Ninth Circuit confirms contempt finding against Apple in Epic Games battle

(CN) — The Ninth Circuit Court of Appeals on Thursday agreed with a trial judge who held Apple in civil contempt for violating her 2021 injunction that was meant to curtail the tech giant’s anticompetitive practices by allowing consumers to make app purchases other than through Apple’s app store.

In a unanimous decision, the three-judge panel concluded that Apple’s civil contempt was shown by clear and convincing evidence. The judges affirmed U.S. District Judge Yvonne Gonzalez Rogers’ findings last April that Apple had taken steps to avoid the impact of the injunction by imposing a 27% commission on developers for purchases on their websites, as well as by putting restrictions on how developers could enable consumers to make purchases through external sites.

“Apple is not the first litigant to try burdening what it could not prohibit,” said U.S. Circuit Judge Milan Smith Jr., a George W. Bush appointee. “Apple has demonstrated that charging commissions on linked-out purchases gives it the power to prohibit them.”

Before Epic Games brought its antitrust lawsuit against Apple, there had been no way to make app purchases with an iPhone or other Apple device other than through Apple’s app store, which pocketed a hefty commission. After the 2021 injunction, Apple was required to allow developers to provide consumers with other options.

But, as the Ninth Circuit panel agreed, the 27% commission on those transactions was large enough that no rational developer would offer them.

“Apple did not charge any commission; it charged a prohibitive commission,” Smith said. “The district court did not abuse its discretion for finding Apple in contempt for imposing it.”

The appellate panel also agreed that Apple’s “scare screen” violated the injunction by discouraging consumers from making purchases other than through its own app store.

Before users could use an external purchase link, they would be warned in large, bold font that they were about to go to an external website and that Apple is not responsible for the privacy or security of purchases made on the web.

“Apple designed the scare screen to prevent external purchases,” Smith wrote. “It chose the phrase ’external website” because it ‘sounds scary.’ It used the developer’s name, rather than the app name, to make the screen ’even worse.’ It discussed how to make the screen ‘scarier’ and how to ‘scare’ users a bit.’ By engineering this screen to prevent users from completing linked-out purchases, Apple engaged in conduct designed to defeat the injunction.”

The panel, however, reversed one of the trial judge’s contempt sanctions that had ordered Apple not to charge any commission on purchases consumers make on a developer’s website, saying that this was more like a punitive, criminal contempt sanction. The panel said the trial judge had to modify this part of her ruling.

The other two judges on the panel were Senior U.S. Circuit Judge Sidney Thomas, a Bill Clinton appointee, and Chief U.S. District Judge Michael McShane of the U.S. District Court for the District of Oregon, a Barack Obama appointee who sat on the panel by designation.

Representatives of Apple and Epic had no immediate comment on the Ninth Circuit’s opinion.

Apple had mostly prevailed in the antitrust lawsuit by Epic Games, the maker of the hugely popular Fortnite video game.

Yet, Gonzalez Rogers ruled in 2021 that Apple violated California’s competition law and told the iPhone maker to allow app developers to more freedom to give users access to other payment options. Epic Games lost its appeal to the Ninth Circuit and the Supreme Court declined to get involved, leading to the injunction taking effect in January 2024.

During evidentiary hearings last year, Epic Games told the court Apple was “blatantly” violating the court’s order, including by imposing new fees on app developers when Apple customers complete an app purchase outside the App Store.

Epic Games also said Apple began displaying messages on its products warning customers of the potential danger of using outside links to purchase items in order to deter non-Apple payments.

At the end of those evidentiary hearings, Gonzalez Rogers demanded months of Apple’s documents to determine if it violated her injunction.

“After two sets of evidentiary hearings, the truth emerged. Apple, despite knowing its obligations thereunder, thwarted the injunction’s goals, and continued its anticompetitive conduct solely to maintain its revenue stream. Remarkably, Apple believed that this court would not see through its obvious cover-up,” said Gonzalez Rogers, an Obama appointee.

Apple argued at an October hearing before the Ninth Circuit panel that it followed the terms of the injunction and stopped blocking app developers from steering users to external purchasing mechanisms. The company 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.

Follow @edpettersson