Apple vs Epic lawsuit twist as DoJ and 35 US states weigh in

Apple’s claimed victory in its legal fight with Epic Games over the iPhone’s App Store is under threat after the US Department of Justice, Microsoft and 35 state attorneys all challenged last year’s court ruling.

The third-party legal filings, submitted on Thursday in California, will raise the stakes further in a case seen as central to antitrust complaints against Big Tech.

Hundreds of pages of documents were filed to a federal appeals court as the Fortnite developer challenges a ruling last year that fees on purchases within the iPhone maker’s App Store do not violate competition law.

The DoJ, however, said in its submission that the California district court behind that ruling had “committed several legal errors that could imperil effective antitrust enforcement, especially in the digital economy”. 

It said the court had interpreted the Sherman Act — an 1890 law prohibiting anti-competitive behaviour — “narrowly and wrongly, in ways that would leave many anti-competitive agreements and practices outside their protections”.

Microsoft said: “If Apple is allowed to step between any company with online services and users of iPhones, few areas of the vast mobile economy will be safe from Apple’s interference and eventual dominance. Consumers and innovation will suffer — indeed, they already have.”

Attorneys-general in 35 US states called on the appeals court to reverse the decision of the lower court, which ruled that the App Store was not a monopolist “under either federal or state antitrust laws” and that Epic had “over-reached”.

They said the ruling amounted to “a paralysing paradox” by treating the “agreement” developers must sign with Apple as a non-negotiable contract that made it exempt from antitrust enforcement.

“The district court’s holding blows a hole through Section 1 [of the Sherman Act],” the states wrote. “Paradoxically, firms with enough market power to unilaterally impose contracts would be protected from antitrust scrutiny — precisely the firms whose activities give the most cause for antitrust concern.”

The documents were filed hours after Apple reported record quarterly revenues of almost $124bn and net profit of $34.6bn. Revenues at its lucrative Services business — which includes App Store revenues — rose 24 per cent, with margins of 72.4 per cent.

Microsoft, itself subject to one of the biggest antitrust lawsuits from the US government in recent decades, said the “stakes are high” for antitrust laws to project competition “throughout huge swaths of the economy far beyond gaming”.

Thirty-eight professors of business, law and economics also urged the appeals court to reverse the earlier ruling, citing perceived errors in judgment that would disrupt decades of precedent.

“The magnitude of Apple’s profit margin and its imperviousness to competition are compelling evidence that Apple is exercising monopoly power,” they wrote.

Apple did not immediately respond to a request for comment. The company is expected to respond to the court in March.

Additional reporting by Tim Bradshaw in London