Northern California Judge Yvonne Gonzalez Rogers on Friday ruled against the foundational argument of Epic Games’ high-profile antitrust lawsuit against Apple, determining that Epic had “overreached” in claiming that Apple had exercised monopoly control in its App Store.
Her ruling comes on the heels of D.C. Judge James E. Boasberg’s June decision to dismiss the Federal Trade Commission’s lawsuit against Facebook, finding that the agency had failed to provide enough evidence to prove that Facebook had a monopoly in social networking.
The pair of decisions in two of the most high-profile cases brought against the industry in decades show that while increasingly popular rhetoric asserts that Silicon Valley giants wield monopoly power, the U.S. court system and legal precedent don’t agree. That disconnect could constrain the growing movement to break the companies up.
“Case law is just stacked in favor of the defendants,” said Sam Weinstein, an associate professor at Benjamin N. Cardozo School of Law and a former attorney in the antitrust division of the Justice Department. “It’s especially difficult in the tech area because tech companies are able to argue that competition is just a click away.”
Gonzalez Rogers did determine that Apple’s restrictions on the developers of apps displayed in the company’s app store were “anticompetitive” and in violation of California competition law. She ruled that the company must allow developers to direct customers to alternatives to Apple’s payment system, which collects up to a 30 percent commission on purchases.
But she also found Apple had not violated any federal antitrust law.
In his June decision, Boasberg questioned the FTC’s assertion in its initial Facebook complaint that the company controlled 60 percent of the social networking market, saying that the agency fell short in providing a proper definition of an antitrust product market.
“It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist,” Boasberg wrote.
Boasberg allowed the FTC to refile its case, which it did last month. Boasberg has not ruled on whether the refiling provided enough evidence to allow the case to go forward.
Some advocates for greater antitrust enforcement said the two decisions underscore that antitrust law needs to be overhauled to better address the power of Silicon Valley companies.
Sen. Amy Klobuchar, the chair of the Senate Judiciary antitrust panel, said the judge’s ruling shows why antitrust laws, which haven’t been amended in decades, need to be updated for the digital era.
“You see time and time again, our laws are not as sophisticated as the companies violating their spirit,” she said in an interview. “These circumstances cry out for change.”
David N. Cicilline, the chair of the House Judiciary antitrust subcommittee, said in an interview that the courts repeatedly get cases involving tech firms wrong and that their decisions don’t reflect a nuanced understanding of the complicated markets in which tech firms operate.
“They’re not applying [existing laws] in a way that makes any sense, and part of it is because Congress has not done its job of modernizing our antitrust statutes,” he said.
Cicilline, along with other House Democrats and Republicans, has introduced a package of bipartisan bills that would address some of the ways Congressional investigators allege the companies have solidified digital dominance, and make major changes to their businesses. He said he expects the bills to be brought to a House vote later this fall, and he is working with Klobuchar on Senate companion bills.
The top Republican on the House antitrust panel also called for Congress to pass the bills, as concerns about tech giants’ power increasingly cut across party lines.
“How a judge could look at the evidence and rule that Apple is not a monopoly defies logic,” tweeted Rep. Ken Buck, the top Republican on the House Judiciary antitrust panel.
Congress is facing external pressure to act from some of the tech giants’ biggest corporate challengers. Match Group, which has testified about alleged anticompetitive behavior by Apple before Congress, said in a statement that Friday’s ruling makes clear that “antiquated antitrust laws cannot solely be fixed by the courts.”
“Apple and Google’s monopolistic practices will only end when we bring our laws into the digital age,” spokeswoman Vidhya Murugesan said in a statement.
Both the Facebook and Apple cases show how challenging and controversial it can be to define markets in cases involving Silicon Valley companies, which have business interests that cross myriad traditional industries. As Gonzalez Rogers explained in her ruling, these definitions are “central” to antitrust cases, because courts traditionally review both the structure of a market and a company’s behavior to determine whether it’s broken antitrust laws.
In this instance, she accepted neither company’s market definition. Epic sought to argue Apple is a “monopoly of one,” she said, by arguing Apple is a monopolist over its own system of distributing apps on its own devices in the App Store, as well as its in-app payment system. Apple, meanwhile, argued that the court should focus on the entire video games market, in which both companies compete. Gonzalez Rogers decided to focus specifically on transactions in mobile games.
“This is unusual, for a court to throw them out and say I’ve got another one,” said Doug Melamed, a Stanford Law professor, specializing in antitrust.
Neither the Apple nor Facebook decision is a death-knell to the efforts to bring antitrust motions against the company. Gonzalez Rogers notably said the court “does not find that it is impossible” that Apple is an illegal monopolist, only that Epic failed to prove it in this case. That leaves the door open for other companies or the government to bring antitrust challenges against Apple, which has been the subject of Justice Department scrutiny.
In the Facebook case, Boasberg permitted the agency to refile its complaint, and the FTC submitted a bolstered version of the suit last month, in which it made a more detailed argument about the ways that Facebook dominates “personal social networking.” Facebook has until Oct. 4 to respond, but industry groups have panned the agency’s decision to home in on a very narrow market that does not include popular social media companies including YouTube or TikTok among the social network’s competitors.
Weinstein, the law professor, said it’s possible the ruling in the Apple case could be appealed by either or both parties, and subsequent rulings could be more consequential for the debate about the future of tech regulation.
“Both parties walk away somewhat unscathed,” he said. “This is maybe round one, and this leaves the window open for more action.”