I'm going to be tweeting today's 9th Circuit hearing in Epic v. Apple; you can also follow along here:
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We're getting underway now with judges getting seated — noting that the hearing was postponed from a couple months ago.
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Epic Games attorney Tom Goldstein is getting started with Epic's argument — briefly outlining Epic's plans for argument, and highlighting particularly the issue of Apple's competitive effects.
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The first question from the Ninth Circuit is whether switching costs were analyzed accurately. "I pay $1500 for my iPhone, and we're talking about something like a 30% tax on a dollar transaction later on. ... I don't really understand the life cycle cost of that."
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Judge McShane notes that the district court ruling found a lack of research by Epic, which Epic acknowledges. "Whatever reason people don't switch, they don't switch," says Goldstein. "People stick with their phone."
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Now we're talking about the relevant market, per question from Judge Smith. Asking — should this be sent back to the district court if the market is misidentified, and then everything holds while the judge reevaluates it?
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Goldstein says no matter what, we'll end up getting to the rule of reason, so the case should be able to proceed.
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Goldstein calls the "beating heart" of the case the analysis of whether Apple's walled garden provides useful pro-competitive effects, not things like defining the relevant market.
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Smith brings up the privacy and security justification. "It seems like what she cited are almost [entirely] vertical cases" — cases about vertical integration. Goldstein argues there are horizontal competitors that make this case different, i.e. competing app stores.
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"It has never been okay to eliminate ... your horizontal competitors," says Goldstein. "The only thing that is kept out by Apple's walled garden is competitors."
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Judge White is seemingly sympathetic to the argument that Apple can't argue its walled garden is a unified product, though we shouldn't read too much into the questions at this point.
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Judge is also bringing up "Project Liberty," the publicity blitz involving lots of fellow competitors, calling it "horizontal" attack. "Does this Project Liberty play any role in our analysis?" Goldstein admits "the district court really didn't like it."
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Nick Levin is now up from the US government, which is supporting Epic.
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Levin is arguing about whether Epic's contractual terms with Apple should be enforceable. McShane is pushing skeptically on the US argument that Apple's contract should still be scrutinized under antitrust law, even if Epic and Apple both signed it.
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Levin: "We haven't said whether these terms are or are not reasonable ... our point is these licensing agreements are concerted action" that could be scrutinized.
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Now we're hearing from the state of California, here to argue over the state's unfair competition law. "Some of the arguments" from Apple would "result in significant departures from existing California law," says California attorney.
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One of the issues at hand is when you can find a violation of the UCL even when there's no violation of the letter of antitrust law — California wants this possibility preserved and is concerned Apple's arguments could jeopardize it.
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And now we have Mark Perry from Apple, arguing again over the balancing claims for Apple's anti/pro competitive effects.
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We're in a protracted argument over the application of AmEx, a case about anti-steering rules, which Smith calls "one of the most confusing antitrust cases I have ever read."
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Perry effectively accusing Epic of bad faith — accuses it of crafting a market definition designed to rope in Apple and Google for lawsuits and avoid picking a fight with, say, console makers.
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Smith is pushing back on the district court's analysis of the relevant market. Perry rebuts by saying "this was not a grand legal principles case," saying Epic failed to prove the facts of its argument.
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Perry is also disputing the idea that there's a horizontal aspect to Apple's App Store policies — says it set policies like App Store review process before competition could even exist.
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Smith objects to Apple's claim (as he characterizes it) that macOS and iOS should have different levels of security because iOS is more mobile — says people take their laptops everywhere. "What's the real difference here and why should it make an impact on us?"
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Smith similarly asks why digital transactions are different from physical ones for in-app purchases.
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Perry doesn't really answer what I see as the thrust of these questions in first pass — he gets around to saying that "it knew from its experience with Mac what not to do" and wanted to create a more secure device.
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Perry hits hard the importance of security and privacy and refers back to Goldstein's quip about walled gardens: "That is just false, and it is totally disproven by the trial records." He says what's kept out is "fraudsters, and pornsters, and hackers..." among other bad actors.
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"The competition there is fierce, and this is Apple's competitive differentiator" in the mobile market — and "the minor, minor anti-competitive effects" affect only developers, not consumers.
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McShane notes that people also put a lot of digital authentications etc. on their phones, which could justify more security.
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Now we're turning to the piece where Apple lost: anti-steering provisions. Apple was ordered to let developers add links to outside payments; Perry calls the negative effects "very significant" and "deleterious." "It would be a breach in the wall," he says.
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Now we have Goldstein back for a rebuttal. He starts in on the privacy/security justification. He characterizes Apple's claim as simply trying to say that Apple's distinguishing factor is lacking competition — which he says would be "laughed out of court."
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Smith: "The one thing that really troubles me is this failure of proof," which he says there's a "pretty good case" for.
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