Context: Epic Games and Apple are embroiled in an enforcement dispute over a U.S.-wide anti-anti-steering injunction under California Unfair Competition Law that was ordered in September 2021 and entered into force (after the exhaustion of all appeals) in January 2024. Epic Games alleges that Apple’s restrictions on how app makers can inform U.S.-based users of alternative purchasing options, and particularly a commission that is essentially the same as on the App Store but minus the approximate cost of external payment processors like Stripe, violate the injunction, while Apple claims to be in compliance (April 13, 2024 games fray article).
What’s new: Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California, who presided over the 2021 Epic v. Apple trial and made the ruling in question, has now reached the preliminary conclusion that Apple is presently out of compliance with the injunction, which could (if not resolved) result in contempt-of-court sanctions. Instead of holding only a short hearing on the matter which was scheduled for April 30, 2024, Judge Gonzalez Rogers has now scheduled a three-day evidentiary hearing for May 8, 10 and 17 in Oakland, California. The court will try to conclude the hearing on the first day (May 8), but just in case more time is needed has also reserved May 10 and 17. Apple had argued that defendants are entitled to such a hearing when there are factual disputes.
Direct impact: The hearing will serve the purpose of looking at what requirements Apple imposes on app makers, such as by looking at the sequence and appearance of on-screen messages and required user interface actions, and to discuss the commission Apple imposes on purchases made within seven days of clicking on an in-app link. It is possible that Apple will make some adjustments, but at this point the most likely next step is that Judge Gonzalez Rogers will, with or without further measures taken by Apple, hold Apple in civil contempt, and Apple will appeal her decision to the Ninth Circuit. As games fray stated previously, Judge Gonzalez Rogers presumably did not anticipate Apple to do what it is doing now that the injunction has entered into force, but the appeals court will be more focused on what the September 2021 decision said than on what the district judge was thinking.
Wider ramifications: Even if Apple prevailed on appeal (which it very well may, but first the district court has to hold that hearing and enter a formal decision), the fact that a federal judge deems Apple to be non-compliant has certain ramifications. Apple is facing four non-compliance investigations (three full-blown ones and a preliminary one) in the European Union, two of which relate to Apple’s anti-steering rules just like the U.S. proceedings: after launching a fact-finding mission concerning Apple’s (and Google’s) compliance with the Digital Markets Act’s anti-steering rules, the European Commission also decided to formally investigate Apple’s suspected non-compliance with an anti-anti-steering decision further to a traditional antitrust (not DMA) complaint by Spotify (April 8, 2024 games fray article). In those contexts, too, games fray believes some further adjustments may happen, but doubts that Apple can be prevented from imposing a commission, the amount of which would be difficult to determine. And in a parallel app store antitrust case where Epic won a jury trial against Google late last year, the discussion will be about how strict and how specific an injunction must be. Epic proposes 14-page injunction (April 12, 2024 games fray article) and will point to the issues with enforcing a different app store injunction against Apple.
The key sentence in Judge Gonzalez Rogers’ order, which is major progress for Epic but not yet a final district court decision (and in the end the appeals court will decide under a defendant-friendly legal standard), is the following one:
“Having reviewed [Epic’s and Apple’s as well as various amici curiae’s] arguments and the supporting documentation relevant thereto, the Court FINDS that Epic Games has made a sufficient preliminary showing that, viewed holistically, Apple’s practice changes undermine the spirit of the injunction by limiting competition, impeding the free flow of information, and constraining user choice.”
Here’s the full document:
For Epic Games, this is encouraging, but as explained above, it is still possible that Apple will come away unscathed by making only limited adjustments.
The order came down within less than 24 hours of Epic’s reply brief, suggesting that Judge Gonzalez Rogers had been following the briefing with great interest and was unconvinced by Apple’s opposition brief. Here’s the reply brief, which by the way also makes reference to the situation in the European Union:
There was also a bit of a sideshow with media advocacy group Digital Content Next writing the judge a letter to clarify that the organization has more members than Disney (though Apple had a point that they’re all large media corporations) (DocumentCloud link). Judge Gonzalez Rogers threw out that submission as procedurally improper. And given what conclusion she has preliminarily reached here, there is no reason to assume that DCN’s additional arguments were needed to tip the balance.
games fray predicts that Apple, while possibly loosening some of the user interface-related rules, will vigorously defend its right to charge a commission, which Apple argues was recognized by the district court in its September 2021 ruling, though Epic says the court only allowed Apple to continue to charge a commission on in-app purchases, but not on external links. Apple is not going to give up on the idea of a commission on external purchase links without an appeal.