Ninth Circuit Upholds Jury Verdict Against and Remedies Imposed Upon Google in Epic Games Monopolization Antitrust Suit

Overview

In what Epic Games’ CEO describes as a “[t]otal victory in the Epic v. Google appeal”,[1] on July 31, the United States Court of Appeals for the Ninth Circuit affirmed a 2023 jury verdict (along with the contours entry of the district court’s remedial injunction) finding that Google’s Play Store and payment system form the basis of a violation of Section 2 of the Sherman Act, preventing developers from using alternative app stores and payment systems.[2]  Google vows to appeal further, but in the meantime is under an impending deadline to open its Android ecosystem to greater competition.[3] 

The Ninth Circuit’s unanimous opinion contains interesting discussions of the law regarding issue preclusion and jury instructions, among other things.  In this Note, however, we focus upon the antitrust issues addressed by the opinion. 

As background, Epic originally separately filed antitrust suits against both Google and Apple in 2020 following the removal of its popular Fortnite video game from both stores. Similar to Apple, Google takes a 30% share of the revenue for all sales made through its Play Store, including in-app purchases.  Epic challenged this practice by embedding secret code into Fortnite to allow players to buy in-game currency directly From Epic at a lower cost.[4]  This led to Fortnite’s immediate removal from Google’s Play Store and Apple’s App Store for noncompliance with their terms of service.

Epic used this removal as the basis for its federal antitrust lawsuits in the United States District Court for the Northern District of California.  The two suits proceeded separately.  Prior to the Google trial, Apple received a judgment in its favor on all the federal antitrust counts, a ruling that was affirmed by the Ninth Circuit.

With specific regard to Google, Epic accused Google of monopolizing how consumers access apps on Android devices and pay for transactions within apps.[5]  Epic sought injunctive relief, which the court granted following a unanimous jury finding that Google’s policies and agreements with manufacturers and developers illegally restricted competition in the Android app distribution and payment markets. The court temporarily stayed this injunctive order pending the outcome of Google’s appeal of both the liability verdict and injunction.

The Ninth Circuit Court of Appeals Opinion 

A unanimous three-judge panel[6] affirmed the jury’s verdict and upheld the district court’s injunction requiring Google to open its Google Play Store to rivals, rejecting Google’s arguments on all fronts.  We review the key antitrust issues below.

Issue Preclusion from Epic v. Apple Litigation as to Market Definition

Section 2 cases place the burden on plaintiffs to define and prove a relevant product market.  Google’s lead argument was that the market definition found and favorable to Apple in the Epic v. Apple litigation precludes the court from defining the market differently in this case and ultimately reaching a different conclusion.[7] The argument failed; the Google court found that it should look at the “commercial realities faced by consumers”[8] In doing so, the court found important differences between Apple’s and Google’s business approach, which led the court to reject the issue preclusion argument and define its own relevant product market.

While the court in Apple found that Apple and Google compete together in the same market for “digital mobile gaming transactions”, the court in Google isolated the market to “a single-brand aftermarket” (i.e., Android-only where Google competes against Samsung, Amazon, and others) for app distribution and in-app billing services. The court placed great importance on the implications of Apple’s walled garden approach and Google’s willingness to license its operating system to third parties.

Thus, the Google case requires an independent analysis of the “very different relationship between Epic and Google, the relevant submarket in the Android platform, [and] the distinct market-definition issues in the two suits.”[9] Importantly, the difference in markets led Epic to allege different theories of harm in the present case flowing from conduct specific to Google.  For example:

• Google requires OEMs to install Google Play on the home screen of every device the OEM makes, whereas Apple does not license its operating system to other OEMs and thus has no installation requirements.
• Google entered agreements to keep other app stores off OEMs’ home screens, while Apple’s iPhones preclude third-party app stores altogether, making such agreements unnecessary.
• Google entered alleged monopolistic agreements with app developers to refrain from offering their apps on any other app store and manipulated its operating system to deter direct downloads, behaviors that were not at issue in the Apple litigation.

To the court, “[t]hese are not fringe issues” but rather, these differences in the commercial realities between Apple’s “walled garden” iOS platform and Google’s “open distribution” Android operating system required a “wholly different approach for the antitrust claims” and “wholly different evidence about relevant markets”. 

Plaintiff’s Burden of Proof Reflected by Jury Instructions

Google argued that the court’s jury instructions were flawed and tainted the verdict. Google claimed the district court abused its discretion in declining to instruct jurors on legal requirements for a “single-brand” aftermarket and in its framing of the rule of reason instruction.  As background, a single-brand aftermarket is a market in which a consumer is “locked in” with a single brand and “demand for a good is entirely dependent on the prior purchase of a durable good in a foremarket.” For example, when customers in the past purchased Kodak photocopiers in the foremarket, they were “locked in” to an aftermarket of Kodak parts and servicing.[10] 

Because Epic failed in its Apple litigation to meet the burden imposed on asserting a single-brand aftermarket, Google argued for a similar result by imposing those same burdens in its litigation via jury instruction.  However, Epic never argued for a single-brand Google aftermarket, and in fact, the court found that the “crux of this case is Google’s anticompetitive conduct vis-à-vis many different brands within the Android ecosystem.”[11] 

Although an appellate court reviews de novo whether a jury instruction accurately states the law, “whether an instruction should be given in the first place depends on the theories and evidence presented at trial” which “is mostly a factual inquiry” reviewed for abuse of discretion.[12]  Therefore, because the single-brand aftermarket theory lacked a “foundation in the evidence” as it was never plead, the panel found it was “within the district court’s discretion to refuse to give the requested instruction because the instruction could have confused the jury.”[13] 

Regarding the trial court’s rule of reason instruction, the underlying balancing test requires a plaintiff to first show the challenged conduct had an adverse effect on competition and then considers whether any procompetitive benefits are outweighed by anticompetitive effects.  On appeal, Google argued the district court improperly limited the jury’s consideration of procompetitive benefits of the challenged conduct to the Android-focused relevant market, instead of also allowing the jury to consider related/cross markets where Google competes with Apple (claiming Google’s restrictive practices were justified by its competitive battle with Apple).  The trial court disagreed, finding that once again Google’s concern was that its competition with Apple should have been an issue for the jury, despite Epic defining Android-only markets. 

The appellate court reviewed de novo whether the rule of reason jury instruction accurately states the law and began by noting it is not settled case law that a jury is required to consider cross-market procompetitive benefits when conducting a rule of reason analysis.[14]  The Supreme Court’s precedent is not clear, and the Ninth Circuit has never expressly confronted the issue.  Therefore, because consideration of cross-market benefits is an open question unsettled by case precedent and not an established legal requirement, the appellate panel found it was not error for the district court to exclude it from the jury instruction.[15]

Despite this limited holding, one can expect that the appellate case will be cited by litigants as standing for approval of excluding cross-market benefits from jury instructions. This might form the basis of further Google appeals; however, the appellate court did make an alternative finding that any error from excluding this point from the jury instructions was harmless.

Did the Court’s Remedy Improperly Impose a Duty to Deal? 

Finally, Google took aim at the three year-injunction imposed by the district court as inconsistent with case law that even monopolists have no duty to deal with rivals, which the injunction required here.[16] This argument also failed.

 In October 2024, District Court Judge Donato issued a three-year injunction requiring Google to open up the Google Play Store, i.e., allow users to download apps from alternative app stores and allow app downloads from other platforms on the Google Play Store.  The injunction also blocks Google from paying companies not to compete in the app distribution market and from entering into exclusive distribution agreements with app developers. 

In line with arguments recently raised by other large tech companies entangled in antitrust litigation such as Meta, Apple, and Live Nation, Google objected that the injunction opening up the Android app-distribution market illegally imposes a duty-to-deal requirement “to design new products and services tailor-made for [Google’s] competitors”.[17]  In raising this defense, Google relied primarily on the Supreme Court’s Trinko decision for the proposition that companies can choose with whom they do business, with no “duty to deal,” particularly with their direct rivals.[18]

 The appellate panel rejected this reasoning, however, explaining that the Trinko case addressed the issue of whether a unilateral refusal to deal with rivals violates Section 2 of the Sherman Act, not the legality of compelling a defendant already found liable under that statute to deal with its competitors.  Thus, the panel found that the district court “had within its basket of remedial powers the authority to require Google to deal with parties harmed by its anticompetitive conduct, including its competitors.”[19]

In so holding, the Ninth Circuit recognized the district court’s objective of restoring competition through its injunctive remedy.  In fact, the panel explained, the Supreme Court endorses the principle that district courts are “clothed with ‘large discretion’ to fit the decree to the special needs of the individual case” – not just to “unfetter a market from anticompetitive conduct,” but also to “pry open to competition a market that has been closed by defendants’ illegal restraints.”[20] 

Google further argued that by opening its Play Store as required by the injunction, it would face significant security concerns.  To address this concern, the app-store-distribution remedy’s pricing clause provides that “Google may require app developers and app store owners to pay a reasonable fee” for its security procedures.  Google asked the appellate court to revise this provision to only require “nondiscriminatory pricing.”[21]  The appellate court expressed concern, however, that Google could circumvent the remedy altogether through its preferred pricing clause language by keeping third-party app stores off the Play Store via unreasonably high prices. In amici filings the Department of Justice and Federal Trade Commission supported this view, arguing in their amicus brief that the reasonable fee provision “plainly prevents Google from undermining the decree by charging rival app stores exorbitant rates that could undermine their competitiveness.”[22]

In conclusion, the panel found the lower court’s injunction was supported by the extensive record on remedies and was narrowly tailored to address the anticompetitive harm of Google’s misconduct.  The panel’s opinion further explained that the remedy accounted for “the particular characteristics of digital markets” and that in light of the digital two-sided market at issue, the remedy represents “a reasonable method of eliminating the consequences of Google’s illegal conduct that we must affirm as the reviewing court.”[23] 

Conclusion

We view this as an important decision, particularly since it was issued by an appellate court.  The interplay of refusals to deal versus conduct characterizable as illegal monopolization stands at the heart of many of the closely watched tech cases now in federal courts around the country, including a case by the U.S. Justice Department regarding ad tech discussed here, and the search monopolization case now in the remedy stage in the United States District Court for the District of Columbia. Additionally, as referenced above, this is the most recent in a line of decisions rejecting refusal-to-deal defenses to monopolization allegations.

The Mintz Antitrust Practice continues to monitor major antitrust litigations, including those involving technology companies.  If you have a question about activity in this space, please contact one of the individuals above or your regular Mintz attorney.

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