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US DoJ, Microsoft and 35 states support an appeal of Epic Games-Apple decision

All eyes are on the Epic Games-Apple case, with US federal and state law agencies and Microsoft all vocalising their belief the case will be pivotal in unpacking antitrust issues in the app store payments market.
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Written by Campbell Kwan, Journalist on

In another twist to the Epic Games lawsuit against Apple, the US Department of Justice (DoJ), Microsoft, and 35 state attorneys-general have all submitted legal filings disputing the lawsuit's original ruling from September last year.

The original ruling had sided with Apple on nine out of 10 counts. It found Apple engaged in anticompetitive conduct under California's competition laws, but ultimately it ruled the iPhone maker was not an antitrust monopolist.

The ruling, made by District Judge Yvonne Gonzales-Rogers, came to this conclusion as she found Apple's developer program license agreements were not contracts and other competitors had enough market share in submarkets such as mobile gaming.

That decision is now up for appeal at the Ninth Circuit Court of Appeals, with both Apple and Epic Games filing appeals as neither side were happy with the outcome.

See more: Epic's appeal of Apple App Store ruling hones in on monopoly allegations

In all the third-party briefs, which were filed over the weekend, the consistent argument that arose was Gonzales-Roger's interpretations of the Sherman Act were too narrow and wrong. The Sherman Act is a US law that was specifically drafted to prohibit anticompetitive behaviour.

In the state attorneys-general brief, the states argue that the district court erred by ruling out Section 1 liability.

"Firms with sufficient market power can unilaterally impose contractual terms," the attorneys-general wrote.

"The district court's holding creates a paralysng paradox: Once a firm acquires market power and unilaterally imposes a contract, then it is no longer subject to Section 1. Affirming this paradox would gut the Sherman Act and prevent the Amici States from enforcing antitrust violations by large firms that harm their citizens."

The DoJ shared a similar sentiment in its filing, arguing the original judgment "committed several legal errors that could imperil effective antitrust enforcement, especially in the digital economy."

"If upheld, could significantly harm competition and consumers by allowing a minor benefit to condone a major harm," the DoJ wrote, in unpacking its belief that the judgment misinterpreted Sections 1 and 2 of the Sherman Act.

Microsoft's filing was less neutral than the other two filings, with the tech giant specifically saying that a broad ruling for Apple would leave little room for competition and allow the iPhone maker to leverage its control of the iOS ecosystem to gain more market share.

"Apple uses its control over an essential component of modern communications technology -- now the phones, rather than the phone network -- to interfere with how its customers may deal with third parties in other markets," Microsoft wrote in its brief.

"Consumers and innovation will suffer -- indeed, they already have. The district court's reasoning failed to give sufficient weight to these immense competitive risks and, if broadly affirmed, could insulate Apple from meritorious antitrust scrutiny and embolden further harmful conduct."

The input from third parties come almost two years since the lawsuit began, which was sparked by Epic Games' Fortnite being booted off Apple and Google's app stores for introducing a new payment system that sidestepped the tech giants' payment systems and in-app purchase commissions.

Beyond Epic Games' lawsuits, Apple faces increasing antitrust scrutiny from regulators too, with EU, UK and Japanese competition regulators all conducting antitrust investigations into its App Store practices. Just last week, Apple was also slapped with a weekly €5 million fine from Dutch regulators for failing to make sufficient changes to its App Store policies, which were found to be anticompetitive towards dating app providers.

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