85 F.4th 948
9th Cir.2023Background
- Apple operates the App Store under developer contracts (Developer Agreement and DPLA) that give Apple "sole discretion" to approve or reject apps and provides App Store Review Guidelines.
- Plaintiffs (Coronavirus Reporter, CALID, Primary Productions, and Dr. Isaacs) developed several apps; two (Coronavirus Reporter and Bitcoin Lottery) were rejected under Apple’s COVID-19 and blockchain policies.
- Plaintiffs sued Apple asserting Sherman Act Sections 1 and 2 antitrust claims, breach of contract, RICO, and fraud, alleging Apple monopolized app distribution via curation and censorship.
- The district court dismissed the First Amended Complaint with prejudice for failure to state a claim (Rule 12(b)(6)), finding plaintiffs failed to define a relevant market, show antitrust injury or monopoly power, or plead contract/RICO/fraud elements with requisite specificity; other motions were denied as moot.
- The Ninth Circuit affirmed, holding the complaint failed the market-definition threshold for antitrust claims, failed to identify a contractual breach, mispleaded RICO (enterprise issues), and failed to plead fraud with particularity; denial of further leave to amend was not an abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relevant market definition for antitrust (Sections 1 & 2) | Plaintiffs alleged multiple "relevant markets" (including iOS/App markets) showing App Store monopoly | Apple argued plaintiffs did not define a coherent product/geographic market or show cross-elasticity/substitutes | Dismissed: plaintiffs failed to define a plausible relevant market; threshold failure fatal to antitrust claims |
| Monopoly power and anticompetitive conduct (§2) | Apple’s App Store policies and rejections reflect exclusionary conduct preserving monopoly power | Apple stressed rejections were permissible under the contracts and consumer-protection policies and lacked evidence of anticompetitive effect on the market as a whole | Dismissed: plaintiffs did not plead market share, barriers to entry, nor anticompetitive conduct harming competition generally |
| Breach of contract / covenant of good faith | Plaintiffs claimed a contractual promise to permit COVID apps by qualified medical entities | Apple pointed to contract language reserving "sole discretion" to approve apps and no promise as alleged | Dismissed: no specific contractual provision alleged and DPLA grants Apple discretion; no breach shown |
| RICO and fraud pleading requirements | Plaintiffs alleged a RICO enterprise and predicate acts (idea appropriation, mail/wire fraud) by Apple and employees | Apple argued plaintiffs impermissibly treated the corporation as both enterprise and defendant and failed to plead fraud with particularity | Dismissed: RICO improperly pleaded (corporation cannot be both enterprise and defendant) and fraud allegations were vague, failing Rule 9(b) |
| Leave to amend / dismissal with prejudice | Plaintiffs sought further opportunities to amend | Apple argued multiple prior amendment opportunities had failed; further amendment would be futile | Affirmed: district court did not abuse discretion; plaintiffs had many prior attempts and dismissal with prejudice was warranted |
Key Cases Cited
- Epic Games, Inc. v. Apple, Inc., 67 F.4th 946 (9th Cir. 2023) (two-sided platform analysis and single-brand aftermarket considerations)
- Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) (defining two-sided markets and need to show anticompetitive impact on whole market)
- FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) (market-definition threshold and importance of defining the field of competition)
- Dreamstime.com, LLC v. Google LLC, 54 F.4th 1130 (9th Cir. 2022) (elements for Section 2: market power, barriers to entry, and anticompetitive conduct harming competitive process)
- Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (1992) (aftermarket and foremarket relationship principles)
- Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (cross-elasticity of demand as principle for market definition)
- Newcal Indus., Inc. v. Ikon Office Sols., 513 F.3d 1038 (9th Cir. 2008) (market boundaries must encompass all economic substitutes)
- Kaplan v. Burroughs Corp., 611 F.2d 286 (9th Cir. 1979) (cross-elasticity of demand and interchangeability test)
- Rae v. Union Bank, 725 F.2d 478 (9th Cir. 1984) (a corporation cannot be both the RICO enterprise and the RICO defendant)
- Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016) (Rule 12(b)(6) de novo review and pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard; conclusory allegations insufficient)