Context: Epic Games filed a motion last month to challenge Apple’s proposed compliance with a U.S.-wide anti-anti-steering injunction under California Unfair Competition Law (March 13, 2024 games fray article). Amicus curiae briefs in support of Epic’s motion were then submitted by Meta, Microsoft, X, Match Group, Spotify and a media industry body named Digital Context Next (March 23, 2024 games fray article). The most controversial part is that Apple charges essentially the same commission as for in-app purchases, reduced only by what payment processing services like Stripe will charge developers anyway. That issue is also at the heart of a brewing enforcement dispute between Spotify and Apple over the enforcement of an antitrust ruling by the European Commission as well as a Digital Markets Act compliance investigation (March 25, 2024 games fray article).
What’s new: Apple has now filed its opposition brief to those motions to submit amicus briefs, asking Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California not to accept those filings in the first place. Apple’s main arguments are that it is entitled to charge a commission under Judge YGR’s ruling, and the amicus briefs don’t change that; the amicus briefs would merely echo Epic’s arguments without adding new perspective; those companies are large and just interested in their own profits, but 99% of developers technically settled a related class action; and Spotify as well as others make arguments concerning subscription services, but subscriptions are explicitly outside the scope of Epic’s case.
Direct impact: The standard for amicus briefs is rather permissive. Apple’s opposition is very unlikely to result in a denial of the motions to submit those amicus briefs, but it is effectively a vehicle for Apple to respond to those amicus briefs outside the page limits for its opposition brief and, by extension, confirms what was always going to be the biggest issue: the question of whether or not Apple can charge for such links.
Wider ramifications: Apple has to deal with the same key question in the EU, where there are actually two independent but simultaneous enforcement disputes. First, the EU Commission’s competition enforcers handed down a narrow ruling in Spotify’s favor one month ago (March 4, 2024 EC press release). Spotify has repeatedly made it public that a new version of its app is still pending Apple’s App Review. Presumably the contentious issue there has to do with Apple’s position that it is allowed to charge. Second, the EU launched, as mentioned above, DMA enforcement investigations, one of which relates to Apple’s (as well as Google’s) restrictions and charges on steering. The striking parallel is that the DMA, in a recital, explicitly recognizes a gatekeeper’s right to charge for customer referrals just like the U.S. Epic Games v. Apple judgment explicitly allows Apple to charge for the use of its intellectual property rights and access to its customer base. At a more abstract level, an early-stage EU inquiry into Apple’s rules for alternative app stores and “sideloading” also involves the question of Apple’s entitlement to an IP royalty (March 27, 2024 games fray article).
The fight over the extent to which Apple must open up its App Store (and more generally its iOS platform) is a four-dimensional chess game: its multijurisdictional nature, with various ramifications across borders, adds a third dimension, and the fact that Apple changes rules from time to time adds a fourth. So far, Apple is winning that four-dimensional chess game against opponents who have made mistakes, missed opportunities, or did too little too late. And what Apple has on its side is that there are high hurdles under conventional antitrust law, major flaws in the EU’s DMA (there are some good ideas in it, but in the end it’s a dumpster fire), and courts in the civilized world don’t easily strip an innovative company of its intellectual property rights.
Here’s Apple’s opposition brief:
By coincidence, Apple filed that brief on the same day on which the European Parliament’s Internal Market and Consumer Protection (IMCO) committee convened to discuss, with EU antitrust chief and EC Executive Vice President Margrethe Vestager, the state of affairs of DMA enforcement (EP press release). Various politicians just wanted to celebrate what they consider the Commission’s vigorous implementation of a supposedly superb law, except that nothing important has changed in the marketplace or is going to change anytime soon. Nothing but delusion.
In its article on the amicus briefs supporting Epic’s U.S. enforcement motion, games fray already stated the key issue in the California dispute as follows:
Free or not?
If Apple has to allow those links and promotional messages without taxing them, it’s easy. If the question is how much Apple may charge, there’ll be a whole new dispute over the right terms. That would effectively involve a rate-setting trial with expert reports before, expert testimony in court, and evidentiary motions. If the court is not prepared to do that as part of an enforcement proceeding (where the main litigation is already over and it’s “only” about compliance with the injunction), it means a whole new litigation would have to start over that.cides will be appealed anyway.
Apple’s opposition brief unsurprisingly validates the above:
“The principal complaint advanced by the proposed amici is that Apple continues to charge de-velopers for certain transactions facilitated by the iOS platform. But Epic lost its bid to force Apple to provide free access to its platform. Like Epic, the proposed amici are trying to relitigate that issue through the lens of the UCL injunction. At the same time, however, the proposed amici do not dispute that Apple—like all of them, and Epic itself—is entitled to charge platform participants for using its tools and technologies protected by intellectual property, access to the userbase, and many other benefits afforded developers. […] Indeed, the Court has recognized Apple’s right to charge a commission, and the Injunction does not prohibit—or even speak to—Apple’s monetization structure.”
The reference to what those other companies (all of them are themselves gatekeepers) do on their platforms seeks to undermine the credibility of those amicus briefs. It’s like “rules for thee, not for me.”
The last sentence of that quoted passage accurately states two facts: the Epic v. Apple judgment does say that Apple may charge developers, and the language of the injunction does not say anything about commissions. Could two truths nevertheless, in a specific combination, lead to one untruth? According to Epic and the companies supporting it, the purpose of the injunction is simply defeated if Apple charges a commission on purchases made outside the app.
The legal standard for contempt of a court injunction is that it must be interpreted conservatively. Only a wholly unreasonable interpretation by Apple would be unlawful. The question is not going to be whether Epic (or, for that matters, the likes of Meta, Microsoft, X, Match, Spotify, Disney) propose an interpretation that makes more sense than Apple’s. If they want to show Apple is violating the injunction, they must more or less show a literal infraction.
Epic and its supporters point the court to decisions that say an injunction must be given meaning. That is true, but it won’t necessarily help them. The injunction does not exist in vacuum. There’s a lengthy court ruling on which it is based. And that court ruling agreed with Apple on various of the most critical questions.
Some further adjustment of Apple’s rules is possible, and games fray even considers it likely to happen. The court did not allow Apple to prohibit “other calls to action,” and Apple has not done enough to make it clear that such calls (whatever that may mean) are allowed. But there are various restrictions that Apple imposes, and above all, there’s the commission that renders any outbound links commercially counterproductive.
If Judge YGR never meant to bar Apple from charging, then Epic and its amici are simply going to lose this fight, and they will find it hard to convince the appeals court that the injunction should be read differently.
In the other event, if Judge YGR didn’t expect Apple to charge but didn’t really think it through either, she can’t expect Apple to read her mind. Apple just has to read the judgment and the injunction, and then comply. So what could she do? If she now took a position that is not backed up by what she wrote in 2021, Apple will appeal and that appeal will likely succeed.
Apple’s lawyers won’t expect their opposition to succeed. The court will most likely allow the filing of those briefs. But Apple’s opposition brief to the amicus brief motions is just a small intermediate step. Apple will soon file its opposition to the actual motion. The deadline for that one is next week (April 12, 2024). It may also be later if the court doesn’t rule on the admissibility of the amicus briefs this week.
The injunction came down in September 2021. It just didn’t become enforceable for more than two years due to the appellate proceedings, including an unsuccessful bid for Supreme Court review. Apple had a lot of time to prepare for the present situation. When the injunction finally entered into force in January, Apple already had everything prepared and just filed its compliance plan. Apple can make further concessions without the injunction truly undermining its App Store business model. It only becomes hurtful for Apple if it can’t charge for outbound links. If the court feels that Apple can charge, but should charge less, the procedural problem is that the 2021 proceedings did not involve rate-setting. No decision was made on what the appropriate rate would be in that scenario.
Despite a persuasive enforcement motion and impressive amicus briefs, the net effect of the injunction may be limited in the end. That applies to the EU’s DMA as well.