USA – CALIFORNIA Trends and Developments Contributed by: Ryan Sandrock, Shook, Hardy & Bacon LLP
California is one of the most important antitrust juris - dictions 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 deci - sions 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 popu - lar game Fortnite, brought two of these suits – one against Apple and one against Google. In Epic Games, Inc v Apple, Inc , filed in the North - ern District of California, Epic sued Apple under Cali - fornia’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 Califor - nia’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 restric - tions in trade or commerce”. See the California Busi - ness 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]nterpre - tations of federal antitrust law are at most instruc - tive, 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 spe - cific 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 anti - trust laws. The UCL has three “prongs” – unlawful conduct, unfair conduct and fraudulent conduct. Most California anti - trust cases involve claims under the “unlawful” and “unfair” prongs. Analysis under the “unlawful” prong generally mirrors that under the Sherman and Cart - wright Acts. In other words, if conduct is not unlaw - ful 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
298 CHAMBERS.COM
Powered by FlippingBook