Apple and Google’s resounding defeat in the Australian antitrust lawsuit brought against them by Epic Games was a shot across the bow of all tech companies wanting to adopt a one-size-fits all defense strategy to global litigation. The recent finding by a judge that Apple and Google’s app stores had violated antitrust laws highlighted differences in both Australia’s legal framework and the judge’s outlook on the significance of the platforms’ approach to competition.
Epic Games’ antitrust lawsuit targeting Apple and Google over the tech giants’ app-store policies was brimming with déjà vu when it was heard in an Australian courtroom last year. The evidence, the arguments, the cross-examination of witnesses — it was all largely a rerun of lawsuits that had already unfolded in a US court. But there was ultimately one, striking difference between how things played out on opposite sides of the Pacific Ocean: the outcomes.
In Australia, Judge Jonathan Beach found in favor of the Fortnite videogame developer, ruling that both Apple and Google had engaged in anticompetitive conduct and misused their market power in the app-store distribution and in-app payment solutions markets (see here).
In the US, where the two lawsuits proceeded separately before different judges and on different timelines, the outcome had been mixed. A jury in California found that Google had illegally maintained monopolies in markets for Android app distribution and Android in-app billing; while US District Judge Yvonne Gonzalez Rogers found that Apple hadn’t violated federal US antitrust laws.
The differences between the two jurisdictions in the case of Apple were particularly noticeable because of what appeared to be the iPhone maker’s decision to cut-and-paste its Californian defense onto the trial that unfolded in a Melbourne courtroom. It’s an approach that may call into question legal tactics in future litigation across different courts.
The tech giant’s lawyers had argued in the Federal Court of Australia that it all came down to security — that by granting entry to the App Store to third-party developers or payment providers, Apple would be opening its doors to fraud and malware.
During the 16-week trial, Beach struggled with Apple’s assertion. Evidence from the European Union, where App Store policies had been uprooted by regulation, pointed to Apple’s ability to maintain security, despite opening up its store (see here). There was a sense that Apple hadn’t updated its arguments.
Beach appeared to be pondering the balance between making sure a platform was safe and allowing competition. It was in one of the hearings towards the end of last year’s trial that the judge asked the question: “When can security issues trump competition?” (see here).
“The purpose is security. But, in effect, it's anticompetitive, isn't it? To the extent that you're keeping out new entrants,” Beach quipped in one of the concluding hearings (see here).
In announcing his ruling last week, Beach answered the questions he had posed during the trial.
In Google’s case, he decided that security concerns didn’t justify everything, but they were enough to fend off Epic’s challenge to its technical restrictions; for Apple, however, the judge hadn’t bought what the defense lawyers were selling.
Beach said that while there was no doubt that Apple’s premium features included App Store security, the anticompetitive purposes of the closed-shop approach to the platform couldn’t be denied. Apple couldn’t shut out competition by invoking security, he concluded.
Since then, we’ve been offered some glimpses into how things played out behind the scenes in Australia. MLex understands that Apple’s US-based law firm, Gibson Dunn & Crutcher, was determined to run a US-style defense in Australia and required local antitrust experts to fall into line with those wishes.
That approach is now under the microscope and is likely to resonate with other tech giants that may be facing the prospect of global litigation. The suggestion is that the one-size-fits-all defense is no longer feasible and online platforms may need to approach every jurisdiction with different strategies (see here).
Meanwhile, as Epic’s international antitrust campaign continues to have ripple effects, it remains to be seen what significance Google’s security and open-ecosystem arguments will have in other jurisdictions looking at app store competition. These include Brazil (see here and here), India (see here), Indonesia (see here), South Korea (see here) and the UK (see here and here).
— ‘Substandard’ claims —
Epic first sued Google and Apple in the US before opening a new front against the companies in Australia. However, where the Australian trial merged the two lawsuits, with the addition of two class-action suit that unfolded alongside the main game, in the US they remained separate.
The logic for the US approach was that the technology at issue was different.
While Apple iOS devices are closed-platform — or “walled garden” — devices, Google Android devices are open-platform. That means that people wanting to “sideload” apps onto an Android phone can do so, bypassing the Google Play store — assuming they’re not dissuaded by Google’s security warnings.
Gonzalez Rogers held a bench trial in May 2021 for Epic’s claims against Apple. In her order, published a few months later, the judge embraced Apple’s arguments that it wouldn’t authorize certain apps, such as those that are malicious or privacy-invading. Epic’s claims that security was merely a pretext designed to cloak anticompetitive behavior hadn’t won the day (see here).
Epic “only scratched the surface and did not provide particularly compelling evidence of its perspective” on the effectiveness and quality of Apple’s app review process, Gonzalez Rogers concluded. While the game developer “spent considerable time arguing that numerous apps were, in fact, porn,” after further examination, “the proffer was devoid of merit and merely emphasized the lack of evidence on this point” the judge noted.
Centralized app distribution, which enables Apple to conduct app reviews, along with Apple’s closed platform, are what differentiate its platform from Google’s Android, Gonzalez Rogers said, adding that this distinction actually increased consumer choice. Users who value open distribution can purchase Android devices; those who prioritize security and the defense of a “walled garden” can choose iOS devices.
In Australia, Beach wasn’t buying this argument.
“The fact that Apple has imposed a centralized app-distribution system for the purpose of protecting security does not entail … that there is not also a substantial anticompetitive purpose involved,” he concluded in the oral presentation of his decision (the full judgment has yet to be published).
Beach’s decision may well point to a different personal take on Apple’s claims. However, there may also be different legal reasons for his conclusions.
Louise Klamka, a Sydney-based partner with law firm Gilbert + Tobin, notes that under US law, a plaintiff “will need to demonstrate that a company like Apple has monopoly power. This requires evidence that the company faces no real competition.”
“In Australia, you only have to demonstrate that a company has substantial market power and has engaged in conduct with a purpose, effect or likely effect of substantially lessening competition,” Klamka told MLex.
“This means you can have more than one company in the same market with substantial market power, or a company that is the only supplier in a market but faces competition from, say, a rival operating system. There is no need to show that they are a monopolist in Australia,” said Klamka, who wasn’t involved in the case.
“[Judge] Beach found that while one of Apple’s purposes may have been to protect security, it was not the only purpose and that there were other anticompetitive purposes for the conduct. In Australia, the purpose limb can be met, provided a ‘substantial purpose’ is an anticompetitive one. It does not have to be the only one,” she said.
Another difference between the two jurisdictions was that while a judge presided over Epic’s US Apple lawsuit, a jury heard the US case against Google.
At the US trial, the jurors heard arguments that Google erected artificial obstacles and “scary” warnings about apps from sources other than the Play Store. Google presented these barriers as security measures for protecting Android users, but Epic said they were designed to stifle competition from rival app stores (see here).
The jury ultimately returned a verdict against Google on all of Epic’s antitrust claims. However, because it was a jury trial, there are no detailed findings of fact and conclusions of law clarifying how the jury viewed Google’s security justifications.
In Australia, while Google was found to have engaged in anticompetitive behavior, its open operating system offered the company a small consolation prize, when Judge Beach ruled in its favor on the “technical restrictions” allegations presented by Epic.
The Australian judge concluded that Google hadn’t imposed the restrictions, or maintained them, with the purpose of substantially lessening competition.
— ‘Operating like a mob boss’ —
In Australia, Epic found itself in pole position when Beach accepted the company’s market definitions, in both the Apple and Google cases.
In ruling against Apple, the judge revealed he had embraced the markets outlined by Epic: the iOS app-distribution market and the in-app payment solutions market.
In the case of Google, Beach again accepted all three of Epic’s proposed market definitions: the market for supplying operating systems to original equipment manufacturers, or OEMs; the Android app-distribution market; and the Android in-app payment solutions market.
However, the Australian judge went on to conclude that Google had contravened Section 46 of Australia’s 2010 Competition and Consumer Act, which covers the misuse of market power, in only two markets: the app-distribution and in-app payment markets.
This amounted to a key difference between the two jurisdictions.
In the US Apple case, Gonzalez Rogers didn’t accept the market definition of either Apple or Epic Games and instead determined that the relevant market was “digital mobile gaming transactions” (see here).
Meanwhile, the jury that heard Epic’s case against Google found the company had illegally maintained monopolies in markets for Android app distribution and Android in-app billing.
The contrasting outcomes in the two US Epic Games cases went on to become a central issue for Google throughout its appeal of the jury verdict, along with its appeal of an injunction issued by US District Judge James Donato to restore competition.
“This case took a different turn from Epic v. Apple at every step,” Google told the US Court of Appeals for the Ninth Circuit. “Allowing inconsistent results across Epic’s two cases would mean that Google — which has fostered an open ecosystem — would be hamstrung in its ability to compete, while Apple continues to press the full advantages of its entirely closed ecosystem” (see here).
The Ninth Circuit, however, rejected this argument last month when affirming the jury’s findings and court-ordered injunction. “The Apple litigation involved market realities and theories of anticompetitive harms that were separate and distinct from those involved in this case,” the Ninth Circuit said.
Google and the courts have given substantial weight to distinctions between Apple’s “walled garden” and Google’s open ecosystem. But other US cases, including a landmark search monopolization suit brought by the US Department of Justice, casts the Android operating system as a restrictive platform fueling monopoly profits that have ultimately flowed to both Big Tech firms.
The DOJ’s complaint outlines how “control over Android has always been a critical issue” for Google and describes a set of contractual carrots and sticks that empower Google to “own the ecosystem” and limit rivals’ distribution channels despite the availability of open source code for the Android operating system (see here).
In order for OEMs to access important Google features and secure licenses needed to ship proprietary apps like Google Play, manufacturers must agree to use versions of Android that comply with Google-controlled technical standards.
While weighing in on the DOJ’s break-up bid in the Google search case, Perplexity AI executive Dmitry Shevelenko put the dynamic in more stark terms.
“Google has taken the promise of an open Android OS and corrupted it — operating like a mob boss with regards to mobile OEMS and carriers,” Shevelenko said (see here). “Users around the world are deprived of easy access to the best products because of Google's monopoly abuse.”
In Australia, although Beach’s different divergent findings on Apple and Google relating to the relative openness to competition on their stores may also create an unusual dynamic, the fact that both platforms were ultimately found to have breached competition laws means the differences are largely academic.
— The legacy —
Whatever the ultimate outcome of Epic’s legal battles in both the US and Australia, the clash demonstrates that both Apple and Google aren’t afraid to fight court judgments forcing them to make changes to their operations and policies.
It’s a combative spirit that will come in handy over coming years, amid the fallout of these lawsuits and related class actions that are targeting the platforms’ app stores.
In the US, Apple is appealing Gonzalez Rogers’ order finding the company in civil contempt for failing to comply with her injunction against the App Store’s anti-steering rules (see here).
Google, meanwhile, is seeking additional appellate review of the Ninth Circuit’s decision upholding the jury’s verdict and lower court’s injunction, and has said it’s prepared to take the fight to the US Supreme Court if needed (see here).
In Australia, both tech giants may choose to appeal Beach’s decision, once his judgement, set to be over 2,000 pages, is made public. However, those familiar with the dynamics between Apple’s American and Australian lawyers suggest that the “our way or the highway” approach of Gibson Dunn & Crutcher will have to make way for an Australian-led strategy.
Back in the US, the disputes are continuing to evolve. In 2020, Google was hit with a US class-action suit alleging the company had erected contractual and technological barriers foreclosing Android users’ ability to utilize app distribution platforms other than Google’s Play Store (see here).
As Epic’s related case against Google proceeded to trial, the tech giant in September 2023 reached a settlement in principle with US states and consumer plaintiffs over its alleged illegal monopolization of the Android app ecosystem.
Donato – who is overseeing all of the US antitrust cases challenging the Play Store – has not yet given final approval to the settlement, where Google agreed to pay $700 million and make several other concessions (see here).
Meanwhile, last January, Donato granted final approval to Google's settlement with a class of developers, where the company agreed to pay $90 million and make Play Store changes (see here).
Across the Pacific, the two Australian class-actions suits, which played out alongside the Epic cases, have some way to run, as courts set about the task of working out the extent to which app developers and store users were harmed by the anticompetitive behavior. At the same time, app developers have launched a similar class-action suit against Sony Entertainment over its PlayStation app-store policies.
More importantly, however, Epic’s Australian success appears to be bleeding into an ongoing regulatory debate about whether the country needs to adopt forward-looking, “ex ante” competition laws designed to target digital platforms.
Some competition experts are now arguing that Epic’s success proves that existing laws are more than adequate to take on the most powerful tech companies in the world and that the country’s antitrust enforcer, the Australian Competition & Consumer Commission, should harness the certainty gleaned from the ruling and launch significant antitrust enforcement.
“One of the premises behind the proposed ex ante digital regulation was that the current laws were inadequate to deal with these markets,” lawyer Louise Klamka said. “This [outcome] raises the question of whether this is correct.”
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