When users fork over money for an iPhone (average price: over $800), many expect to be able to play their favorite mobile game on it. They expect the apps they buy to work. Many users also expect to install apps that enhance their security and privacy beyond what Apple provides.
Users may not know or understand that Apple’s rules for the App Store can get in the way, by driving up app costs and limiting availability. Apple uses layers of digital locks to channel all app purchases and downloads through its App Store. Apple also requires that all in-app payments run through its own system, and siphons off a 30% cut. Users have no way of knowing, when they purchase a phone, how these policies can affect their current or future app experiences, including whether Apple will decide to kick an app out of the App Store altogether.
Yet, in the antitrust case Epic Games v. Apple, in which the maker of Fortnite alleges that Apple has an illegal monopoly in iOS app distribution, a court ruled that since customers supposedly understand Apple’s policies and buy iPhones anyway when they could choose an Android phone, there’s competition in the market for distributing apps, and Apple’s ability to wield monopoly power is checked by competition from Android.
The court got it wrong. That’s why EFF, along with attorneys from Constantine Cannon, filed an amicus brief siding with Epic Games in the U.S. Court of Appeals for the Ninth Circuit, explaining that the trial court’s decision was contrary to law and defied the reality of mobile software distribution. The decision incorrectly presumed that, if customers are aware of the restrictions when purchasing a device, then competition in that market is sufficient to rein in Apple’s anticompetitive conduct and users are not locked into the App Store.
Here’s the background: Epic Games sued Apple for antitrust violations relating to its App Store policies. Epic is claiming that Apple’s exclusive control over app sales, and Apple’s requirement that all apps use Apple’s in-app payment system, are illegal under U.S. antitrust law. After a lengthy trial last year, the judge found that Apple’s policies harmed competition and innovation, but still dismissed Epic’s antitrust claims.
Among other things, the judge said that Apple’s restrictive rules on app distribution were justified because they improve security and privacy. And the judge ruled that Apple doesn’t have monopoly power because customers can choose Android phones instead. She did find, however, that Apple’s policies violated California’s Unfair Competition Law. Both sides appealed, and the Ninth Circuit is now reviewing the case.
On the first point, as we explained to the Ninth Circuit, the commercial realities of app distribution (and common sense) suggest that consumers can’t be expected to analyze and understand app costs. Even if users are aware of Apple’s rules before they choose a mobile device, they still have no way of knowing how much those rules raise the prices of apps and in-app purchases, or how the rules suppress innovation, or when Apple will decide to kick an app that users want out of the App Store. Users don’t know how their app needs, and the cost of apps, will change over the lifetime of their devices. And apps are just one consideration people have when buying devices. Further, the court erred in declining to recognize that app distribution and in-app payments are separate products, so that tying one to the other can be an antitrust violation.
We also urged the court to not to buy Apple’s arguments that it needs to keep control over app distribution to protect users’ security and privacy. Despite Apple’s claim that only its paternalistic approach to security and privacy can protect users, Apple bans apps and features that would serve a wider range of those needs, like VPN apps for international travelers and apps that tell the user if their device has been jailbroken. More broadly, our antitrust laws are based on the principle that competition is the best way to create better, safer products, so Apple’s argument that more competition would be harmful to users shouldn’t fly with the court. We’re hopeful that the Ninth Circuit will correct these errors and order Apple to drop its restrictive App Store rules.