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Epic Games asks U.S. court to hold Apple in contempt, alleges “Apple’s so-called compliance is a sham”

Context: Last week, Epic Games gots its EU developer account for an alternative iOS app store reinstated after Apple came under regulatory pressure and got negative press (March 8, 2024 games fray article). In the United States, Epic already announced six weeks ago (January 31, 2024 games fray article) that it would formally dispute Apple’s compliance with an anti-anti-steering injunction that was ordered in September 2021 and finally entered into force two months ago after the Supreme Court denied Apple’s petition for writ of certiorari.

What’s new: Epic Games has now filed the contempt motion, accusing Apple of circumventing the injunction instead of complying with it by letting app developers freely inform end users of lower-cost purchasing options. If the motion succeeded, Apple would get 30 days to change its app review guidelines accordingly. To its motion, Epic attached sworn declarations by the maker of the Down Dog yoga app and by the CEO of Paddle, a company that would like to offer app makers an alternative payment option based on web payments to which they link from their apps.

Direct impact: Apple will respond to the motion, and Epic will get to reply. A hearing may take place on April 30 (or later). It is fairly likely that at least parts of Apple’s conduct will be deemed to violate the injunction (in which case Apple would presumably appeal).

Wider ramifications: There is a connection between this U.S. enforcement proceeding and the debate over Apple’s compliance with the European Union’s Digital Markets Act (DMA), which also has an anti-anti-steering rule, as well as the European Commission’s recent antitrust ruling on a complaint brought by Spotify against Apple, which in the end was also limited to the anti-steering question (March 4, 2024 games fray article). The issues are partly the same, such as the charges and the forced fragmentation of the user base that Apple imposes.

First, you can find Epic’s motion along with the attached affidavits, two of them from third parties, on DocumentCloud if you click here.

It is true that the net effect of Apple’s modified rules is that the anti-anti-steering injunction Epic obtained under California Unfair Competition Law (after the court ruled against Epic’s antitrust claims) doesn’t create an opportunity for app makers to promote to users within an app the external availability of digital items at lower prices than on the App Store (January 18, 2024 games fray article). Together with the other part of Epic’s injunction, which is duplicative of a prior class-action settlement and allows email communications with registered users, there could be an opportunity for app (and especially game) makers (January 19, 2024 games fray article). But that is not what many hoped Epic’s injunction would enable: links that send users from an app to an external website where they can conveniently and with a high version rate purchase items at a lower cost than where Apple’s 30% tax applies.

By charging essentially the same commission (a 3% deduction merely covers the cost of payment processing services), Apple makes sure that developers and, therefore, end users stand nothing to gain from such outbound links.

Epic criticizes not only the app tax Apple imposes on purchases generated that way, but also the restrictions on the visual appearance (no real buttons, “scare screens”) and that Apple did not modify a rule relating to multiplatform services such as the Minecraft game, though “Apple has now stated in a separate website post that multiplatform services may obtain an External Link entitlement notwithstanding the express prohibition in Guideline 3.1.3.”

Epic also explains other issues, such as that the URLs used for those outbound links can’t contain parameters that ensure users will get what they’re looking for.

Besides the two detailed declarations by the maker of Down Dog and by the CEO of Paddle, Epic quotes various public statements made by app developers criticizing Apple’s purported compliance, including a reference to a Wall Street Journal article.

One of the issues Epic’s motion stresses and that games fray has previously expressed concern about is that Apple does not allow “other calls to action” though the injunction said they had to strike that prohibition. In a way, “other calls to action” is unclear and open-ended. But if the court says Apple can’t prohibit them, Apple must comply.

The motion indicates that Apple’s lawyers told Epic’s lawyers that Apple “would not enforce the plain language of its own Guidelines,” but as Epic now notes, such promises “[do] not alleviate the need for enforcement of the Injunction.”

Epic makes a number of good points, but in order to realistically assess the chances of the motion, it’s important to consider that Judge Yvonne Gonzalez Rogers said in her September 2021 decision various things that Apple now claims justify certain rules. For instance, the court ruling recognized, in principle, Apple’s right to seek compensation.

The legal standard is that Apple will only be held in contempt if there is no reasonable interpretation under which Apple would be deemed compliant. This means Apple’s proposed interpretations of the injunction must be unreasonable. That is a fairly high standard, but Judge Gonzalez Rogers will easily see (and probably already saw when she received Apple’s notice of compliance in January) that there are serious issues.