(Bloomberg) -- U.S. antitrust officials investigating Apple Inc. face new hurdles after a judge rejected the bulk of Epic Games Inc.’s lawsuit accusing the iPhone maker of thwarting competition laws with its tight grip over the App Store.
The Justice Department’s antitrust division has been investigating Apple over practices in the store, a probe that began during the Trump administration amid scrutiny of the country’s dominant tech platforms. The Biden administration is pressing forward with the investigation.
Antitrust lawyers say Friday’s decision in the Epic lawsuit, while not fatal to the Justice Department’s inquiry, presents new challenges for the government because the judge said that Epic failed to establish that Apple’s conduct violates the Sherman Act, the federal law used to target monopolies.
“It raises the bar to any Justice Department lawsuit,” said Joel Mitnick, an antitrust lawyer at Cadwalader, Wickersham & Taft LLP who isn’t involved in the case. “Apple pretty much got a flat out victory on all the Sherman Act claims.”
The Biden administration has vowed to take on consolidation and anticompetitive conduct across the economy. President Joe Biden has put prominent tech critics in key positions and in a July executive order said he would combat the rise of dominant internet platforms, which he accused of using “their power to exclude market entrants, to extract monopoly profits, and to gather intimate personal information that they can exploit for their own advantage.”
On Capitol Hill, Democratic and Republic lawmakers are backing legislation that would give antitrust enforcers more power and impose new rules on app stores run by Apple and Alphabet Inc.’s Google.
Apple Ruling Underscores Need for App Store Bill, Lawmakers Say
U.S. District Judge Yvonne Gonzalez Rogers said in her decision that Apple’s rules preventing app developers from alerting consumers about purchase options outside the App Store are anticompetitive, and she said Apple must let developers steer people to other payment methods.
Yet the judge ruled that Apple isn’t illegally monopolizing the market for mobile gaming transactions. She also rejected Epic’s case that Apple is engaging in unlawful restraint of trade, another element of federal antitrust law.
One of the challenges for the Justice Department, according to lawyers, is that Gonzalez Rogers said Apple’s restrictions imposed on developers are justified in order to protect security. She also said the market is two-sided, which presents courts with the difficulty of weighing harms on one side and benefits on the other, a framework established in a 2018 U.S. Supreme Court decision.
U.S. Google Monopoly Case Could Hit Supreme Court AmEx Hurdle
“The biggest thing that scares me about this opinion is the two-sided market complexity,” said John Newman, who teaches antitrust law at the University of Miami School of Law. “If this is a two-sided market, you can’t prove harm to just developers or harm to just consumers. You have to somehow prove net harm across all the different groups that interact through the platform.”
Still, the decision doesn’t deliver a mortal blow to a potential Justice Department case, lawyers say. Even though Gonzalez Rogers said Apple doesn’t have monopoly power, she said the company “is near the precipice of substantial market power, or monopoly power.” The judge also wrote that Apple failed to justify the 30% commission it charges on transactions.
“There’s a lot here to encourage an enforcer depending on what their investigation looks like,” said Sam Weinstein, who teaches antitrust law at Cardozo School of Law and is a former lawyer at the Justice Department’s antitrust division. “If I’m the government, I don’t look at this and think we’re out of business.”