we’ve seen. We’ve seen a number of district court opinions, but they’ve been at the pleading stage before there’s been any factual or expert discovery. This is the first action in which there is a robust evidentiary record detailing in this particular case, how Apple’s platform iOS operates both technologically and economically operates with respect to mobile gaming. And mobile gaming, as the court found, that’s 100 billion dollar a year industry. So in terms of big tech cases, this is certainly one of them and it’s the first where we have a record that we can discuss and that the Court of Appeals is going have to deal with.

Matthew Cantor:

I should also just state, David, you said why is this case important and I just talked about the headlines, the enforcement actions and the legislative proposals. But it’s also important because technology providers affect all Americans. Every American, or virtually all Americans, have a smartphone. All Americans are familiar with social media whether or not they actively use it or not. Amazon sells goods to virtually every American, if not all Americans. So these are very, very big players. So on the one hand they’re used, but on the other hand they affect everyone from the most wealthy to the least wealthy. So they’ve just had a tremendous effect on American lives.

David Golden:

Let’s delve into some of the issues in the oral argument now. There was extensive discussion of the rule of reason and role of balancing anti-competitive arms with pro competitive benefits. So Ankur, I’ll first turn this over to you and then Matt can respond, but it would probably be helpful to the audience to explain exactly what the rule of reason is and the role of balancing in this context.

Ankur Kapoor:

Sure. So broadly speaking in antitrust law, there are two modes of analysis. The first, which is not an issue in Epic versus Apple, is the so-called per se rule where certain conduct is per se unlawful, and that includes classic hardcore price fixing. A number of competitors get together and agree on the prices that they’re going to charge for their products. This again, is not one of those cases. The second paradigm is the so-called rule of reason. And the rule of reason dates back to Justice Brandeis’s opinion in Chicago Board of Trade in 1918. So it is 104-years-old. And the rule of reasons is simply you have to weigh any competitive effects of a restraint of trade or a challenge conduct against its procompetitive effects.

Antitrust law is a no harm, no foul jurisprudence. So there has to be some competitive harm in order for the conduct to be held unlawful under the antitrust laws. And as the rule of reason has evolved over the last century and as recently as the Supreme Court’s decisions in Ohio versus American Express in 2018 and CAA versus Austin in I think it was 2021, as it’s evolved, it’s evolved into a three step burden shifting process. The first step, the burden is on the plaintiff to prove the anti-competitive effects of the challenge conduct, and those are classically higher prices, lower quality or lower innovation, lesser innovation.

Once the plaintiff has met that burden of proof, the burden then shifts to the defendant to demonstrate the procompetitive benefits of the challenge conduct. And the reason for the defendant to bear that burden makes a great deal of sense because it’s the defendant’s conduct, the defendant decided what were the business reasons for engaging in that conduct for implementing that business practice? How does that conduct benefit the defendant? How does it benefit competition? So the defendant is really in the best place to put forward the justifications for its conduct. And that’s why the burden sits with the defendant.

If the defendant does that, then the burden shifts back to the plaintiff to show one of two things. The plaintiff could show that the defendant’s procompetitive justifications were pre-textual, they were just made up for the litigation. Or the plaintiff could show that there are ways to accomplish those procompetitive objectives using means that are less restrictive of competition. And if the plaintiff does that, then inherently in that analysis, the anti-competitive effects are greater than the procompetitive effects because you can get those procompetitive effects without restraining competition as much.

Ultimately, the finder of fact, and that could be a jury, in Epic versus Apple it was the judge because it was on trial, the finder of fact has to balance the anti-competitive effects and procompetitive effects. If it’s a jury trial, we’re not privy to the jury’s deliberation. So we, the lawyers or the public, don’t really know how juries weigh procompetitive effects and anti-competitive effects. But in Epic versus Apple, because the judges required as the finder of fact in its judgment to put forth the reasons why the anti-competitive effects are greater or lesser than the procompetitive effects, the absence of that has generated Epic’s principle argument on appeal.

In other words, that the district court did not engage in that balancing and simply said, “Here are the anti-competitive effects. Here are the procompetitive effects I find for Apple.” That’s essentially what the District Court’s opinion said. And Epic’s primary argument on appeal is that the district court, as the trier of fact, was obligated to conduct that balancing and determine net was this conduct good for competition or bad for competition?

Matthew Cantor:

Yeah. Let me just step in. I’m not going to restate the rule of reason, because Ankur did such a great job doing it. The rule of reason is antitrust 101. One of the things that was very surprising about the role of argument yesterday was there was a debate over whether or not there is a balancing form. In other words, when you get to that after the plaintiff has established that there’s some anti-competitive effects put into practice and the defendant has established there’s probably some also procompetitive benefits as well, there wasn’t question and a debate as to whether the court should do anything thereafter.

And clearly, the rule of reason requires that balance. The authorities that Ankur mentioned, very recent authorities merely just reaffirm what’s happened over the last century in interpreting the rule of reason, which is at the end of the day, if you find effects and you find benefits, there has to be a way. There also was discussion. Judge Smith was the judge who posed a question. There was discussion about how do you do the balancing? Does there have to be some type of quantitative analysis that demonstrates that at the end of the day the anti-competitive effects outweigh the procompetitive benefits? And the plaintiff’s lawyer, Tom Goldstein, said, “No. This can be done qualitatively.” So I was surprised that so much debate was had yesterday over whether or not a balancing should be done or explicit balancing needs to be done by a judge who’s making findings of fact and conclusions of law under the federal rules of civil procedure. But nonetheless, that was being debated yesterday.

Ankur Kapoor:

And I think that there are some cases where you can do a quantitative balancing. So I’m thinking of, for example, cases involving payments from brand name pharmaceutical companies to generic pharmaceutical companies which settle patent litigation between the two of them, but which result in the generic pharmaceutical company agreeing not to bring its lower cost generic drug to market. And there you can quantify how much more have consumers and health plans paid for prescription drugs? And you can quantify what the savings were in litigation costs by settling that litigation. So there you can actually do math and to a reasonable degree of accuracy calculate what the net anti-competitive harm is.

In Epic versus Apple, the anti-competitive harm that was alleged to be Apple’s maintenance of a super competitive commission of 30% on all app sales and in-app purchases. And Apple’s procompetitive justifications were payment security and data privacy, which are notoriously difficult to quantify. So I think in this case the idea of a quantitative balancing, it just doesn’t work. And as Matt said, the rule of reason has never required quantitative balancing. It certainly can accommodate it where it makes sense, but it’s never actually required.

David Golden:

So let’s shift to market definition. There was a significant amount of argument over the markets at issue in the case. And first, and I’ll put this to you, Matt, is what is market definition in an antitrust case and what were the markets at issue here in the context of the oral argument? And it’s a bit of a preface, because we all know market definition is not necessarily required in antitrust cases, especially where there’s horizontal conduct, but it was established here.

Matthew Cantor:

So in many rule of reason cases, the court requires that markets be defined because when you define a market, you are setting forth the scope of effective competition. And by doing that, you are providing the court with a proxy to determine whether or not the defendant wields market power. Do they have a large slice of the defined relevant market that make up 50%, for example, or 60% of the commerce in that market or what kind anti-competitive effects have been caused? Where have they been caused? Have they been caused in this area of effective competition?

So in many rule of reason cases, particularly cases that are wholly vertical, that’s where you have a manufacturer that’s coercing, for example, retailers to engage in certain distribution policies, where you have that kind assessment, that’s an issue in an antitrust case. You generally have to define a relative market. Not in the first eight cases that Ankur mentioned. One is if it’s a price fixing case, you don’t have to do that. And not in some other rule of reason cases, particularly those that are dealing with what are called horizontal restraints.

And there was an issue in this case, I must say. There was a fight over whether or not the restraint at issue here Apple’s requirements regarding its App Stores that were put on its developers, whether this was a vertical restraint of trade or it was horizontal because it effectively, according to Epic, kept horizontal competitors from supplying the same services that Apple was providing. Market definition can serve an important function. Most economists will tell you at the end of the day it’s just a lawyer’s construct, right? They will say, “We don’t care what kind of market share someone has,” or “We don’t care whether or not certain products are substitutable for another,” but that will all come out in the wash. The question here is whether the defendant, by virtue of the policies at issue, has been able to charge higher prices than it otherwise would’ve or has been able to foreclose competition or to stunt innovation.

Economists want to get to the end game. They see this as a hurdle that’s not necessary. But here the argument was, “Well, does Apple’s operating system constitute its own market, over which Apple has market power?” And the judge didn’t buy that. The judge said, “That’s sort of silly.” There are certain single brand markets that have been defined under the United States antitrust loan. There’s a famous case concerning Kodak copiers, but those markets are generally disfavored. And here, the court went as far as saying, “Look. There’s no market for Apple’s operating system because Apple doesn’t even sell it or license it to anybody. The only entity that uses Apple’s operating system is Apple.” So that market was rejected.

So it defined the market where Apple still arguably had market power, which was the market of mobile gaming. And it was within that lens that the court adjudicated whether or not Apple had caused anti-competitive effects and whether it yielded market power. And at the end of the day it found that Apple does have some market power and has caused some anti-competitive effects. At the end of the day it also said, “Well, but there are justifications behind these policies.” And then we were sort of left with an implicit conclusion that they didn’t violate the antitrust laws, because the weighing that is required that Ankur and I discussed under the litigation was not completed. But that’s how market definition relates to cases in general under the antitrust laws and why it was important in this case as well.

David Golden:

And there was a bit of argument yesterday about foremarkets and after markets and the nature of whether there was actually any discipline that was provided from the foremarket that Epic contends exists, which would be iOS or the iOS ecosystem. Ankur, what are your thoughts on the argument yesterday regarding foremarkets and aftermarkets?

Ankur Kapoor:

So the idea of an aftermarket claim or a Kodak type claim as its own is that there’s insufficient competition in the foremarket. So foremarkets, think of when consumer is actually purchasing the phone, they’re deciding between an iOS device and an Android device. And then there’s an aftermarket, everything else you buy in order to be able to use your smartphone. The apps, accessories, et cetera. And in the Kodak case it was copiers which were, and back then the size of a car and probably just as complicated. So there was a huge aftermarket for copier parts and businesses that serviced Kodak copiers. And as often happens, the aftermarket is even bigger than the foremarket.

So in order to demonstrate there is harm to competition in the aftermarket, an antitrust plaintiff has to show that competition in the foremarket is insufficient to check whatever happens in the aftermarket. And Epic’s argument was that, “Look. Consumers, once they buy an iPhone for whatever reason, they’re locked in.” They’re just not going to switch from an iPhone to an Android and vice versa. If they buy an Android, they’re not going to switch to an iPhone. Although, the data show that consumers are I think more likely to go from an Android to an iPhone than vice versa. But the data are clear and undisputed that very, very few consumers actually go back and forth from one to the other, because if you’re on Android, all your photos are on Google Photos. If you have an iPhone, and I don’t, all your photos are on whatever Apple calls its photo service. So you’re not going to lose all that and switch to another phone.

Epic’s argument was regardless of why, consumers aren’t switching away from an iPhone. So because of that, competition in the foremarket is just not checking as a practical matter. The reality is it’s not providing any kind of constraint on what Apple can do in the aftermarket. Therefore, Apple can exercise power over price, it can charge 30% commissions and it has market power. The district court rejected Epic’s claim on the basis that Epic had not put forth sufficient proof that consumers were locked into iOS, because they were unaware of Apple’s aftermarket policies. In other words, that you could only buy apps on the App Store. That when you made an in-app purchase, you had to use Apple’s in-app payment systems.

Apple had disclosed all of that to consumers before, so consumers were fully aware and their deciding to buy an iPhone with open eyes, that’s not an exercise of market power. Some of the cases talk about it being an exercise of contractual power. Apple has by virtue of the way it’s set up its ecosystem, the walled garden, it makes consumers and developers well aware of that fact and consumers and developers choose to buy into the Apple ecosystem and that’s not an exercise of market power. It’s voluntary.

And the Court of Appeals certainly showed some skepticism as to whether Epic had met its burden of proof on this claim, but maybe more tellingly Epic’s lawyer acknowledged that that was a weakness of Epic’s claim in the district court. And instead what Epic’s lawyer I think very smartly and tactically did was get to the heart of the issue on the appeal, which is, “Okay. Even if there is no single brand market for Apple devices, the district court still found that Apple had market power over the relevant market for mobile games.” Mobile games, not just on Apple devices but mobile games on Android, Nintendo, all competing mobile devices. And it had a 55% market share in that market. Epic’s point was, “Look, regardless of what the relevant market is, we do have a finding that Apple has market power when it comes to mobile games.”

Maybe the market’s broader, maybe not. But at least for mobile games, Apple has market power. It’s charging a 30% commission, and that’s far above its costs and therefore, that’s the economic definition of it being super competitive. So what the district court had to do was weigh those anti-competitive effects against the procompetitive effects. Ultimately, whether it’s a single brand market or a market for mobile games, it’s a rule of reason case in the district court, so you end up there anyway, regardless of which route you take in terms of market definition. You end up in the rule of reason and that’s where the district court went wrong.

Matthew Cantor:

I just wanted to say two things to follow on what Ankur said really quickly. One is it was extremely interesting that the plaintiff’s lawyer just started saying, “It really doesn’t matter what the market is here.” But that’s really what he said. He said, “It could be Apple iOS, it could be Apple phone. It doesn’t matter.” And the defense lawyer said, “Oh no, it matters a lot.” And that was the acknowledgement, as Ankur said, of a weakness in the way that Epic proved or failed to prove its case. But I also want to state my own opinion, which is I absolutely believe that there is a single brand market for Apple. I think that there is a number of lock-in effects, as Ankur mentioned, which is that you buy an Apple phone, you get certain media relative to Apple, Apple interconnects with other devices that you have. It’s constantly changing its user policies.

I doubt very much that we’re all aware perfectly of Apple’s various distribution policies when we buy the phone or that sufficient notice is really given by virtue of a term sheet to consumers that’s probably hundreds of pages long. So no, I think that the notion that Apple is a single brand market is a viable economic and antitrust theory. I think what happened here was that, as Ankur said, Epic failed to prove it down below. And my expectation is that when the Ninth Circuit writes on this case and they discuss the single market issue, I think that will affirm her on market definition and say that Epic failed to prove the single brand market. I think that’s how they’ll put it. I think they’ll say, “There was a failure of proof at the district court level.” I don’t think they’re going to make sweeping findings here or sweeping statements that Apple cannot be a single brand market. I don’t think you’re going to find that.

David Golden:

So we’ve discussing some of the claims under the Sherman Act that Epic brought, which it lost below in the district court. But wanted to turn to the one bright spot for Epic in the district court and that would be Unfair Competition Law that is a California state law in unfair conduct. And there the lower court issued an injunction against certain Apple anti-steering rules, as they’re called, and allow developers to put, for example, buttons or links in their apps on iOS to link to outside platforms, whether it’s another platform like iOS or perhaps just a website. And Apple is challenging that rule in that injunction. So I’ll turn this over to you first, Matt. Maybe first describe what are anti-steering rules and then your thoughts on the oral argument on these topics.

Matthew Cantor:

Well, anti-steering rules are rules that have been used by various entities. They’re sometimes used by monopolists, which basically prevents the downstream contracting party from suggesting or redirecting the consumer to another competitor. For example, in the American Express case that Ankur mentioned that went to the Supreme Court, the case was about how Amex said, “If you are a merchant that accepts American Express cards, when an American Express card is presented to you at the point of sale, you got to take it. You can’t then say, ‘Please give me a Visa card instead.’ You can’t have signage that says, ‘Please give us Visa cards even though we also accept American Express.’ You can’t discount for other forms of payment,” et cetera. So that’s one thing. That’s in the payment industry. You see it in the healthcare industry. A hospital monopolist. There have been a number of cases now that have been litigated, one which expressly found that anti-steering rules by hospitals that say to health plans, “You cannot steer your insured members to hospitals or healthcare providers that offer lower prices.”

Those rules were deemed to be anti-competitive in the healthcare system in North Carolina that was sued by the United States Department of Justice over that settled and got rid of the rules. So there are rules that you find in a number of industries, but they can be anti-competitive when imposed by a monopolist in order to preserve its market position. And here, that’s exactly what the judge found. In fact, what’s really curious about the judge’s opinion is that she failed to do the weighing that Ankur and I have discussed today under the rule of reason with respect to the litigated antitrust claims, but she did the weighing when it came to determining whether or not these other practices were quote-unquote unfair under California state law, the Unfair Competition Law. And there she said specifically, “Look. There are anti-competitive effects from these rules.” She said that, “Epic has demonstrated real anti-competitive effects and Apple has proffered mostly, not all but mostly valid and non-pretextual procompetitive justifications.”

She said, “To a large extent” quote-unquote, “not fully, that makes the conduct more than not anti-competitive.” But then she says, “The procompetitive justifications were only part of certain practices and not the anti-steering rules.” So it’s just curious that she said, “On balance, these are unfair practices.” And the UCL, by the way, is broader than the antitrust law. There’s a case called Cell Tech that was decided by California appellate court some years ago, which says basically that if a practice violates the spirit of the antitrust laws and is incipiently anti-competitive, in other words those effects are going to start soon, well, they can be enjoined under the UCL. Well, they can be enjoined under Clayton Act section 16 as well if they threaten consumers or competitors.

And I’m not casting dispersions on Judge Gonzalez Rogers at all. She wrote 180 some odd page decision, single space. She put in a lot of effort here. But it’s curious that she did this weigh in here but didn’t explicitly do the weighing under the antitrust laws. And it raises a question as to what is the Ninth Circuit going to do. And we’ll talk about my handicap at the end of this call. But it’s sort of an unusual thing. So what happened here? Yeah, the judge found the UCL was broader than the antitrust laws and she found that these policies, when it comes to the anti-steering rules on balance harm consumers and should be enjoined.

Ankur Kapoor:

I’ll just add that some of the inconsistency between her approach under the UCL claim and her approach on the antitrust claim also shows up where she talks about Apple’s procompetitive justifications of payment security. And what she says, what the court found as a factual matter is that competing payment services to Apple’s payment services had greater scale and data. If you think about such payment services as American Express or PayPal, they’re as payment services much larger than Apple, and so they have a lot more data with which to combat payment fraud. And the court finds that competing payment services could provide better payment security. In other words that Apple’s restrictions on apps directing consumers to other payment services, just the opposite of promoting security actually undermined payment security because the competing payment services offered better security, which suggests that her balancing on the antitrust claim, or had she done a balancing on the antitrust claim, it would not have come out in Apple’s favor. And I think that inconsistency is going to bother the Court of Appeals.

David Golden:

And I would just point out on this that to me, it’s almost an explicit acknowledgement from Judge Rogers in granting the injunction and finding for Epic under the UCL that there is consumer lock-in here. And while there may have been a failure of proof on Epic’s part, the fact that she was so concerned about information provided to consumers about potentially lower prices on other platforms or websites or what have you to me shows that she concerned about some form of lock-in of consumers on iOS. So I’ll turn to our final topic, which will be, as Matt said, handicapping what we think might happen with the Ninth Circuit when it writes its decision. Obviously, none of can know where the judges are leaning, but based on the oral argument, I’d like to first turn it over to Matt to give his closing thoughts on where he thinks the panel might come out.

Matthew Cantor:

Yeah. I’ll give you my closing thoughts on where they’re going to come out and I’ll give you my closing thoughts on what I’d like to see. I think that they’re going to affirm the antitrust analysis. I think at the end of the day, I really would be shocked if they said there’s no balancing requirement and that would just be wrong. That would be erroneous as a matter of law. I think more likely they’ll say, “Well, there may be a balancing requirement,” and maybe she didn’t explicitly do the balancing under her analysis of the antitrust charges, but she effectively did or she implicitly did. Therefore, she found at the end of the day that the laws didn’t violate section one and section two. So the balancing was appropriate or the balancing, as I said, was maybe not explicit, but it was enough to get you past the hurdle of whether or not this matter should be sent back to her for further analysis.

On the UCL claim, they made some references that the analysis was cursory. And I think the reason why they thought that among other things is she only spent about four or five pages on the Unfair Competition analysis and she spent 160 on the antitrust law analysis. So I think that they may reverse her there. And if they do reverse her, my hope is that they’ll reverse her and remand it for further proceedings and not just reverse her outline, because if they say at the end of the day, “Well, she needs to do more to explain why this is unfair or why these particular anti-steering rules should be struck down and there should be another trial on that,” then that’s what should happen. But to say at the end of the day that somehow these anti-steering rules were as a matter of law not unfair, given what Cell Tech says and given what she found, which was that the anti-competitive text of these rules outweigh the procompetitive benefits, it would seem to me to be a miscarriage justice for them not to reverse and remand for further proceedings.

So what I would like to see here is I frankly would like to see the court, if I had my druthers, the court would say that a balancing is required under section one of the Sherman Act, sufficient balancing was done with respect to the anti-steering rules. They should continue to be enjoined both under the antitrust laws and under the UCL. And with respect to the other policies at issue in this case, there should be further proceedings held for the court to explain whether on balance they were anti-competitive or not. And that’s what I’d like to see. I don’t think that’s what will happen. I think they’ll affirm the antitrust judgment and they’ll reverse the UCL. I hope for further proceedings, but they may not. They may just reverse it outright.

Ankur Kapoor:

Well, wishful thinking that I’m a Ninth Circuit Court of Appeals judge. What I would do is very similar to what Matt thinks might happen. I would affirm the dismissal of Epic’s single brand market claim. Again, not because it’s an invalid antitrust claim. In theory, you could have one and there are good reasons to think that Apple, it is a single brand market, but because Epic did not meet its burden of proof as Epic almost, if not actually, conceded at oral argument. But that’s the claim which would deem Apple a monopolist over its own product and allow Epic to have its own store within the App Store.

The other reason I think that I don’t think the Court of Appeals is going to allow such a claim to proceed is because antitrust law looks askance at competitors working together. And the idea that Apple has a duty to help its rival by letting its rival establish a store with an Apple store… I mean, think about Walmart wanting to establish a store within Target. That’s what Epic is seeking and that’s something while it’s theoretically possible in an antitrust law, antitrust looks really skeptically upon those kinds of claims.

So I think that claim is not going to survive. Because of the court, the District court’s findings of anti-competitive harm and undermined payment security that the court made within the UCL claim, I think that’s going to give the Court of Appeals some pause in affirming the District Court’s decision on the antitrust claim involving Apple’s in-app payments. So I think that at least what I would do is reverse the district court on that claim and send it back for the court to conduct the rule of reason balancing on the antitrust claim and then also address the UCL claim.

David Golden:

Well, I think all of us and the Antitrust bar and both people inside and outside the technology industry will be watching this closely and looking to see what the Ninth Circuit ultimately decides. I just want to thank both you, Matt, and you, Ankur, for participating in this podcast. I think people will find it very interesting and we’ll be following this case closely.

Ankur Kapoor:

Our pleasure.

Matthew Cantor:


Jeff Shinder:

That’s all for our show today. If you like the podcast, make sure to subscribe to Antitrust Matters and leave us comments on how we were doing or on the topics you would like us to cover going forward. You can also follow us on Twitter, or follow the Constantine Cannon antitrust team on LinkedIn. Until next time, be well, and remember antitrust matters.