SCOTUS Should Strike Down Apple Anti-Steering Injunction, Say 2 More Amicus Briefs

Two more amicus briefs emerged Monday at the U.S. Supreme Court in support of Apple’s petition to set aside the 9th U.S. Circuit Appeals Court’s affirmation of the U.S. District Court for Northern California’s injunction barring Apple from enforcing its anti-steering rules against U.S. iOS app developers. The injunction arose from the App Store antitrust litigation against Epic Games (see 2310030002).

Before the 9th Circuit’s decision, no federal appellate court previously upheld an injunction on businesses enforcing anti-steering rules, “and for good reason,” argued NetChoice and the Chamber of Progress (CoP) in one amicus brief (docket 23-344). Nationwide injunctions “are problematic,” because they can cause “abrupt changes in federal policy and interrupt or even dictate federal policy for months or years while they go through the appeal process,” argued the Civil Justice Association of California (CJAC) in the other brief.

SCOTUS “recently recognized anti-steering rules as procompetitive,” said the NetChoice/CoP brief, citing the 2018 decision in Ohio v. American Express. It’s “undisputed” among the parties that virtually all digital transaction platforms “enforce similar anti-steering rules,” it said.

The 9th Circuit panel, to achieve its finding, placed a “novel federal restriction” on California’s Chavez doctrine, “a common-sense rule” that a business practice can’t be both “reasonable and unfair” in the context of claims under California’s Unfair Competition Law (UCL), said the NetChoice/CoP brief. “But rather than promoting fair competition, the panel’s UCL holding will undermine it,” it said.

NetChoice and CoP urge SCOTUS to review the 9th Circuit’s “faulty ‘categorical legal bar’ rule,” said their brief. Failure to do so will effectively “blind future courts” to some of the most important evidence, public-policy issues and legal precedent implicated by “parallel” UCL claims, “compromising competition and consumer welfare in the process,” it said.

Apple proved that there were “strong procompetitive rationales” for its anti-steering rule to bar apps that route users to sites outside the App Store’s “walled garden” when making in-app purchases, said the NetChoice/CoP brief. The groups don’t mean to suggest that Apple’s “walled garden” approach “is the only safe or desirable one,” it said. They advocate only that Apple “should be free to differentiate its store from others by promising enhanced security and privacy, and that consumers should be free to choose between competing app store models,” it said.

The anti-steering rule “provides direct support” for two App Store rules “that were found to be procompetitive and that are critical to Apple’s business model,” said the NetChoice/CoP brief. One rule is that in-app purchases can be made only through Apple’s in-app payment processor, it said. The other is that apps “can be distributed to iOS devices only through the App Store,” it said. But this evidence was “effectively negated” by the 9th Circuit panel’s “categorical legal bar” rule in the context of adjudicating Epic’s parallel UCL claim, it said.

That wasn’t “merely error,” but rather “the inauguration of a new legal framework that guarantees future error” in the 9th Circuit, said the NetChoice/CoP brief. Evidence of the anti-steering rule’s procompetitive rationales “was both abundant and vital to the proper adjudication of Epic’s flawed UCL claim,” it said. Besides device security and privacy, those rationales “included protecting app users from dangerous frauds, such as the financial exploitation of minors through unsupervised in-app purchases that use third-party payment processing mechanisms,” it said.

Negating evidence “resulted in the wrong result under the UCL,” said the NetChoice/CoP brief. But it also makes the public “worse off” by improperly labeling commercial practices as unfair, “when they are in fact procompetitive,” it said. Large app developers like Epic might have the resources to provide or access alternatives, it said. But “small developers (which is most developers) may well prefer that the anti-steering provision remain in place to reduce transaction friction on the App Store, thereby improving the platform’s quality generally and attracting more users,” it said.

The injunction, if left intact, will undermine the “freemium” business model for mobile apps, said the NetChoice/CoP brief. Freemium is “the most popular model today,” it said, because it lowers the barrier for users to try an app by offering a basic version of it for free, giving users the option to pay if they want to engage more deeply.

Nationwide injunctions are problematic “in civil, non-governmental litigation in which litigants, without having to certify a class under Federal Rule of Civil Procedure 23(b)(2), seek to enjoin company policies that challenge generally applicable business policies,” said the CJAC’s amicus brief. That’s “particularly problematic in this case,” where the lower courts relied on a California statute to impose an injunction “that will have consequences far beyond that state’s borders,” it said.

Scholars have noted that nationwide injunctions are “a recent phenomenon,” and that no statutory or constitutional basis “explicitly authorizes single district courts to issue nationwide injunctions,” said the CJAC brief. CJAC believes that the 9th Circuit opinion “injects an inharmonious voice into the already discordant Circuit chorus on the constitutional requirements for the issuance of nationwide injunctions,” it said. That decision “intensifies the need for clarity and guidance for uniformity of decision,” which only SCOTUS can provide, it said.

A federal court may “constitutionally provide” injunctive relief beyond the named plaintiff only if a class is certified or if broader relief is necessary to redress the named plaintiff’s injury, said the CJAC brief, citing the 1979 SCOTUS decision in Califano v. Yamasaki. There’s “no third option,” it said.

But the 9th Circuit “begs to differ,” said the CJAC’s brief. “So do numerous other federal courts, which have been increasingly issuing nationwide injunctions in disregard of Califano’s constitutional constraints,” it said. The 9th Circuit’s opinion in this case “is an eye-popping example of ‘nonclass class’ universal injunctive relief gone awry,” it said.

The district court issued, and the 9th Circuit affirmed, “a breathtakingly broad ‘nonclass class’ universal injunction potentially affecting millions of nonparty iOS developers around the globe,” said the CJAC’s brief. Because this wasn’t a class action, Califano’s first option wasn’t available, it said. Neither was Califano’s second option -- necessary to redress the named plaintiff’s injury, it said. Epic, the only named plaintiff, “was no longer an iOS developer at the time the injunction was issued,” it said. Epic thus lacked “any cognizable Article III injury that injunctive relief could redress,” it said.