Case: 21-16506, 01/27/2022, ID: 12353959, DktEntry: 56, Page 1 of 48

Nos. 21-16506 & 21-16695

IN THE
United States Court of Appeals
for the Ninth Circuit

EPIC GAMES, I NC.,

Plaintiff-Counter-Defendant-
Appellant-Cross-Appellee,
v.
A PPLE, I NC.,
Defendant-Counterclaimant-
Appellee-Cross-Appellant.

On Appeal from the

United States District Court for the Northern District of California
The Honorable Yvonne Gonzalez Rogers
No. 4:20-cv-05640-YGR

BRIEF FOR THE UNITED STATES OF AMERICA AS AMICUS

CURIAE IN SUPPORT OF NEITHER PARTY

DOHA G. MEKKI
Principal Deputy Assistant Attorney
General
DAVID B. LAWRENCE
Policy Director
DANIEL E. HAAR
NICKOLAI G. LEVIN
PATRICK M. KUHLMANN
MATTHEW C. MANDELBERG
Attorneys
U.S. DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
950 Pennsylvania Ave., NW, Room 3224
Washington, DC 20530-0001
(202) 476-0428
Patrick.Kuhlmann@usdoj.gov

Counsel for the United States

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TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................... i

TABLE OF AUTHORITIES..................................................................... ii
INTEREST OF THE UNITED STATES ................................................. 1
STATEMENT........................................................................................... 2
ARGUMENT ............................................................................................ 7
I. The District Court Erred in Applying Section 1
of the Sherman Act ........................................................................... 9
A. The district court erred in concluding that the
DPLA—a written “contract”—is not concerted action ............... 10
B. The district court failed to assess the restraints’ overall
competitive effect ........................................................................ 15
II. The District Court Erred in Applying Section 2
of the Sherman Act ........................................................................ 20
A. The district court appears to have improperly
evaluated the pricing evidence during the
monopoly-power analysis............................................................ 20
B. The district court erroneously equated
the Section 1 and 2 analyses ...................................................... 24
III. The District Court’s Opinion Could Be Read
as Adopting Inflexible Market-Definition Principles
That Would Improperly Limit the Sherman Act’s Scope.............. 27
A. Antitrust markets can include products the
defendant does not license or sell ............................................... 28
B. Product markets can be defined around components
of a bundled product ................................................................... 31
CONCLUSION....................................................................................... 39
CERTIFICATE OF COMPLIANCE ...................................................... 40
CERTIFICATE OF SERVICE ............................................................... 41

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TABLE OF AUTHORITIES
CASES Pages(s)

American Ad Management, Inc. v. GTE Corp.,

92 F.3d 781 (9th Cir. 1996) ................................................................. 17
American Needle, Inc. v. National Football League,
560 U.S. 183 (2010) ............................................................................... 9
Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,
9 F.4th 1102 (9th Cir. 2021)................................................................ 17
Bhan v. NME Hospitals, Inc.,
929 F.2d 1404 (9th Cir. 1991) ............................................................. 17

Brown Shoe Co. v. United States,

370 U.S. 294 (1962) .................................................................. 27, 28, 33

California v. American Stores Co.,

495 U.S. 271 (1990) ........................................................................28, 29

California Dental Association v. FTC,

526 U.S. 756 (1999) ........................................................................15, 18

Capital Imaging Associates, P.C. v. Mohawk Valley

Medical Associates, 996 F.2d 537 (2d Cir. 1993)................................. 19

Cascade Health Solutions v. PeaceHealth,

515 F.3d 883 (9th Cir. 2008) ..........................................................11, 32
Close v. Sotheby’s, Inc.,
894 F.3d 1061 (9th Cir. 2018) ............................................................. 18

County of Tuolumne v. Sonora Community Hospital,

236 F.3d 1148 (9th Cir. 2001) ............................................................. 17
Continental TV, Inc. v. GTE Sylvania, Inc.,
433 U.S. 36 (1977) ............................................................................... 12

Copperweld Corp. v. Independence Tube Corp.,

467 U.S. 752 (1984) .............................................................. 9, 11, 18, 30
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Dimidowich v. Bell & Howell,

803 F.2d 1473 (9th Cir. 1986) ............................................................. 13

DSM Desotech Inc. v. 3D System Corp.,

749 F.3d 1332 (Fed. Cir. 2014)............................................................ 33
Eastman Kodak Co. v. Image Technical Services, Inc.,
504 U.S. 451 (1992) ........................................................................25, 27

FTC v. Actavis, Inc.,

570 U.S. 136 (2013) ........................................................................20, 21

FTC v. Facebook, Inc.,

No. 20-3590, 2022 WL 103308 (D.D.C. Jan. 12, 2022)........................ 30

FTC v. Qualcomm Inc.,

969 F.3d 974 (9th Cir. 2020) .................................................... 20, 24, 26

FTC v. Whole Foods Market, Inc.,

548 F.3d 1028 (D.C. Cir. 2008)............................................................ 27

Greyhound Computer Corp., Inc. v. International

Business Machines Corp., 559 F.2d 448 (9th Cir. 1977) ................23, 24
Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc.,
627 F.2d 919 (9th Cir. 1980) ............................................................... 23

Illinois Tool Works Inc. v. Independent Ink, Inc.,

547 U.S. 28 (2006) ............................................................................... 12

Image Technical Services, Inc. v. Eastman Kodak Co.,

125 F.3d 1195 (9th Cir. 1997) ............................................................. 23

Impax Laboratories, Inc. v. FTC,

994 F.3d 484 (5th Cir. 2021) ............................................................... 16

In re Insurance Brokerage Antitrust Litigation,

618 F.3d 300 (3d Cir. 2010)................................................................. 10
In re NCAA Athletic Grant-In-Aid Cap Antitrust
Litigation, 375 F. Supp. 3d 1058 (N.D. Cal. 2019).............................. 17

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International Telephone and Telegraph Corp. v. General

Telephone & Electronics Corp., 518 F.2d 913 (9th Cir. 1975)............. 28

Jeanery, Inc. v. James Jeans, Inc.,

849 F.2d 1148 (9th Cir. 1988) ............................................................. 13
Jefferson Parish Hospital District No. 2 v. Hyde,
466 U.S. 2 (1984) ...................................................................... 12, 34, 35

Klein v. Facebook, Inc.,

No. 20-cv-08570-LHK, 2022 WL 141561 (Jan. 14, 2022).................... 30

Leegin Creative Leather Products, Inc. v. PSKS, Inc.,

551 U.S. 877 (2007) ............................................................................. 15

Lim v. TForce Logistics, LLC,

8 F.4th 992 (9th Cir. 2021).................................................................. 11

McWane, Inc. v. FTC,

783 F.3d 814 (11th Cir. 2015) ............................................................. 23

Monsanto Co. v. Spray-Rite Service Corp.,

465 U.S. 752 (1984) ............................................................................. 13
Movie 1 & 2 v. United Artist Communications, Inc.,
909 F.2d 1245 (9th Cir. 1990) ............................................................. 23

Multistate Legal Studies, Inc. v. Harcourt Brace

Jovanovich Legal & Professional Publications, Inc.,
63 F.3d 1540 (10th Cir. 1995) ............................................................. 25

National Society Professional Engineers v. United States,

435 U.S. 679 (1978) ............................................................................. 17

NCAA v. Alston,
141 S. Ct. 2141 (2021) .................................................................. passim
O’Bannon v. NCAA,
802 F.3d 1049 (9th Cir. 2015) ............................................................. 30

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Ohio v. American Express Co.,

138 S. Ct. 2274 (2020) .................................................................. passim

Paladin Associates, Inc. v. Montana Power Co.,

328 F.3d 1145 (9th Cir. 2003) ............................................ 10, 11, 14, 15
Perma Life Mufflers, Inc. v. International Parts Corp.,
392 U.S. 134 (1968) ............................................................................. 11

Rebel Oil Co., Inc. v. Atl. Richfield Co.,

51 F.3d 1421 (9th Cir. 1995) ..........................................................22, 23

Robertson v. Sea Pines Real Estate Cos.,

679 F.3d 278 (4th Cir. 2012) ..........................................................13, 14

Simpson v. Union Oil Co. of California,

377 U.S. 13 (1964) ............................................................................... 12

Systemcare, Inc. v. Wang Laboratories Corp.,

117 F.3d 1137 (10th Cir. 1997) ........................................................... 10

Toscano v. PGA Tour, Inc.,

70 F. Supp. 2d 1109 (E.D. Cal. 1999).................................................. 14
Toscano v. Professional Golfers’ Association,
258 F.3d 978 (9th Cir. 2001) ............................................................... 14

Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp.,

959 F.2d 468 (3d Cir. 1992)................................................................. 32

United States v. American Express Co.,

838 F.3d 179 (2d Cir. 2016)............................................................19, 20

United States v. AMR Corp.,

335 F.3d 1109 (10th Cir. 2003) ........................................................... 22

United States v. Continental Can Co.,

378 U.S. 441 (1964) ............................................................................. 27
United States v. Dentsply International, Inc.,
399 F.3d 181 (3d Cir. 2005)................................................ 22, 23, 25, 31

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United States v. E.I. du Pont de Nemours & Co.,

351 U.S. 377 (1956) ............................................................................. 20

United States v. H&R Block, Inc.,

833 F. Supp. 2d 36 (D.D.C. 2011)........................................................ 30
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) ........................................................ passim

United States v. Paramount Pictures, Inc.,

334 U.S. 131 (1948) ........................................................................10, 11

Viamedia, Inc. v. Comcast Corp.,

951 F.3d 429 (7th Cir. 2020) ............................................................... 25

Wallace v. International Business Machines Corp.,

467 F.3d 1104 (7th Cir. 2006) ............................................................. 30

Williams v. I.B. Fisher Nevada,

999 F.2d 445 (9th Cir. 1993) ............................................................... 26

STATUTES

15 U.S.C. § 1........................................................................................9, 30

15 U.S.C. § 2........................................................................................... 30

RULES
Fed. R. App. P. 29..................................................................................... 1

OTHER AUTHORITIES

Phillip E. Areeda & Herbert Hovenkamp, Fundamentals

of Antitrust Law § 15.04 (4th ed. 2017) .............................................. 19
Julian O. von Kalinowski et al., Antitrust Laws
and Trade Regulation § 12.02[5] (2d ed. 2017)................................... 19

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INTEREST OF THE UNITED STATES

The United States enforces the federal antitrust laws and has a strong

interest in their correct interpretation. The United States files this brief,

pursuant to Federal Rule of Appellate Procedure 29(a)(2), to address

errors in the district court’s analysis of the Sherman Act, which, if

uncorrected, could significantly harm antitrust enforcement. The United

States takes no position on the merits of the parties’ claims.

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STATEMENT

1. Epic Games challenges Apple’s control over the distribution of

apps and in-app payments on its popular iPhone and iPad, devices with

over one billion users. 3-ER-683. Apple’s mobile devices are “walled

garden[s],” meaning that a user can acquire apps for her device only

through the Apple App Store. 1-ER-5. Apple does not permit competing

app stores on its devices, and prohibits the downloading of apps directly

from the Web. 1-ER-21.

Apple has “benefited” from third-party apps that “enhance[] the

experience for iOS devices and their consumers.” 1-ER-6. Developers

wanting to distribute their apps through the App Store must execute a

standard-form Developer Program License Agreement (DPLA). 1-ER-31-

32. The developer pays a $99 annual fee, receives access to certain tools,

and can distribute apps through the App Store. Id. The developer agrees

to abide by Apple’s App Guidelines, which prohibit certain features and

types of apps (e.g., “storefront” apps). 1-ER-39.

The developer agrees to use Apple’s in-app purchasing (IAP) system

when a user makes certain in-app purchases (e.g., purchasing “premium”

content). 1-ER-33-34. Apple charges a 30 percent commission to the

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developer. 1-ER-36. An anti-steering provision prohibits the developer

from, inter alia, advertising lower prices on other platforms within the

app. 1-ER-34-35.

Epic develops and distributes video games. 1-ER-7. Its flagship

video game, Fortnite, is available on multiple platforms, including (until

this dispute) the App Store. 1-ER-16. Epic also operates the Epic Games

Store, which is available on multiple platforms, and carries hundreds of

games. 1-ER-17-18.

Epic requested that Apple allow it to use an alternative to Apple’s

IAP system and distribute the Epic Games Store through the App Store.

1-ER-27. When Apple refused, Epic activated an alternative payment

method for its Fortnite app and filed this lawsuit. 1-ER-28. Apple

counterclaimed, alleging contractual claims.

2. Epic alleged that Apple violated Sections 1 and 2 of the Sherman

Act, as well as California’s Cartwright Act and Unfair Competition Law

(UCL). In its primary Sherman Act claims, Epic alleged, inter alia, that

Apple’s prohibition on competing app stores and requirement that

developers use only its IAP system harmed competition in global

aftermarkets for (1) iOS app distribution and (2) iOS in-app payment

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processing. Epic alleged that these aftermarkets followed from a

“foremarket” of smartphone operating systems. 1-ER-47. Apple

disagreed, contending the relevant product market was “digital games

transactions,” encompassing all platforms facilitating gaming-app

transactions. Id.

The district court ruled for Apple on all of Epic’s claims except for

part of the UCL claim. The court rejected both parties’ product markets,

instead defining a global market for mobile gaming transactions

(encompassing Apple and non-Apple mobile devices). 1-ER-128-29. It

reasoned, inter alia, that (a) Epic’s foremarket for smartphone operating

systems was “misconceived” because iOS is not “licensed or sold to

anyone” (and the aftermarkets consequently failed), 1-ER-48, and (b)

“IAP is not a product for which there is a market,” 1-ER-130.

Regarding Epic’s Section 1 claims, the court concluded that there

was not concerted action because the DPLA “is a unilateral contract

which the parties agree that a developer must accept its provisions

(including the challenged restrictions) to distribute games on iOS.” 1-

ER-145. The court also concluded that Epic had not shown that Apple’s

restrictions are unreasonable. Epic showed anticompetitive effects

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(supracompetitive profits, and reduced choice, innovation, and quality);

Apple presented procompetitive justifications, including greater security,

user convenience, and vindication of its IP rights; and Epic did not

identify less restrictive alternatives. 1-ER-147-53. But the court stopped

there, finding Apple’s restraints reasonable without determining

whether, on balance, they harmed competition. 1-ER-153. The court also

rejected Epic’s tying claim, finding that Apple’s IAP system and app

distribution are not separate products. 1-ER-158.

The court concluded that Apple had not violated Section 2 because

(a) Epic had not shown that Apple has monopoly power and (b) Apple’s

restrictions could not constitute anticompetitive conduct under Section 2

because they were not anticompetitive under Section 1 and “proving a [§

2] violation” is “more exacting.” 1-ER-154-55 (internal quotation marks

omitted). The court concluded that Apple “is near the precipice of []

monopoly power,” but is “saved by the fact that its [market] share [of 52-

57%] is not higher, that competitors from related submarkets are making

inroads into the mobile gaming submarket, and, perhaps, because

plaintiff did not focus on this topic.” 1-ER-140-42.

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Finally, the court held that Apple’s anti-steering provision violated

the UCL and enjoined its enforcement. 1-ER-165-71. But this Court

stayed the injunction.

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ARGUMENT

The district court committed several legal errors that could imperil

effective antitrust enforcement, especially in the digital economy. The

court read Sections 1 and 2 of the Sherman Act narrowly and wrongly, in

ways that would leave many anticompetitive agreements and practices

outside their protections.

On Section 1, the court held that the DPLA—Apple’s written

agreement with developers—is not a “contract” subject to Section 1

because developers must accept its terms. This carve-out—at odds with

text and precedent—would insulate numerous potentially harmful

agreements from Section 1 scrutiny.

The court also found the challenged restraints “reasonable” without

weighing their proven harms and benefits to determine the restraints’

overall competitive effects. This failure to confront the rule of reason’s

ultimate question—“whether a challenged restraint harms competition,”

NCAA v. Alston, 141 S. Ct. 2141, 2160 (2021)—was erroneous and, if

upheld, could significantly harm competition and consumers by allowing

a minor benefit to condone a major harm.

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On Section 2, the court appeared to miss the significance of pricing

evidence when assessing monopoly power. It found that Apple sustained

supracompetitive prices for years, without regard to its competitors’

prices—a textbook example of monopoly power, see United States v.

Microsoft, 253 F.3d 34, 58 (D.C. Cir. 2001) (en banc)—but appeared to

treat such evidence as insignificant without accompanying evidence of

reduced output. Even if the pricing evidence failed to prove monopoly

power directly, the court should have considered it as part of the

circumstantial evidence of monopoly power, which it apparently failed to

do.

Additionally, the court stated erroneously that conduct found

reasonable under Section 1 cannot violate Section 2 as a matter of law.

That is incorrect as a general manner, improperly circumscribing the

statute’s reach, and it led the court to omit erroneously the weighing

required under Section 2.

Last, the district court’s opinion is ambiguous and could be read as

resting on rigid legal rules foreclosing a product market including a

product that the defendant does not itself license or sell or comprising

just one component of an integrated product that the defendant does sell.

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There are no such legal rules, however. The lodestar of market definition

is “the commercial realities of the industry,” Ohio v. Am. Express Co., 138

S. Ct. 2274, 2286 (2020) (cleaned up), and, in some cases, the commercial

realities may support product markets for products that the defendant

does not license or sell or that are components of a bundle. A contrary

rule would cause courts to miss many important dimensions of

competition—and hinder effective antitrust enforcement, particularly in

the digital economy.

I. The District Court Erred in Applying Section 1 of the

Sherman Act

Section 1’s prohibitions are crucial because “[c]oncerted activity

inherently is fraught with anticompetitive risk.” Copperweld Corp. v.

Indep. Tube Corp., 467 U.S. 752, 768–69 (1984). It is therefore vital to

correct the district court’s holdings improperly narrowing its protections.

Section 1 prohibits every “contract, combination . . . , or conspiracy,

in restraint of trade.” 15 U.S.C. § 1. Thus, a Section 1 plaintiff must

prove (1) concerted action (a “contract,” “combination,” or “conspiracy”)

that (2) unreasonably restrains trade. Am. Needle, Inc. v. Nat’l Football

League, 560 U.S. 183, 190 (2010). The district court misinterpreted both

elements.
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A. The district court erred in concluding that the

DPLA—a written “contract”—is not concerted action

1. Section 1 expressly reaches “contract[s]” restraining trade.

Accordingly, a written contract like the DPLA establishes concerted

action. E.g., United States v. Paramount Pictures, Inc., 334 U.S. 131, 142

(1948) (concerted action “plainly established” by “express agreements”);

In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 323 (3d Cir. 2010)

(written agreement is “independently adequate” to establish concerted

action); see Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137, 1143

(10th Cir. 1997) (en banc) (“To hold otherwise would be to read the words

‘contract’ and ‘combination’ out of section 1.”).

The district court, however, concluded that the DPLA did not

establish concerted action, even though the challenged restraints gave

rise to the harm to competition. The court deemed the DPLA “a

unilateral contract” because it is “a contract of adhesion” and “a developer

must accept its provisions.” 1-ER-96, 1-ER-145. That ruling is

irreconcilable with this Court’s holding that “it is sufficient that

[plaintiff] has offered evidence that [defendant] signed agreements.”

Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1153-54 (9th Cir.

2003). The court “improperly graft[ed] an additional requirement”—

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here, the ability to negotiate the challenged terms—“onto the element of

[plaintiff’s] prima facie case requiring that the defendants acted in

concert.” Id.

It is immaterial that developers “must accept” the provisions of the

DPLA. 1-ER-145. A contract of adhesion is still a “contract,” see Lim v.

TForce Logistics, LLC, 8 F.4th 992, 1000-01 (9th Cir. 2021), and

“acquiescence in an illegal scheme is as much a violation of the Sherman

Act as the creation or promotion of one,” Paramount Pictures, 334 U.S. at

161; see also Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 917

(9th Cir. 2008) (an antitrust conspiracy exists “even though [defendant]

participates in the conspiracy only under coercion”). The Supreme Court

has found concerted action even where one party “unwillingly complied

with the restrictive [] agreement[]” and where acquiescence was

“induced” by “the communicated danger of termination.” Perma Life

Mufflers, Inc. v. Int’l Parts Corp., 392 U.S. 134, 142 (1968), overruled on

other grounds by Copperweld, 467 U.S. 752.

Indeed, the district court’s interpretation would upend Section 1

jurisprudence, including on vertical restraints. As the court

acknowledged, in many vertical arrangements, “the buyer passively

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accepts conditions set by the vendor.” 1-ER-146. The Supreme Court

nonetheless has repeatedly decided Section 1 challenges to vertical

restraints embodied in express contracts without pausing to consider

whether the counterparty embraced those restraints. E.g., Ohio v. Am.

Express Co., 138 S. Ct. 2274, 2282 (2018) (Amex) (“Amex’s business model

sometimes causes friction with merchants”); Cont’l TV, Inc. v. GTE

Sylvania, Inc., 433 U.S. 36, 40 (1977) (plaintiff challenged a provision in

its franchise agreement with defendant). In fact, vertical restraints are

especially problematic when a party has market power—sometimes

defined as the ability “to force a purchaser to do something that [it] would

not do in a competitive market.” Jefferson Parish Hosp. Dist. No. 2 v.

Hyde, 466 U.S. 2, 14 (1984), abrogated on other grounds by Ill. Tool Works

Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006). Thus, a rule precluding

liability if a party imposes a term on its counterparty would remove

Section 1 where it is especially needed.

Moreover, the district court’s approach would strip the

counterparty of a countermeasure to the coercion—a Section 1 suit

challenging the restraint and a contractual defense of unenforceability.

See Simpson v. Union Oil Co. of Cal., 377 U.S. 13, 21 (1964) (Section 1

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claim challenging “agreement” imposed on plaintiff “coercively”). Finally,

the district court’s approach would needlessly complicate the analysis,

requiring courts to explore the minds of the negotiators to determine the

nature of a party’s acceptance of the challenged terms.

2. The authorities cited by the district court do not support its

holding. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764

(1984), explains that when a plaintiff relies on circumstantial evidence of

conspiracy (e.g., defendants charging the same price), plaintiff must

present some evidence “that tends to exclude the possibility that the

[defendants] were acting independently.” Accord The Jeanery, Inc. v.

James Jeans, Inc., 849 F.2d 1148, 1155, 1161 (9th Cir. 1988) (customer

complaints did not support an inference of concerted action); Dimidowich

v. Bell & Howell, 803 F.2d 1473, 1478 (9th Cir. 1986) (refusing “to infer

a vertical combination” from a refusal to deal with certain customers but

not others). But this precedent is “inapplicable where, as here, the

concerted conduct is not a matter of inference or dispute.” Robertson v.

Sea Pines Real Estate Cos., 679 F.3d 278, 290 (4th Cir. 2012). Direct

evidence—such as a contract—“establishes that the defendants convened

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and came to an agreement.” Id. at 289; see Paladin Assocs., 328 F.3d at

1153 (written agreements are “direct evidence of ‘concerted activity’”).

The district court’s reliance on Toscano v. Professional Golfers’

Association, 258 F.3d 978 (9th Cir. 2001), was similarly misplaced.

There, the plaintiff challenged certain PGA rules incorporated by

reference into contracts between the PGA and local sponsors. Id. at 982.

In relevant part, this Court affirmed summary judgment in favor of the

local sponsors because they “merely accepted the PGA Tour’s rules and

regulations and played no role in creating or enforcing them.” Id. at 983.

But context is critical. The Toscano plaintiff did not challenge the

contracts between the PGA and the local sponsors themselves, but rather

alleged a broader conspiracy among the PGA and “certain of its officers,

[player representatives on the PGA Board], and the sponsors to boycott

[plaintiff].” Toscano v. PGA Tour, Inc., 70 F. Supp. 2d 1109, 1114 (E.D.

Cal. 1999). This alleged conspiracy was not embodied in the written

agreements executed by the sponsors, and thus Monsanto’s strictures on

the use of circumstantial evidence applied. Here, conversely, the

contractual terms themselves are being challenged.

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B. The district court failed to assess the restraints’

overall competitive effect

The rule of reason requires factfinders to “‘weigh[] all of the

circumstances’” in order “to assess whether a challenged restraint harms

competition.” Alston, 141 S. Ct. at 2160 (quoting Leegin Creative Leather

Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007)). Accordingly, the

“rule of reason weighs legitimate justifications for a restraint against any

anticompetitive effects.” Paladin Assocs., 328 F.3d at 1156. Weighing is

how a factfinder determines a restraint’s overall competitive effect when

a restraint has both competitive harms and benefits, and there is no less

restrictive alternative.

The district court failed to do that weighing here. After finding that

the challenged restraints have competitive harms and some

justifications, and that Epic had not identified less restrictive means of

achieving the benefits, 1-ER-147-53, the court erroneously halted its

analysis without making the ultimate assessment of reasonableness at

the rule’s heart.

1. “What is required” under the rule of reason is “an enquiry meet

for the case, looking to the circumstances, details, and logic of a

restraint.” Cal. Dental Ass’n v. FTC, 526 U.S. 756, 781 (1999). Courts
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often apply a burden-shifting framework. The “plaintiff has the initial

burden to prove that the challenged restraint has a substantial

anticompetitive effect.” Amex, 138 S. Ct. at 2284. If that is established,

“the burden shifts to the defendant to show a procompetitive rationale

for the restraint.” Id. “If the defendant makes this showing, then the

burden shifts back to the plaintiff to demonstrate that the procompetitive

efficiencies could be reasonably achieved through less anticompetitive

means.” Id. However, “[t]hese three steps do not represent a rote

checklist, nor may they be employed as an inflexible substitute for careful

analysis.” Alston, 141 S. Ct. at 2160.

This framework resolves the vast majority of rule-of-reason cases

without necessitating a weighing of competitive harms and benefits. See

id. at 2161. For example, there is nothing to weigh if the plaintiff fails to

show an anticompetitive effect or the defendant fails to show a cognizable

procompetitive justification. Likewise, “it is unreasonable to justify a

restraint of trade based on a purported benefit to competition if that same

benefit could be achieved with less damage to competition.” Impax Labs.,

Inc. v. FTC, 994 F.3d 484, 497 (5th Cir. 2021).

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However, where a restraint has both procompetitive and

anticompetitive effects, and there is no less restrictive alternative, “the

court must weigh the harms and benefits to determine if the behavior is

reasonable on balance.” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1413

(9th Cir. 1991); accord Aya Healthcare Servs., Inc. v. AMN Healthcare,

Inc., 9 F.4th 1102, 1108 (9th Cir. 2021); Cnty. of Tuolumne v. Sonora

Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) (“Because plaintiffs

have failed to meet their burden of advancing viable less restrictive

alternatives, we reach the balancing stage.”); Am. Ad Mgmt., Inc. v. GTE

Corp., 92 F.3d 781, 791 (9th Cir. 1996) (factfinder must decide “whether

this is valid justification which also outweighs any restraint on trade”).

Without weighing, “an egregious restraint with a minor

procompetitive effect would have to be allowed to continue, merely

because a qualifying less restrictive alternative was not shown.” In re

NCAA Athletic Grant-In-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058,

1109 (N.D. Cal. 2019). But “the inquiry mandated by the Rule of Reason

is whether the challenged agreement is one that promotes competition or

one that suppresses competition,” Nat’l Soc’y Prof’l Eng’rs v. United

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States, 435 U.S. 679, 691 (1978), not simply whether a defendant has

some justification for a restraint that, on balance, harms competition.1

2. The district court relied on the Supreme Court’s formulation of

the burden-shifting framework in Alston and Amex, which does not

expressly reference weighing when describing that framework. 1-ER-

143-44. But these brief passages should not be read to rework core

antitrust jurisprudence or displace this Court’s cases recognizing a

weighing requirement. See Close v. Sotheby’s, Inc., 894 F.3d 1061, 1073

(9th Cir. 2018) (explicating the “high standard” for overruling precedent).

To the contrary, read in full, Alston and Amex confirm that the rule

of reason entails weighing (in cases not resolved at earlier stages). Alston

reiterated that the “whole point” of the rule is to condemn any restraint

that “unduly harms competition” after a “weigh[ing of] all of the

circumstances of a case.” 141 S. Ct. at 2160 (quoting Copperweld, 467

U.S. at 768). It restated the principle that the relevant analysis “can vary

1The form of the weighing depends on the circumstances of the case. Cal.
Dental, 526 U.S. at 780. A court often will be able to determine the
“principal tendency of a restriction” or its “net” effect through a
qualitative assessment of whether the harms or benefits predominate.
Id. at 771, 775, 781.

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depending on the circumstances,” and avoided enshrining the particular

three-step formulation as the entire and sole test. Id. (noting that the

Court had “sometimes spoken of” a three-step, burden-shifting

framework (emphasis added)). 2

Alston and Amex were resolved at earlier stages, so weighing was

unnecessary. In Alston, plaintiffs had successfully proved a less

restrictive alternative, and thus the Court had no need to weigh

anything. Id. at 2163-66. And in Amex, plaintiffs failed to carry their

initial burden. 138 S. Ct. at 2290. While “the parties agree[d] that a

three-step, burden-shifting framework applie[d],” id. at 2284 (emphasis

added), that was because the court below framed weighing as an ultimate

determination that follows three burden-shifting steps, rather than as

part of the burden shifting itself, 3 United States v. Am. Express Co., 838

2 Tellingly, the authorities cited by the Court for its capsule of burden
shifting all recognize an ultimate weighing of harms and benefits.
Capital Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., 996 F.2d
537, 543 (2d Cir. 1993); Phillip E. Areeda & Herbert Hovenkamp,
Fundamentals of Antitrust Law § 15.04 (4th ed. 2017); Julian O. von
Kalinowski et al., Antitrust Laws and Trade Regulation § 12.02[5] (2d ed.
2021).
3 The burden is already back on the plaintiff at step three, so there is no

additional burden shift before the weighing stage. In that sense,

weighing can be said to follow the three-step burden-shifting framework,
rather than constituting a separate, fourth step in that framework.
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F.3d 179, 195 (2d Cir. 2016) (“Ultimately, it remains for the factfinder to

weigh the harms and benefits of the challenged behavior.” (internal

quotation omitted)).

II. The District Court Erred in Applying Section 2 of the

Sherman Act

Section 2 is aimed at “achiev[ing] for the Nation the freedom of

enterprise from monopoly.” United States v. E.I. du Pont de Nemours &

Co., 351 U.S. 377, 385-86 (1956). To establish monopolization, a plaintiff

must show that the defendant (1) possesses monopoly power and (2)

engaged in anticompetitive conduct. FTC v. Qualcomm Inc., 969 F.3d

974, 990 (9th Cir. 2020). The district court appears to have erred on both

elements, discounting pricing evidence in the monopoly-power analysis

even though monopoly power encompasses “the power to control prices,”

du Pont, 351 U.S. at 391, and wrongly narrowing the range of conduct

actionable under Section 2.

A. The district court appears to have improperly

evaluated the pricing evidence during the
monopoly-power analysis

“Monopoly power is the power to control prices or exclude

competition.” Id. Axiomatically, then, evidence of sustained

supracompetitive prices is highly probative of monopoly power. Cf. FTC

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v. Actavis, Inc., 570 U.S. 136, 157 (2013) (“higher-than-competitive

profits [are] a strong indication of market power”). As Microsoft noted,

“a firm is a monopolist if it can profitably raise prices substantially above

the competitive level,” so “[w]here evidence indicates that a firm has in

fact profitably done so, the existence of monopoly power is clear.” 253

F.3d at 51.

The court found that Apple’s pricing is immune from “market

forces” and that Apple has “extraordinarily high” operating margins and

has long imposed a “supracompetitive” commission. 1-ER-95-97, 1-ER-

101, 1-ER-121. Nonetheless, it held that this evidence was not sufficient

direct evidence of monopoly power because there was no proof of a

“corollary impact on output.” 1-ER-140. Then, the court found “a more

mixed result” with regard to circumstantial evidence, holding that Apple

lacks monopoly power, but “is near the precipice.” 1-ER-141-42. In

making this determination, the court never addressed the pricing

evidence, and its silence suggests that it erroneously failed to consider

the pricing evidence when evaluating the circumstantial evidence.

Reviewed as a whole, the district court’s analysis could be viewed

as suggesting that the pricing evidence was insignificant without

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separate proof of reduced output. A combination of output and pricing

evidence is one way to prove monopoly power directly, see Rebel Oil Co.,

Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995), but not the

only way. Behavior “difficult to explain unless [the defendant has] a

monopoly product”—e.g., pricing “without considering rivals’ prices”—

establishes monopoly power. Microsoft, 253 F.3d at 57-58. Indeed,

“set[ting] prices with little concern for its competitors” is “‘something a

firm without a monopoly would [be] unable to do.’” United States v.

Dentsply Int’l, Inc., 399 F.3d 181, 191 (3d Cir. 2005) (quoting Microsoft,

253 F.3d at 58).

Additionally, in most cases, a reduction in output follows from a

price increase as a matter of course, see United States v. AMR Corp., 335

F.3d 1109, 1115 n.6 (10th Cir. 2003) (“prices and productive output are

two sides of the same coin” (internal quotation marks omitted)), and

requiring separate proof of reduced output imposes an unnecessary

burden on the plaintiff. Moreover, output can change due to many factors

independent of the defendant’s conduct, such as the strength of the

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economy, making output effects attributable to the challenged restraint

difficult to isolate. 4

Even assuming arguendo that the sustained supracompetitive

pricing evidence is not direct evidence of monopoly power, the court erred

to the extent it ignored the pricing evidence when considering the

circumstantial evidence. Indeed, courts regularly rely on such evidence

in finding monopoly power via circumstantial evidence (in addition to

proof of a significant market share and barriers to entry). 5 E.g.,

McWane, Inc. v. FTC, 783 F.3d 814, 832 (11th Cir. 2015) (defendant’s

“continued power over [] prices” among the sufficient evidence of

monopoly power); Dentsply, 399 F.3d at 191 (“growing” profit margins

part of circumstantial evidence of monopoly power); Greyhound

4 The court correctly held that the benchmark for assessing competitive
effects was the level of output absent the challenged restraint. 1-ER-102.
5 “Courts generally require a 65% market share to establish a prima facie

case of [monopoly] power.” Image Tech. Servs., Inc. v. Eastman Kodak

Co., 125 F.3d 1195, 1206 (9th Cir. 1997). But a market share as low as
45-50% may support a finding of monopoly power “if accompanied by
other relevant factors.” Movie 1 & 2 v. United Artist Commc’ns, Inc., 909
F.2d 1245, 1254 (9th Cir. 1990); Rebel Oil, 51 F.3d at 1438. Indeed, when
there is a relatively low market share but otherwise compelling evidence
of monopoly power, “[b]lind reliance upon market share, divorced from
commercial reality, could give a misleading picture of a firm’s actual
ability to control prices or exclude competition.” Hunt-Wesson Foods, Inc.
v. Ragu Foods, Inc., 627 F.2d 919, 924 (9th Cir. 1980).
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Computer Corp., Inc. v. Int’l Business Machs. Corp., 559 F.2d 488, 497

(9th Cir. 1977) (“evidence indicating [defendant’s] ability to manage its

prices with little regard to competition” supported an inference of

monopoly power).

The court’s apparent failure to include the pricing evidence among

the circumstantial evidence was potentially consequential. It found that

Apple has a “considerable” market share (52-57%) and is “near the

precipice” of having a monopoly, even without considering this highly

probative type of evidence. 1-ER-140-42.

B. The district court erroneously equated the Section 1

and 2 analyses

The district court held that Epic had not shown anticompetitive

conduct under Section 2 “for similar reasons as Section 1.” 1-ER-155. It

reasoned that if “a court finds that the conduct in question is not

anticompetitive under § 1, the court need not separately analyze the

conduct under § 2” because “proving an antitrust violation under § 2 of

the Sherman Act is more exacting than proving a § 1 violation.” 1-ER-

136 (quoting Qualcomm, 969 F.3d at 991-92). The court misstated the

law.

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1. Section 2 is not categorically “more exacting” on plaintiffs.

“Although the standard for a § 2 violation is significantly stricter in its

power assessment than for a § 1 claim, it is broader and less categorical

in its definition of proscribed conduct.” Viamedia, Inc. v. Comcast Corp.,

951 F.3d 429, 453 (7th Cir. 2020) (cleaned up). “Behavior that might

otherwise not be of concern to the antitrust laws—or that might even be

viewed as procompetitive—can take on exclusionary connotations when

practiced by a monopolist.” Eastman Kodak Co. v. Image Tech. Servs.,

Inc., 504 U.S. 451, 488 (1992) (Scalia, J., dissenting); cf. Microsoft, 253

F.3d at 58 (“the means of illicit exclusion . . . are myriad”).

For example, “a monopolist’s use of exclusive contracts, in certain

circumstances, may give rise to a § 2 violation even though the contracts

foreclose less than the roughly 40% or 50% share usually required in

order to establish a § 1 violation.” Microsoft, 253 F.3d at 70; see also

Dentsply, 399 F.3d at 197 (similar). Similarly, conduct that does not

satisfy the elements of a Section 1 tying claim nonetheless may constitute

anticompetitive conduct under Section 2. Viamedia, 951 F.3d at 469;

Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal &

Prof’l Publ’ns, Inc., 63 F.3d 1540, 1551 (10th Cir. 1995).

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Qualcomm, cited by the district court, does not teach differently.

There, this Court made the narrow point that Section 2 is “more exacting”

“[i]n this respect”: “a plaintiff may not use indirect evidence to prove

unlawful monopoly maintenance via anticompetitive conduct under § 2.”

969 F.3d at 991-92 (emphasis added). The Court cautioned that the tests

are only “largely similar,” and qualified that “[t]he similarity of the

burden-shifting tests under §§ 1 and 2 means that courts often review

claims under each section simultaneously.” Id. (emphasis added). In

some cases, the analyses will overlap. E.g., Williams v. I.B. Fisher Nev.,

999 F.2d 445, 448 (9th Cir. 1993) (rejecting a “brief and opaque” Section

2 claim that had as its “sole basis” an “insufficient” Section 1 claim). But

“often” is not “always,” and this Court should not endorse the district

court’s hard-and-fast rule.

2. Section 2 requires a court to determine whether “the

anticompetitive harm of the conduct outweighs the procompetitive

benefit” when both are present. Qualcomm, 969 F.3d at 991 (quoting

Microsoft, 253 F.3d at 59). The court failed to do the weighing required

under Section 1, supra Section I.B, and compounded that error by

rejecting the Section 2 claims “for the same reasons,” 1-ER-155. Thus,

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the court never did the weighing that it expressly recognized is required

under Section 2. 1-ER-150 n.610.

III. The District Court’s Opinion Could Be Read as Adopting

Inflexible Market-Definition Principles That Would
Improperly Limit the Sherman Act’s Scope

Market definition is a tool that helps courts ascertain the “locus of

competition” in which to judge the challenged conduct, identify market

participants, and assess market concentration. Brown Shoe Co. v. United

States, 370 U.S. 294, 320-21 (1962). But “[t]hat is not to say that market

definition will always be crucial,” and it “does not exhaust the possible

ways to prove” competitive effects. FTC v. Whole Foods Market, Inc., 548

F.3d 1028, 1036 (D.C. Cir. 2008).

Parts of the opinion suggest that the district court’s market-

definition analysis rested on erroneous legal rules that markets cannot

be defined around products that (a) Apple does not license or sell or (b)

are components of a bundled product or service that Apple does offer.

E.g., 1-ER-48, 1-ER-68-69. Such rules would be improper. Antitrust law

generally favors “actual market realities,” Kodak, 504 U.S. at 466-67, and

so market definition must not “be used to obscure competition but

[should] recognize competition where, in fact, competition exists,” United

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States v. Cont’l Can Co., 378 U.S. 441, 453 (1964) (quoting Brown Shoe,

370 U.S. at 326). By potentially obscuring market realities, the rigid

rules suggested by the district court could significantly harm antitrust

enforcement, especially in the digital economy.

A. Antitrust markets can include products the defendant

does not license or sell

The district court rejected Epic’s proposed markets, in part, because

Apple does not license or sell its products in those markets. 1-ER-48

(rejecting “foremarket” for smartphone operating systems because iOS

“is not licensed or sold to anyone”); 1-ER-68 (rejecting aftermarket for

IAP processing because Apple’s “system is not something that is bought

or sold”). In appropriate circumstances, however, markets can be defined

around products that the defendant does not license or sell. A contrary

legal rule could cause courts to miss important dimensions of competition

squarely within the Sherman Act’s protections.

1. No rule of law prevents a court from drawing a market around a

product that is not sold by the defendant. For example, numerous courts

have defined markets to include firms that are vertically integrated and

self-provision the product (as Apple does here). E.g., Brown Shoe, 370

U.S. at 301-303 (market shares included sales to self-owned retailers);

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IT&T v. Gen’l Tel. & Elecs. Corp., 518 F.2d 913, 930-32 (9th Cir. 1975),

overruled on other grounds by California v. Am. Stores Co., 495 U.S. 271

(1990) (error to exclude from the market defendant’s purchases from its

owned affiliate).

Microsoft is directly on point. There, Microsoft licensed its

operating system (OS) to hardware manufacturers (OEMs), while Apple

did not license its Mac OS to other manufacturers. The court treated Mac

OS as a product, finding that “Apple had a not insignificant share of

worldwide sales of operating systems.” Microsoft, 253 F.3d at 73. It

affirmed the product market “as the licensing of all Intel-compatible PC

operating systems,” but only because Mac OS was not a close enough

substitute to PC OSs. Id. at 52.

2. The district court considered it significant that customers are not

charged a price for iOS and Apple’s IAP system. 1-ER-68, 1-ER-133

n.583. But, in appropriate circumstances, markets (especially digital

markets) can be defined around products for which customers are not

directly charged.

First, while sometimes there may be no separate price charged for

a component of a product, the price for the whole product reflects (in part)

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the component. Thus, for example, customers pay for iPhones with an

OS. Similarly, developers account for IAP charges when setting their

prices.

Second, in some circumstances, customers are not charged a

monetary price at all because they provide value in other ways (e.g.,

through disclosing data). The Sherman Act protects competition in or

affecting any part of “trade or commerce,” 15 U.S.C. §§ 1-2, and its

“broad” terms capture “almost every activity from which the actor

anticipates economic gain,” whether that gain happens in the market

under consideration or a separate market, O’Bannon v. NCAA, 802 F.3d

1049, 1065 (9th Cir. 2015). Accordingly, courts have recognized that

markets can be defined around “free” products. 6 E.g., Klein v. Facebook,

Inc., No. 20-cv-08570-LHK, 2022 WL 141561, at *12-14 (Jan. 14, 2022)

(sufficiently alleging markets for “free” social media and social

networking services); FTC v. Facebook, Inc., No. 20-3590, 2022 WL

6 Further, a “free” product can compete in antitrust markets with

positively priced alternatives. E.g., Wallace v. Int’l Business Machs.
Corp., 467 F.3d 1104, 1107-08 (7th Cir. 2006) (finding that free Linux
competed with other OSs); United States v. H&R Block, Inc., 833 F. Supp.
2d 36, 50-53 (D.D.C. 2011) (market for “digital do-it-yourself” tax
software included products offered “in some instances free”).
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103308, at *5, *12 (D.D.C. Jan. 12, 2022) (sufficiently alleging a product

market for personal social network services even though the services “are

all provided free of charge”). In these cases, the Sherman Act continues

to protect non-price competition, including on quality, variety, and

innovation. E.g., Amex, 138 S. Ct. at 2284 (“decreased quality” an

anticompetitive effect); Dentsply, 399 F.3d at 194 (“limitation of choice”

an anticompetitive effect).

B. Product markets can be defined around components of

a bundled product

The district court’s opinion also could be read as resting on a legal

rule that product markets should not be defined around components of a

bundled product, even when other firms offer that component separately.

It rejected a foremarket including Apple iOS because iPhones “are more

than the operating system,” notwithstanding Google’s licensing of

Android OS. 1-ER-48, 1-ER-133 n.583. It likewise concluded that Apple’s

IAP system is not a “product,” noting that “it is integrated into an iOS

device,” and separate from other payment processors that do not offer all

the functionalities of Apple’s IAP system, 1-ER-68-70, notwithstanding

the court’s acknowledgement that “there may be a market for payment

processing,” 1-ER-158.
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No legal rule prevents courts from defining a market around a

component of a bundle. Firms commonly bundle various products and

services into a single package. For example, Apple includes a variety of

functionalities in its iPhone, and health systems contract with insurers

for the entire range of healthcare services the systems provide. Where it

reflects competitive dynamics, a market can be defined around individual

components of such bundles. See, e.g., Cascade Health Sols., 515 F.3d at

891 (a relevant market of primary and secondary acute care hospital

services where defendant bundled tertiary acute care hospital services);

Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468,

493-94 (3d Cir. 1992) (en banc) (a relevant market of car sound systems

where defendant tied such systems with the sale of the car).

1. The district court relied on Microsoft’s observation that

integration is common in software markets. 1-ER-157. But Microsoft

does not teach that integration means that competition does not exist for

the component or that the market must include the entire integrated

product. To the contrary, the Microsoft court defined a market for Intel-

compatible PC OSs, even though those were integrated into computers

sold to consumers. 253 F.3d at 51-54. Likewise, the decision affirmed

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the district court’s finding that separate product markets existed for

Windows and Internet Explorer, even though those were technologically

integrated for the consumer. Id. at 95.

The district court considered it significant that the products offered

by Apple and other firms did not completely replicate each other’s

functionalities. See, e.g., 1-ER-69-70 (contrasting the additional

functionalities of Apple’s IAP system with other payment processors).

But that is a common feature of differentiated products, and courts

frequently include them in the same market when there is sufficient

substitution between them. See Brown Shoe, 370 U.S. at 326; DSM

Desotech Inc. v. 3D Sys. Corp., 749 F.3d 1332, 1339-40 (Fed. Cir. 2014)

(products may be “good substitutes” even when differentiated by

features).

2. Relatedly, the district court stated that “a single platform []

cannot be broken into pieces to create artificially two products,” relying

on tying cases and Amex. 1-ER-157. But neither supports such a rigid

rule.

a. Tying law does not indicate that a market cannot be drawn

around a component of a platform. To the contrary, tying cases focus on

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“competitive consequences” and not “label[s],” and account for

competition involving products comprising only part of a bundle.

Jefferson Parish, 466 U.S. at 21 n.34. To show that the defendant has

tied separate products, the Supreme Court requires evidence of sufficient

independent demand such that “it is efficient to offer [the tied product]

separately from [the tying product].” Id. at 21-22. The Court rejected an

alternative test that no tie exists where the defendant is “merely

providing a functionally integrated package of services”—instead the

Court protected competition for a component even when the component

would be “useless” outside the integrated bundle. Id. at 18-19 n.30, 21.

The district court deemed it artificial to consider Apple’s IAP

system and iOS app distribution separate products. 1-ER-158. In

making this determination, the court “focused on functionality”—in

particular, IAP’s “integration” into the “full suite of services offered by

iOS and the App Store”—and claimed it was “irrelevant” that there was

a potential market for component services. 1-ER-70 n.336, 1-ER-158-59.

However, under Jefferson Parish, such evidence can support a finding

that the component is a separate product. Where there is “competition

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on the merits” for a component, tying law, like antitrust law more

generally, protects that competition. Jefferson Parish, 466 U.S. at 21-22.

b. Nor does Amex set forth a broad legal rule requiring that the

product market encompass all the component services offered on a

defendant’s platform. To the contrary, Amex reaffirmed that the relevant

market “must correspond to the commercial realities of the industry.”

Amex, 138 S. Ct. at 2285 (internal quotation marks omitted). That fact-

specific inquiry depends on the nature of the challenged restraint and the

platform involved.

i. Amex analyzed a challenge to anti-steering rules that American

Express imposed on merchants. The district court had held “that the

credit-card market should be treated as two separate markets—one for

merchants and one for cardholders”—but the Second Circuit reversed,

“conclud[ing] that the credit-card market is one market, not two.” Id. at

2283. The Supreme Court affirmed the court of appeals’ holding because

“credit-card networks are a special type of two-sided platform known as

a ‘transaction’ platform,’” which “facilitate a single, simultaneous

transaction between participants.” Id. at 2280, 2286. “The key feature

of transaction platforms is that they cannot make a sale to one side of the

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platform without simultaneously making a sale to the other.” Id. at

2280. The Court distinguished credit-card networks from other types of

two-sided platforms that do not provide simultaneous transactions—

which the Court called “nontransaction platforms”—such as

newspapers. Id. at 2286-87.

ii. When the defendant operates a nontransaction platform, the

relevant market frequently will not comprise the entire platform.

Nontransaction platforms often “behave[] much like” one-sided markets,

with rivals that compete only for some of the services provided by the

platform. Id. at 2286-87 n.9. In such circumstances, the relevant market

would be a one-sided market corresponding to the competition for those

services, and thus would comprise less than the defendant’s full platform.

Id. at 2286; see also id. (“the market for newspaper advertising behaves

much like a one-sided market and should be analyzed as such”).

Even in the special case when the defendant operates a transaction

platform, the relevant market may well be less than the full platform.

First, the defendant’s platform may process different types of

transactions that involve different competitions. Here, for instance, the

district court distinguished gaming transactions on the App Store from

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other types of App Store transactions, and held the relevant market

includes the former but not the latter. 1-ER-124-27.

Second, the defendant’s platform may include both transaction-

processing services and other services facilitating the transactions. See

Amex, 138 S. Ct. at 2286 n.8 (distinguishing transaction-processing

services from “[m]erchant services and cardholder services[, which] are

both inputs to this single [transaction] product”). In some cases, the

competition affected by the challenged restraint may be just for one or

more facilitating services. See Br. for United States at 28-32, PLS.com v.

Nat’l Ass’n of Realtors, No. 21-55164 (9th Cir. June 2, 2021).

iii. Epic argues that Amex does not require that separate

transactions (app downloading and in-app purchases) be in a single

market. See Epic Br.71. We agree. Amex does not set forth a rule of law

requiring that different types of transactions on the same platform be

analyzed in the same market—an issue that was not presented in Amex.

For the reasons discussed above, there can be circumstances where there

are different relevant markets corresponding to distinct competitions for

different sorts of transactions that occur on one platform. We take no

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position on the fact-specific questions of the relevant market(s) supported

by the record and their proper characterization under Amex.

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CONCLUSION

The Court should ensure that the Sherman Act is not unduly

narrowed through legal error.

Respectfully submitted.

s/ Patrick M. Kuhlmann

DOHA G. MEKKI
Principal Deputy Assistant
Attorney General
DAVID B. LAWRENCE
Policy Director
DANIEL E. HAAR
NICKOLAI G. LEVIN
PATRICK M. KUHLMANN
MATTHEW C. MANDELBERG
Attorneys
U.S. DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
950 Pennsylvania Ave., N.W.
Room 3224
Washington, D.C. 20530-0001
(202) 476-0428
Patrick.Kuhlmann@usdoj.gov
January 27, 2022 Counsel for the United States

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UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
Form 8. Certificate of Compliance for Briefs
Instructions for this form: http://www.ca9.uscourts.gov/forms/form08instructions.pdf

9th Cir. Case Number(s) Nos. 21-16506 & 21-16695

I am the attorney or self-represented party.

This brief contains 6,986 words, excluding the items exempted

by Fed. R. App. P. 32(f). The brief’s type size and typeface comply with Fed. R.

App. P. 32(a)(5) and (6).

I certify that this brief (select only one):

complies with the word limit of Cir. R. 32-1.

is a cross-appeal brief and complies with the word limit of Cir. R. 28.1-1.

is an amicus brief and complies with the word limit of Fed. R. App. P.
29(a)(5), Cir. R. 29-2(c)(2), or Cir. R. 29-2(c)(3).

is for a death penalty case and complies with the word limit of Cir. R. 32-4.

complies with the longer length limit permitted by Cir. R. 32-2(b) because
(select only one):

it is a joint brief submitted by separately represented parties;

a party or parties are filing a single brief in response to multiple briefs; or
a party or parties are filing a single brief in response to a longer joint brief.

complies with the length limit designated by court order dated .

is accompanied by a motion to file a longer brief pursuant to Cir. R. 32-2(a).

Signature s/ Patrick M. Kuhlmann Date January 27, 2022

(use “s/[typed name]” to sign electronically-filed documents)
Feedback or questions about this form? Email us at forms@ca9.uscourts.gov

Form 8 Rev. 12/01/2018

 Case: 21-16506, 01/27/2022, ID: 12353959, DktEntry: 56, Page 48 of 48

CERTIFICATE OF SERVICE

I certify that on January 27, 2022, I caused the foregoing to be filed

through this Court’s CM/ECF system, which will serve a notice of

electronic filing on all registered users, including counsel for the parties.

s/ Patrick M. Kuhlmann
Counsel for the United States

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