Epic decision in landmark misuse of market power case against tech giants Apple and Google

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Together, these decisions marked the first occasion on which the amended s 46 of the Competition and Consumer Act 2010 (Cth) (CCA) has been the subject of judicial determination on the merits. As Beach J observed, at [3691] of the Epic v Apple decision:

The 2017 amendments relevantly recast s 46 to remove the requirement that a firm “take advantage” of a substantial degree of power in a market as an element of the contravention. Indeed, there is no express causal link required between the possession of “a substantial degree of power in a market” and the proscribed conduct with the requisite purpose, effect or likely effect. 

The proceedings

These judgments arose after Epic Games, the developer of the globally popular game Fortnight, brought proceedings against both Apple and Google, alleging contraventions of ss 46 and 47 (alternatively s 45) of the CCA. The core complaint against Apple was that its contractual and technical restrictions forced app developers to distribute native iOS apps exclusively through the App Store and to use Apple’s in-app purchase system (IAP) as the sole payment solution for digital content, with Apple charging commissions of 30%. On 13 August 2020, Apple removed Fortnite from the App store after Epic introduced its own direct payment mechanism.

The parallel claim against Google alleged that Google hindered the ability of app developers (including Epic) to distribute apps to Android devices in a realistic and practical way, other than through Google’s Play Store. After Epic introduced its own direct payment mechanism, it was also removed from the Play Store on 13 August 2020.

The third and fourth proceedings, Anthony v Apple and McDonald v Google, were representative proceedings, brought on behalf of developers and consumers. The class applicants’ case was “on all fours with Epic’s case in its separate proceeding against Apple and its separate proceeding against Google,” save that the class applicants alleged contraventions limited to the period from 6 November 2017 to 20 June 2022 (Anthony v Apple, [12]). The additional issue for determination was whether Apple and Google had caused app developers to pay materially higher commissions on paid app downloads and in-app purchases of digital content than they would have paid absent the contravening conduct (Anthony v Apple, [10]).

Key Findings

With regards to the s 46 claim, Apple was found to possess a substantial degree of market power in both the iOS app distribution market and the iOS in-app payment solutions market.

His honour held that “Apple’s restrictions on direct downloading or sideloading of native iOS apps had the purpose and effect or likely effect of substantially lessening competition in the iOS app distribution services market” (Epic v Apple, [55]). “Apple’s conduct in imposing IAP on app developers in the circumstances indicated had the effect or likely effect of substantially lessening competition in the payment solutions market” (Epic v Apple, [56]). However, Apple banning rival app stores within the App Store itself did not contravene the CCA, as this would have diminished the quality of the App Store (Epic v Apple; [67]).

In Epic v Google, his Honour found that there were three relevant markets: the mobile OS licensing market, the Android mobile app distribution market, and the Android in-app payment solutions market. Google was found to have a substantial degree of power in each market (Epic v Google, [69]).

Google engaged in conduct in the latter two of the three posited markets that has had or is likely to have the effect of substantially lessening competition in such markets, being conduct that prevents or prohibits developers and users from using alternative payment methods to Google Play Billing for purchasing digital in app content. With regards to the first market his Honour found that Epic did not put a case concerning conduct with an anti-competitive purpose or effect in the mobile OS licensing market (Epic v Google, [3370])

Further his Honour rejected the s 47 exclusive dealing claims against both Apple and Google. His Honour held that the requirement to use IAP or Google Play Billing did not constitute a "condition" within the meaning of s 47: "It is not sufficient that a 'likely consequence' of a provision is that a person will not acquire services from a competitor. There must be some form of prohibition" (Epic v Apple, [6149]). Developers retained the ability to monetise their apps by other means, and users could choose their transaction platform. The s 45 claims were also rejected on the basis that Epic had not isolated the particular provisions said to have the anti-competitive purpose or effect (Epic v Apple, [6152]).

In the representative proceeding, Beach J concluded that "the commissions payable by developers would likely have been materially less absent the contravening conduct of Apple and Google" (Anthony v Apple, [858]). However, his Honour could not quantify the precise difference. He noted that there may not be a single counterfactual commission figure — "[a]ny relevant counterfactual commission may vary depending upon the time period one is considering or possibly the type of app or possibly developer revenue type considerations" (Anthony v Apple, [36]).

Key Legal Principles

Causation - In finding that Apple and Google contravened s 46, his Honour interpreted that the new s 46 “is to be read such that some form of causation is to be taken as necessarily implicit in the statutory text and assumed by the legislature to apply and be conclusively assumed if all conditions for the statutory proscription in each case have been satisfied and without more” (Epic v Apple,  [3714]].

Market power – His Honour recognised that in multi-sided digital markets, “no single market share metric can adequately capture the realities in such a market. Market share is therefore a poor tool for assessing the market power of platforms” (Epic v Apple, [3862]). His honour found that “the ultimate determinant of market power is the degree of competitive constraint to which a firm is subject in the relevant market” (Epic v Apple, [3868]). The possession and control of large data sets and first-mover advantages were identified as sources of market power in technology markets: "[a] new entrant may not be able to readily replicate the scope of data possessed by the operators of existing platforms within a reasonable time-frame or at a level which may enable it to effectively compete" (Epic v Apple, [3737]).

Purpose - The proscribed purpose must be a "substantial" purpose of the conduct, meaning it must loom large among the objectives sought to be achieved, but it need not be the sole purpose (Epic v Apple, [3827]–[3828]). Although purpose is subjective, it can be identified from objective circumstances and inferred from circumstantial evidence, including the predictable outcomes of a corporation's conduct (Epic v Apple, [3831]). In the Apple proceeding, Beach J rejected Apple's evidence that its sole purpose in maintaining centralised distribution was security and privacy, finding instead that "even if and to the extent that the model of centralised distribution served a security purpose, it also served a substantial anti-competitive purpose" (Epic v Apple, [5051]). The two purposes were found to sit side by side.

Counterfactual - Beach J held that "[i]t is not necessary to prove each predicted fact on the balance of probabilities. The counterfactual is no more than an element of the calculus aimed at detecting the existence and extent of a change in the competitive process" (at Epic v Apple, [3791]). Further his Honour held that “it is not incumbent on an applicant to prove each predicted fact that may arise in the counterfactual on the balance of probabilities. The comparison of the “with” and “without” scenarios involves a consideration of all commercially realistic counterfactuals culminating in a “single evaluative judgment”. That inquiry is not an atomised one.” (Epic v Apple, [5224).

In the Google proceeding, the counterfactual analysis was more nuanced. Beach J rejected Epic's effects case concerning several categories of conduct — including the MADA pre-installation provisions and technical restrictions — on the basis that Epic had failed to prove that there was a "real commercial likelihood" that OEMs or users would act differently absent those specific restrictions (Epic v Google, [3575]). His Honour emphasised that "[i]t is not sufficient in a competition case to assess competitive effects by reference to mere speculative possibilities without any evidentiary foundation" (Epic v Google, [3574]). However, the counterfactual analysis succeeded in respect of Project Hug and the GVP agreements, where Beach J found that absent those arrangements, participating developers "would be free to distribute differentiated or exclusive content through rival Android app stores, which those stores would promote so as to entice users away from the Play Store" (Epic v Google, [4268]).

Beach J agreed with the class applicants that in a counterfactual without the contravening conduct, "acting as commercially rational firms without market power, Apple and Google would have taken legitimate steps to respond to competition", and that "the rational legitimate step absent the elements of the contravening conduct would have been to lower prices" (Anthony v Apple, [28]).

Pro-Competitive Justifications – His Honour found that “To be legally relevant, any claimed pro-competitive justifications must "negate the propositions that the impugned conduct had a substantial purpose of substantially lessening competition in the relevant markets and/or that it had, or was likely to have, the effect of substantially lessening competition in the relevant markets" (Epic v Apple, [4645]).

Counterfactual Commissions

His Honour indicated that the counterfactual commission and overcharge questions and their resolution need to be more focused and to take into account the actual contraventions found, and that he would need to hear further from counsel before resolving them. Accordingly, in all four proceedings, the further hearing has been stood over to a date to be fixed.

Anthony v Apple Inc [2025] FCA 902

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