Appeals court largely sides with Apple on ‘Fortnite’ antitrust case

By Brian Fung, CNN

A federal appeals court largely sided with Apple on Monday in a closely watched case about its app store policies, a decision that could complicate future efforts to regulate app store operators and frustrate claims that Apple behaves monopolistically.

The decision in the case involving Epic Games, maker of the hit video game “Fortnite,” upholds a lower court ruling that found Apple is not a monopolist in the distribution of iOS apps, and that Apple did not violate antitrust laws by requiring app developers to use Apple’s proprietary in-app payment systems.

In reaching its conclusion, a three-judge panel of the US Court of Appeals for the Ninth Circuit said Epic Games failed to show how Apple could have implemented “alternative means for Apple to accomplish the procompetitive justifications supporting iOS’s walled garden ecosystem.”

Apple grounds its app store restrictions in security and privacy rationales that differentiate the company from other mobile operating system makers such as Google, the court said, creating “a heterogenous market for app-transaction platforms which, as a result, increases interbrand competition” between iOS and Android.

In a statement, Apple said the court had handed it a “resounding victory.”

“For the second time in two years, a federal court has ruled that Apple abides by antitrust laws at the state and federal levels. The App Store continues to promote competition, drive innovation, and expand opportunity, and we’re proud of its profound contributions to both users and developers around the world,” the company said. “We respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.”

Epic said “Apple prevailed at the 9th Circuit Court.” It added: “Though the court upheld the ruling that Apple’s restraints have ‘a substantial anticompetitive effect that harms consumers’, they found we didn’t prove our Sherman Act case.”

The ruling comes as policymakers worldwide have begun circling around app store providers with legislation and investigations that view the industry’s practices skeptically. For years, app makers have accused Apple and Google of charging excessive fees, imposing burdensome restrictions and bullying developers who protest the policies. Epic and Google are embroiled in a separate lawsuit over similar issues.

The high-stakes legal battle in Epic Games v. Apple first arose in 2020, when Epic sought to trigger a confrontation with Apple by telling Fortnite players they could purchase the game’s virtual currency, V-Bucks, at a lower price if they did so directly on Epic’s website rather than through the iOS app. Apple responded by removing Fortnite from the iOS App Store, a move Epic anticipated and that prompted Epic to sue. Apple countersued Epic, accusing it of breach of contract.

On Monday, in addition to siding with Apple on the antitrust claims, the appeals court held that Apple is entitled to have Epic cover its legal fees stemming from the countersuit, reversing a lower-court decision.

The appeals court agreed with the lower court, however, that Apple violated California’s unfair competition law when, in its developer agreement, Apple forbade Epic from informing iOS users about other ways they could pay for in-game virtual currency besides using Apple’s in-app payment system. Monday’s ruling upholds an injunction that, if allowed to take effect, would prevent Apple from intervening when developers include “buttons, external links or other calls to action that direct customers to purchasing mechanisms” apart from Apple’s own channels.

The court also held that developer agreements such as the ones Apple signs with app makers are subject to the nation’s anti-monopoly laws, contrary to the lower-court ruling. That finding could give some ammunition to critics of app store operators.

Both sides now have several weeks to determine whether to seek a rehearing from the appeals court or to appeal to the Supreme Court.

The-CNN-Wire
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