Epic, Apple Lawyers Joust Over ‘Walled Garden’ of iOS App Store

The flawed September 2021 finding by the U.S. District Court for Northern California that Epic Games failed in its burden to demonstrate that Apple is an illegal monopolist in the way it runs the App Store is where “the rubber meets the road” as the massive antitrust case progresses toward an appellate decision, Epic attorney Thomas Goldstein with Goldstein & Russell told the 9th Circuit U.S. Court of Appeals in oral argument Monday. Apple attorney Mark Perry of Weil countered by emphasizing the district court’s finding that elements in the App Store have procompetitive effects that offset any of their anticompetitive impacts.

The district court found that Apple hides critical information from consumers and illegally stifles consumer choice, and imposed an injunction permanently enjoining the company from prohibiting developers from including in their apps "anti-steering" mechanisms that prevent consumers from making purchases outside the App Store. The court agreed with Apple’s counterclaim that Epic breached the Apple Developer Program License Agreement when it collected revenue from users in the Fortnite app on iOS through in-app payment (IAP) to Epic.

The district court improperly found “that what Apple is doing here is legitimately and procompetitively creating a walled garden in its product," said Goldstein. "That weighs very heavily in favor of sustaining what Apple has done here,” to the detriment of competition and consumer choice, he said. “It has never been OK under the antitrust laws to eliminate by contract or individual action your horizontal competitors,” he said. “The only thing that is kept out by Apple’s walled garden is competitors.”

The trial was “a classic failure of proof case” on Epic’s part, said Apple lawyer Perry. Epic started its antitrust assault on Apple “two years before the lawsuit was filed,” he said. “They had antitrust counsel embedded in the company. This was a preplan. They worked on this so hard.”

Apple has “abundant evidence of the pro-consumer benefits that Apple provides” through the iOS operating system and the App Store, said Perry. Apple made the decision early on to make the iPhone “the safest, the most secure, the most private computing device the world has ever known,” he said. Epic’s own CEO testified at trial “that he uses an Apple phone because it protects his security and privacy better than anybody else,” he said.

Epic lawyer Goldstein’s assertion that the only thing kept out by walled gardens is competition “is just false,” and “totally disproven by the trial record,” said Perry. “What’s kept out by walled gardens is fraudsters and pornsters and hackers and malware and spyware and foreign governments who wish to hijack the phone and GPS and microphone features of the device,” he said.

Apple’s main argument for defending its “privacy and security justifications” for the walled garden is that it’s Apple’s means for differentiating itself from Android, countered Goldstein for Epic. The argument should be “laughed out of court,” he said. “You cannot block horizontal competition” between app stores and between IAP providers, “and use as your excuse that I am now going to offer a product that is differentiated by the fact that it lacks any competition,” he said.

If Apple wants to offer a product “that we’ll call the walled garden,” then “have at it,” said Goldstein. “Sell that product to consumers, tell them use only our App Store, use only our IAP,” he said. “What the law does not permit is for Apple to say, ‘I’m not going to allow a competitive alternative,’” and forbid customers “by contract and by technology from using the Disney app store that might be even more protective or the one that’s cheaper,” he said.