California is one of the most important antitrust jurisdictions in the world. While San Francisco is not Washington, DC or Brussels, it is one of the few cities deserving of mention in the same antitrust context. The reason is simple: big tech. Many of the companies with powerful market shares in the United States and world technology markets – Apple, Facebook/Meta, Google, Intel, Nvidia – are California companies. The geographic concentration of these tech headquarters means that the Northern District of California decides many significant tech antitrust cases. This pattern will likely remain true for years to come because of the concentration of AI companies in California. 

This article focuses on recent big tech antitrust decisions decided by California courts, paying particular attention to how California law has shaped those decisions. In California, the Cartwright Act and Unfair Competition Law (UCL) can be as important as the Sherman Act. As the court noted in the Epic v Apple case discussed below: “[a]ntitrust law does not end with the Sherman Act.”

California’s UCL and Epic v Apple

An antitrust populist movement has spread across the United States in recent years, with enforcers and plaintiffs arguing that technology companies acquired power not through exclusionary conduct but business acumen. Epic Games, the creator of the wildly popular game Fortnite, brought two of these suits – one against Apple and one against Google.

In Epic Games, Inc v Apple, Inc, filed in the Northern District of California, Epic sued Apple under California’s UCL and the Sherman Act. Epic challenged Apple’s “walled garden” business model which made Apple’s App Store the only place to sell and download apps. Epic asserted that Apple maintained an illegal monopoly on the distribution of apps and that Apple illegally tied in-app payment processing systems to app distribution. After a bench trial, the District Court rejected Epic’s claims under Sections 1 and 2 of the Sherman Act.

Relationship Between the Cartwright Act and Sherman Act

The court also rejected Epic’s claims under California’s Cartwright Act, weighing in on the oft-litigated question of whether or not there is a complete overlap between the Cartwright Act and the Sherman Act.

The Cartwright Act outlaws “every trust”, which is defined as “a combination of capital, skill, or acts by two or more persons... [t]o create or carry out restrictions in trade or commerce”. See the California Business and Professions Code Sections 16720(a) and 16726. Like the text of the Sherman Act, the bare text of the Cartwright Act is not very helpful, so litigants must look to the case law. Apple argued that Sherman Act cases largely dictated the Cartwright Act analysis. The court gently disagreed, holding that “[i]nterpretations of federal antitrust law are at most instructive, not conclusive, when construing the Cartwright Act, given that the Cartwright Act was modelled not on federal antitrust statutes but instead on statutes enacted by California’s sister states around the turn of the 20th century.”

The court still agreed with Apple that Epic’s claims failed under the Cartwright Act for the same reasons as they did under the Sherman Act. The court explained that Epic had not “identified any specific and material differences between the Cartwright Act and the Sherman Act” requiring a different result. 

Relationship Between the UCL and State and Federal Antitrust Laws

The court came to a different conclusion regarding the UCL, ruling that Apple had violated the “unfair” prong of the UCL through “anti-steering” provisions of its agreements with app developers. The court saw daylight between the parts of the UCL and the antitrust laws. 

The UCL has three “prongs” – unlawful conduct, unfair conduct and fraudulent conduct. Most California antitrust cases involve claims under the “unlawful” and “unfair” prongs. Analysis under the “unlawful” prong generally mirrors that under the Sherman and Cartwright Acts. In other words, if conduct is not unlawful under those statutes, a violation of those statutes cannot be a predicate “unlawful” act. Consistent with this rule, the Apple court rejected Epic’s claims under the “unlawful” prong.

The “unfair” prong may sweep more broadly than the antitrust laws: “a practice may be deemed unfair even if not specially proscribed by some other law” and even if not violating an antitrust statute. See Cel-Tech Commc'ns, Inc v LA Cellular Tel Co, 20 Cal 4th 163, 180, 187, 83 Cal Rptr 2d 548, 973 P 2d 527 (1999). The Apple court went into a detailed analysis of two different types of analyses of the “unfair” prong (a “tethering” test applicable to competitor claims and a “balancing” test applicable to consumer claims) before concluding that Apple’s conduct violated both tests.

The court imposed an injunction regarding Apple’s anti-steering agreements, the spirit and scope of which are still in dispute at the time of writing. The court also delivered a complex conclusion regarding Epic’s claims and how antitrust law can promote competition:

“This trial highlighted that “big tech” encompasses many markets, including as relevant here, the submarket for mobile gaming transactions. This lucrative, USD100 billion market has not been fully tapped and is ripe for economic exploitation. As a major player in the wider video gaming industry, Epic Games brought this lawsuit to challenge Apple’s control over access to a considerable portion of this submarket for mobile gaming transactions. Ultimately, Epic Games overreached. As a consequence, the trial record was not as fulsome with respect to antitrust conduct in the relevant market as it could have been. Thus, and in summary, the Court does not find that Apple is an antitrust monopolist in the submarket for mobile gaming transactions. However, it does find that Apple’s conduct in enforcing anti-steering restrictions is anti-competitive.”

Apple appealed, but the Ninth Circuit upheld the District Court’s UCL ruling. The Ninth Circuit embraced the District Court’s finding that Apple’s “anti-steering provisions decrease consumer information, enabling supra-competitive profits and resulting in decreased innovation.” The appeals court also affirmed the lower court’s nation injunction against Apple.

On the fundamental issue of the overlap between the UCL and antitrust laws, the court largely agreed with the district court. The court rejected Apple’s argument that a Sherman Act failure automatically barred a UCL claim under a UCL “safe harbour” doctrine. The court recognised that there are certain areas in which federal antitrust law categorically bars state claims based on the same conduct (ie, the antitrust “baseball exemption” bars UCL claims based on the same theories). In every other area, however, the court found that outcomes under the antitrust laws and the UCL could diverge. The court went on to find that the particular Sherman Act principles cited by Apple did not require a different result on the UCL claim.

The Significance of UCL Injunctive Relief

For some time, the Apple v Epic result seemed mixed, and arguably largely in Apple’s favour. After all, the injunctive relief was just about one aspect of Apple’s conduct. However, the ongoing proceedings regarding Apple’s compliance with the injunctive relief suggest that even seemingly narrow injunctive relief can have significant real-world consequences (with Apple still arguing that the injunction has gone too far).

Epic moved for civil contempt against Apple, and the court found Apple in contempt. Specifically, the District Court concluded that Apple still discouraged consumers from going outside the App Store. Apple’s conduct included imposing a 27% commission on purchases made through links, restricting the placement and design of purchase links, and warning about the dangers of external purchases.

The District Court found that Apple wilfully violated the injunction “with the express intent to create new anti-competitive barriers which would, by design and in effect, maintain a valuable revenue stream; a revenue stream previously found to be anti-competitive”. The court enjoined Apple from imposing any commission or fee on purchases outside the App Store. The court also prevented Apple from restricting the style, language or placement of external purchase links. The case continues before the Ninth Circuit, and there will be more to come on the App Store.

Other Ongoing “California” Antitrust Cases

The Epic v Apple decision does not stand alone. There are many other significant ongoing antitrust cases in California. The most obvious is Epic v Google, in which Epic brought similar claims against Google regarding the Google Play Store. A jury heard this case and concluded that Google illegally monopolised markets for Android app distribution and Android in-app billing services. Google fought these rulings in post-trial motions and on appeal with little success.

Google argued before the Ninth Circuit that the Epic v Apple rulings in the similar case required a different outcome. The appeals court disagreed, emphasising that the general similarities between the cases did not overcome the significantly different facts or bar an “independent analysis”. The Ninth Circuit also did not disturb a broad injunction requiring, among other things, that Google allow consumers to access rival app stores through the Google Play Store.

The Epic v Google decisions include less robust discussion of the relationship between federal and California law, largely because Epic won under federal law (unlike in Apple). The Ninth Circuit did favourably cite its Apple decision to conclude that a UCL claim can survive “independently of any antitrust liability”.

Another branch of the app store cases led to the pending challenge by the United States Department of Justice, California and other states against Apple’s alleged monopolistic practices. The case is in New Jersey but does involve California as a plaintiff, as well as a California-based defendant. Plaintiffs survived a motion to dismiss, and the case remains pending.

In addition, at the time of writing, the world is waiting on two remedies rulings in cases brought by the United States, California and several other states against Google. Plaintiffs prevailed in both the Google “Search” and “Ad Tech” cases. The scope of the remedies will be litigated for years to come and will impact the future of not only the markets litigated in those cases but also markets involving nascent AI technologies.

Takeaways for Non-California Practitioners

Antitrust litigation in California can be unique.

First, many cases filed in California – even in federal court – involve claims under California’s antitrust and unfair competition laws. Those laws can in some cases impose heightened requirements going beyond the Sherman Act.

Second, the richest body of antitrust decisions (besides decisions from the District of Columbia and the DC Circuit) comes from California state courts, the Northern District of California and the Ninth Circuit.

Third, many California judges have significant experience with antitrust cases and therefore may be particularly demanding on counsel.

Fourth, California juries are more likely to involve employees of technology companies, who might have deep understanding of the products and markets at issue.

Fifth, antitrust regulators in California are active, and there is talk of further expansion of California’s antitrust laws.

The deep history of California antitrust will continue with the next wave of antitrust technology cases. We can expect some litigants to steer away from California courts and precedent, while others will try to keep cases in or transfer cases to California. There is no doubt that future generations of antitrust practitioners – litigating over technologies unthinkable today – will still be referring to the 1907 Cartwright Act (focused on trusts involving physical products such as lumber) and the 1999 Cel-Tech decision (about 1990s cell phones).