In case anyone is interested in the legal background behind this decision I've read through the ruling and here are the key reasons why Epic's appeal failed:
1. The first reason involves Epic's attempt to define the relevant antitrust market as "iOS app distribution".
Courts do not allow you to simply declare an arbitrarily narrow market consisting of a single company in order to claim that company has a monopoly over the distribution of its own product. In antitrust law these are known as "single-brand aftermarkets" and are generally considered the exception rather than the rule. There are very specific criteria that need to be met in order for a "single-brand aftermarket" to be allowed:
> "In sum, to establish a single-brand aftermarket, a plaintiff must show: (1) the challenged aftermarket restrictions are “not generally known” when consumers make their foremarket purchase; (2) “significant” information costs prevent accurate life-cycle pricing; (3) “significant” monetary or non-monetary switching costs exist; and (4) general market-definition principles regarding cross-elasticity of demand do not undermine the proposed single-brand market."
The burden of proof was on Epic to provide evidence for all four criteria, and they failed at step (1). In order for "iOS app distribution" to qualify as a "single-brand aftermarket", Epic would need to prove that consumers were unaware that they would be limited to purchasing apps from the App Store when they originally bought their iPhones. Because if they knew about that restriction ahead of time and bought iPhones anyway, then they did so willingly, despite having the option to purchase smartphones on the marketplace without such restrictions.
2. The second reason involves Epic's failure to prove that Apple's app distribution restrictions were unreasonable.
Courts use a three-step process to analyze whether a competitor's behavior is considered an unreasonable restraint of trade:
Step 1: The plaintiff first has to show that the restraints have an anti-competitive effect.
Step 2: The defendant is then given the opportunity to show a pro-competitive justification for the restraint.
Step 3: The plaintiff then has to show that those pro-competitive justifications could have been achieved via less restrictive alternatives.
In this case, the court agreed with Epic that the constraints were anti-competitive. However, they also agreed with Apple that the restraints were justified because a) Apple is entitled to compensation for the use of their IP, and b) the restraints increase the security and privacy of their platform. At that point the burden is shifted back to Epic to show how (a) and (b) could have been achieved through less restrictive alternatives, which Epic failed to do.
1. The first reason involves Epic's attempt to define the relevant antitrust market as "iOS app distribution".
Courts do not allow you to simply declare an arbitrarily narrow market consisting of a single company in order to claim that company has a monopoly over the distribution of its own product. In antitrust law these are known as "single-brand aftermarkets" and are generally considered the exception rather than the rule. There are very specific criteria that need to be met in order for a "single-brand aftermarket" to be allowed:
> "In sum, to establish a single-brand aftermarket, a plaintiff must show: (1) the challenged aftermarket restrictions are “not generally known” when consumers make their foremarket purchase; (2) “significant” information costs prevent accurate life-cycle pricing; (3) “significant” monetary or non-monetary switching costs exist; and (4) general market-definition principles regarding cross-elasticity of demand do not undermine the proposed single-brand market."
The burden of proof was on Epic to provide evidence for all four criteria, and they failed at step (1). In order for "iOS app distribution" to qualify as a "single-brand aftermarket", Epic would need to prove that consumers were unaware that they would be limited to purchasing apps from the App Store when they originally bought their iPhones. Because if they knew about that restriction ahead of time and bought iPhones anyway, then they did so willingly, despite having the option to purchase smartphones on the marketplace without such restrictions.
2. The second reason involves Epic's failure to prove that Apple's app distribution restrictions were unreasonable.
Courts use a three-step process to analyze whether a competitor's behavior is considered an unreasonable restraint of trade:
Step 1: The plaintiff first has to show that the restraints have an anti-competitive effect.
Step 2: The defendant is then given the opportunity to show a pro-competitive justification for the restraint.
Step 3: The plaintiff then has to show that those pro-competitive justifications could have been achieved via less restrictive alternatives.
In this case, the court agreed with Epic that the constraints were anti-competitive. However, they also agreed with Apple that the restraints were justified because a) Apple is entitled to compensation for the use of their IP, and b) the restraints increase the security and privacy of their platform. At that point the burden is shifted back to Epic to show how (a) and (b) could have been achieved through less restrictive alternatives, which Epic failed to do.