Apple asks Ninth Circuit to lift contempt finding over Epic injunction

(CN) — After being held in contempt for violating the terms of a 2021 injunction meant to curb anticompetitive conduct, Apple urged a three-judge panel of the Ninth Circuit on Tuesday to overturn the contempt finding and dissolve a more stringent injunction imposed as a result.

“While Apple respectfully disagrees with them, it takes seriously the district court’s findings and regrets that it lost the district court’s respect and trust,” said Gregory Garre, attorney with Latham and Watkins representing Apple.

Epic Games, developers of hit video games like Fortnite, brought antitrust claims against Apple in 2020, claiming the tech giant engaged in anticompetitive practices by forcing companies to use its proprietary tools to develop and distribute apps on its App Store.

While Apple mostly won the suit, a federal judge ruled in 2021 that Apple violated California’s competition law and ordered the company to allow app developers to have more freedom in giving users access to other payment options.

But earlier this year, U.S. District Judge Yvonne Gonzalez Rogers from the Northern District of California found that Apple “thwarted the injunction’s goals and continued its anticompetitive conduct.”

Apple argues that it followed the terms of the injunction and stopped blocking app developers from steering users to external purchasing mechanisms and claimed that the injunction didn’t restrict it from charging a commission for external purchases, which is the basis for the contempt finding.

The tech giant also argued that the “zero commission rule” imposed by the second injunction is a punishment that contradicts previous court orders and is overbroad.

“Apple wasn’t trying to hide anything,” Garre said.

But U.S. Circuit Judge Milan Smith, a George W. Bush appointee, noted that Gonzalez Rogers didn’t see it that way.

“She did think you were trying to hide something that you reverse-engineered what was done to try to get a specific result,” Smith said. “We want to get it right.”

Apple argued that it has a strong incentive to go back to the lower court, propose a reasonable commission and have a modification proceeding in which experts can be heard on both sides — something the tech giant said should have happened during the contempt proceedings.

Epic Games, however, disputed Apple’s characterization of the proceedings.

“Apple stuck to its guns and argued that it hadn’t violated the injunction at all,” said Gary Bornstein, attorney with Cravath, Swaine and Moore, representing Epic Games. “In the course of doing so, Apple misled the court.”

Further, Epic Games argued that the lower court’s contempt order merely elaborated upon what the original injunction already prohibited rather than penalizing Apple.

“And what it said was, ‘You can’t charge anything, ad infinitum,’” Smith remarked. “That’s quite a penalty. We’re talking billions of dollars.”

But Epic Games argued that Apple’s position of being unable to charge for things it previously charged for is incorrect. In fact, Epic Games argued that the original injunction only made it easier for developers to steer consumers to make non-commissioned transactions.

“All it did was eliminate a barrier that Apple had erected that made it harder for users to make those transactions,” Bornstein said. “So the argument that this is sort of a new kind of transaction that didn’t exist before, which is at the heart of Apple’s argument, is false.”

U.S. District Judge Michael McShane, a Barack Obama appointee sitting on the panel by designation from the District of Oregon, questioned Epic Games about what’s stopping Apple from making a business decision to impose a commission fee on out-of-app transactions.

“Where does it say anything about commissions in that one-page injunction?” McShane asked.

While Epic Games acknowledged that the original injunction doesn’t specifically reference commissions, it argued that Apple “understood there charging a commission posed a serious risk to compliance.”

“The district court could not, and was not required to, imagine every possible way that Apple might choose to evade the injunction,” Bornstein said.

To Apple, those arguments fell short of justifying the “perpetual imposition of a zero-commission rule,” which it argued is beyond the permissible scope of civil contempt.

The panel, which also included U.S. Circuit Judge Sidney R. Thomas, a Bill Clinton appointee, did not indicate when it would rule.