Context: Last month, Epic Games brought a previously announced contempt-of-court motion against Apple over the latter’s alleged non-compliance with an anti-anti-steering injunction under California Unfair Competition Law (March 13, 2024 games fray article). Epic received support from amici curiae including Meta, Microsoft, X, Match Group, Spotify, and Digital Content Next (Disney and others). Apple asked the court not to admit those filings (April 4, 2024 games fray article), but unsurprisingly (as the standard is rather permissive) the court allowed those filings.
What’s new: Around midnight by local time, Apple’s lawyers filed their opposition brief to Epic’s contempt motion. They defend Apple’s compliance plan all the way, including the commission. They argue that the legal standard would require Epic to provide clear and convincing evidence of a violation, and express doubts about whether the injunction in question is amenable to a contempt proceeding at all. Apple stresses that the same court in the same decision that entailed the injunction recognized Apple’s right to collect a commission, and Apple points to the fact that it already formally communicate the plan to charge for links in an October 8, 2021 filing with the court.
Direct impact: Apple will get to reply, and the court will then decide, most likely after a hearing (at least it can’t decide against Apple without a hearing). Apple and its amici have a strong argument that Apple’s rules render the injunction pointless. One could describe Apple’s strategy as “anti-anti-anti-steering”: “steering” means a company (here, an app maker) can direct users to an alternative option, “anti-steering” is a contract clause (here, an Apple app review guideline) that prohibits it, “anti-anti-steering” is a court order that disallows restrictions on steering, and Apple then came up with an “anti-anti-anti-steering” strategy that vitiates the anti-anti-steering injunction. But Apple is legally in a strong position, and even if the district judge was angry that the injunction isn’t going to result in price competition through links, the appeals court may very well agree with Apple that what it does can be debated in other fora but does not constitute contempt of court. While games fray is in favor of ways to bring down App Store commissions, contempt sanctions on Apple appear unlikely at this point.
Wider ramifications: There is also an anti-anti-anti-steering issue in the European Union. Apple’s filing says in a footnote that Epic’s reference to alleged non-compliance with the Digital Markets Act (DMA) would have to be resolved in an EU court. The European Commission is investigating Apple’s compliance with anti-anti-steering rules in two parallel investigations, one under the DMA and a more recent one in connection with a decision under traditional antitrust law further to a Spotify complaint (April 8, 2024 games fray article). In those contexts, too, Apple is not prohibited from charging for links.
Epic’s goal of giving developers and consumers more choice is laudable. But Apple is right that “[a]n accusation that one’s adversary is in contempt of court is among the most serious charges a party can levy in civil litigation,” and the legal hurdle is high. And in response to one of the amicus briefs, Apple accurately notes that the notice of compliance it filed in January (which was voluntary) does not mean Apple needs the court’s approval: the burden is on Epic to prove contempt.
Epic’s criticism of Apple’s compliance plan can be grouped into two categories:
- the commission (the usual App Store commission minus 3%) and
- all non-monetary rules, which are largely about what Apple’s critics describe as “friction” and “scare screens.”
With a view to the commission, Apple has strong arguments in its favor that whether or not one agrees with what it charges, it doesn’t constitute contempt of the existing injunction. The underlying judgment recognized Apple’s right to charge, and (as games fray wrote on earlier occasions) a contempt proceeding is not made for a rate-setting exercise that would actually be more like a new litigation. Apple criticizes that Epic doesn’t propose an alternative commission, but Epic doesn’t have to. What Epic does have to show, however, is that Apple is acting in contempt of court, though Apple has the right (within reason) to interpret the injunction narrowly.
Judge Yvonne Gonzalez Rogers won’t be amused by what Apple is doing. But the way she decided the case in 2021 was optimized for the goal of minimizing the likelihood (or at least the scope) of a reversal by the appeals court. If she looks at it again this way, she’ll have to think hard:
- The legal standard for contempt favors Apple’s approach, according to which something that isn’t explicitly prohibited is effectively allowed.
- The 2021 ruling generally recognized Apple’s right to charge, even if not in the specific context of the anti-anti-steering injunction.
- Apple was very forthright about its intent to collect a commission on the types of outbound links that would be enabled by the anti-anti-steering injunction should it (as it ultimately did) enter into force. In October 2021, Apple asked Judge Gonzalez Rogers to stay the enforcement of the injunction pending Apple’s appeal (which she denied, as trial judges generally do, but the appeals court then granted a stay). One of Apple’s arguments was that if the injunction was temporarily in place (it wasn’t), but ultimately overturned (it wasn’t), Apple would implement a charging mechanism that would be useless later. At that point, the EU DMA had not yet been enacted, so Epic’s injunction would have been the first and potentially only reason for Apple to develop an alternative way to collect a commission. In its October 8, 2021 motion to stay enforcement, Apple wrote: “And Apple would have to engineer alternative solutions for collecting its commission—an undertaking the Court acknowledged could be costly.”
- Epic itself stated to third parties that this injunction allowed Apple to charge. Epic said so in a letter to state attorneys-general in connection with the Google case (same court, different judge).
Here’s Apple’s opposition brief, followed by further commentary:
Apple tries to prevail not only as a matter of law, but also claims that the evidence supports its position, while saying Epic has no evidence, just Apple’s guidelines and legal argument. But if Apple’s rules are out of compliance, those rules are all the evidence that Epic needs. Apple seeks to further strengthen its position through sworn testimony that explains why Apple believes the commission it charges on outbound links is justified.
Apple points to three opinions expressed on the internet according to which Apple’s rules in response to the injunction are compliant:
- an Inc. article;
- a Computerworld article by Jonny Evans (a long-standing Apple fan among journalists); and
- a Daring Fireball blog post (John Gruber has been described as “the King of the Apple Geeks”).
Apple points to those three articles after saying that “a host of industry participants—including some who disagree with Apple’s policies—have recognized that Apple is in compliance with the Injunction.” It would be nice to see more evidence of that, but games fray is in favor of more competition in app distribution as opposed to walled gardens, and is at least unconvinced of Apple being fundamentally out of compliance. Apple may make some adjustments here, but it’s hard to see how Apple would drop the commission without an appeal.
Apple also tries to leverage the fact that Epic’s CEO voiced his disagreement with Apple’s compliance plan within a matter of hours of Apple’s rules becoming known:
“The same day Apple filed its Notice of Compliance, Epic’s CEO, Tim Sweeney, tweeted about some of the same issues Epic raises in its Motion. […] Despite having first learned of Apple’s compliance submission just hours earlier, Mr. Sweeney promised that “Epic will contest Apple’s bad-faith compliance plan in District Court.’”
That is not a strong argument. Epic and its lawyers didn’t need much time to see that Apple’s rules for links to external purchasing options neutralized the injunction. There was just a limited amount of text to read.
Pointing to the parallel Google case, Apple quotes the judge presiding over that litigation (Judge James Donato):
“I would like to emphasize one thing, and I said this, I believe, earlier in the case. A United States district judge, whether me or anyone else or any Article III judge in the federal judiciary, is not going to micromanage Google. All right? So I’m not going to say—I said this before—I’m not going to say you can have four click-through screens and not eight. I can’t do that. Okay? I can’t say you can use this word but not that in the warnings that we saw.
“I have grave doubts—I’m willing to hear what you both have to say, but I have grave doubts that I am in any position to set a fee that developers might pay. Okay? These are all things that are beyond the ken of Article III judges.”
Judge Gonzalez Rogers will probably voice similar concerns now as her colleague. In fact, she already did so during the 2021 trial’s closing argument. The verb “to micromanage” also came up in 2021, such as in the order denying Apple’s motion for an enforcement stay.
In its commentary on the amicus briefs, Apple again emphasizes that those are multi-billion-dollar companies that just want to increase their profits at Apple’s expense. That wouldn’t matter if they were right. Where Apple does have a strong point is that those amicus briefs argue in no small part on the basis of subscription services, which were clearly outside the scope of this case as Judge Gonzalez Rogers also made clear. One can’t help but wonder whether all of the lawyers who came in at this stage to write amicus briefs were fully aware of the history of this complex multi-year litigation.
Epic is fighting for an important cause, but fundamentally the injunction is probably not going to be useful except in connection with a part that duplicates a class-action settlement and allows email communications with users. As Apple itself notes in its opposition filing, developers are free to do that, and there is no commission involved.
It’s been almost four years since Epic started those lawsuits as well as a joint lobbying effort with other App Store critics. One of its allies, Spotify, has been working on this for much longer, and has been ridiculously unsuccessful. So far, nothing important has changed. The DMA in its current form doesn’t change much. Some browsers get a few more downloads in the EU, though they all use Apple’s WebKit browser engine, so it’s pseudo-choice instead of true competition. Epic will be allowed to operate an alternative iOS app store in the EU, but it remains to be seen whether it will make an impact and it may ultimately benefit Apple as it can point to the existence of that store (and others) as it defends itself against accusations of non-compliance. The only major win that Epic has scored so far is a non-final one: the Google verdict. Epic is now seeking a 14-page injunction against Google (April 13, 2024 games fray article), but it remains to be seen what the court will grant and whether Epic’s win is affirmed on appeal.
This enforcement dispute will also reach the appeals court. For Epic, it would be critical to win in district court, based on the judge interpreting the injunction based on the effect she thought in 2021 that it would have. The appellate judges are just going to look at the text, which is what Apple’s opposition brief also says is all that matters. The text is a lengthy ruling that clearly says Apple is entitled to a commission.