Epic Games, Inc v Apple Inc (Stay Application)

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FEDERAL COURT OF AUSTRALIA

Epic Games, Inc v Apple Inc (Stay Application) [2021] FCA 338  

File number: NSD 1236 of 2020
Judgment of: PERRAM J
Date of judgment: 9 April 2021
Catchwords:

PRIVATE INTERNATIONAL LAW – application for permanent stay of proceedings alleging contraventions of Competition and Consumer Act 2010 (Cth) (‘CCA’) Pt IV, Australian Consumer Law (‘ACL’) s 21 – where exclusive jurisdiction clause requires litigation relating to app developer agreement to occur in Northern District of California – where First Applicant has commenced proceedings against First Respondent in Northern District of California alleging contraventions of United States and Californian competition law – whether Australian proceedings ‘relate to’ agreement

PRIVATE INTERNATIONAL LAW – discretionary non-exercise of jurisdiction – whether ‘strong reasons’ adduced against grant of stay, considering Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 – whether CCA Pt IV, ACL s 21 mandatory laws of the forum – where parties agree courts in Northern District of California have jurisdiction to hear claims under CCA and ACL – whether court in Northern District of California would decline to exercise jurisdiction on discretionary grounds – whether Akai places onus on party arguing for stay to prove case will be heard by foreign court

COMPETITION  – where allegation that CCA Pt IV is contravened by requirements that app developers only distribute apps through Respondents’ app store and purchases of in-app content use only Respondent’s payment processing system – whether CCA Pt IV cases should be determined by foreign courts

CONSUMER LAW  – where exclusive jurisdiction clause in standard form contract between First Respondent and app developers – whether clause contravenes ACL s 21

Legislation:

Carriage of Goods by Sea Act 1991 (Cth) s 11(2)

Competition and Consumer Act 2010 (Cth) Pt IV, ss 2, 5, 45, 46, 47, 80, 83, 86, Sch 2 ss 21, 22(1), 23

Insurance Contracts Act 1984 (Cth)

Sherman Act 15 USC §§1-2

Cartwright Act Cal Bus & Prof Code §§16700 et seq

Unfair Competition Law Cal Bus & Prof Code §§17200 et seq

Cases cited:

Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418

Armacel Pty Limited v Smurfit Stone Container Corporation [2008] FCA 592; 248 ALR 573

Attorney General v Mobil Oil NZ Ltd [1989] 2 NZLR 649

Australian Competition and Consumer Commission v Valve Corporation [2016] FCA 196; 337 ALR 647

Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd [2019] NSWCA 61; 99 NSWLR 419

Burke v LFOT Pty Limited [2002] HCA 17; 209 CLR 282

Casaceli v Natuzzi SpA [2012] FCA 691; 292 ALR 143

Clough Engineering Ltd v Oil & Natural Gas Corporation Ltd [2007] FCA 881

Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45

Commonwealth Bank of Australia v White [1999] VSC 262; 2 VR 681

ContentGuard Holdings, Inc. v Amazon.com, Inc. 2015 WL 1885256 (ED Tex 2015)

Dialogue Consulting v Instagram, Inc [2020] FCA…

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Details
Case
[2021] FCA 338
Decision Date

CaseChat Overview and Summary

The case before the Federal Court was brought by Epic Games, Inc against Apple Inc. Epic alleges that Apple contravened the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law by requiring app developers to only distribute their apps through Apple's Australian App Store and to use Apple's payment processing system for in-app purchases. Epic sought injunctions to restrain Apple from engaging in conduct that substantially lessens competition and from exclusive dealing. Epic also alleged that Apple's conduct was unconscionable in contravention of the Australian Consumer Law. Apple sought a permanent stay of the proceedings on the basis that an exclusive jurisdiction clause in the Apple Developer Program License Agreement required any litigation relating to the agreement to occur in the Northern District of California.

The main legal issues were whether the Australian proceedings related to the developer agreement and whether there were strong reasons to exercise the court's discretion not to stay the proceedings. The court considered whether the Competition and Consumer Act and Australian Consumer Law were mandatory laws of the forum that required the Australian court to hear the claims. The court also considered whether it was likely the court in the Northern District of California would decline to exercise jurisdiction on discretionary grounds.

The court found that the Australian proceedings did relate to the developer agreement and that there were strong reasons to exercise the court's discretion to stay the proceedings. The exclusive jurisdiction clause was not contrary to the Australian Consumer Law. It was likely the court in the Northern District of California would exercise jurisdiction over the claims. The onus was on Epic to prove a case for the non-exercise of jurisdiction, following Akai Pty Ltd v People's Insurance Co Ltd. The court granted a temporary stay of the proceedings for 3 months to allow Epic to sue Apple in the Northern District of California. If Epic did not do so, the stay would become permanent.

Orders

Orders of the court

1. The proceedings be temporarily stayed for a period of 3 months from the date of these orders.

2. If at the end of the period referred to in Order 1, the First Applicant has not commenced a suit in a court in the Northern District of California alleging contraventions of Part IV of the Competition and Consumer Act 2010 (Cth) (‘CCA’) and/or s 21 of the Australian Consumer Law, being Sch 2 to the CCA, the proceedings be permanently stayed.

3. If the First Applicant commences a suit of the kind referred to in Order 2 within the period referred to in Order 1, the stay of these proceedings be continued but with liberty to apply in the event that a court in the Northern District of California declines to determine the allegations referred to in Order 2.

4. The Applicants pay 95% of the Respondents’ costs of the Interlocutory Application filed 22 December 2020 as taxed, assessed or otherwise agreed.

5. The costs of these proceedings otherwise be reserved with liberty to the Respondents to apply.

6. The Applicants be granted leave to appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons which follow the case will be temporarily stayed for three months to allow Epic to sue Apple in a court in the Northern District, as it has agreed. If at the end of that period, Epic has not so sued Apple then the stay will become permanent. If Epic does sue Apple in a court in the Northern District, then the stay will continue but if that court declines to determine the allegations of contraventions of Australian law, I will reserve the right to Epic to apply to this Court to lift the stay. In short, Epic can sue Apple in a court in the Northern District and should do so but if for procedural reasons it is prevented from doing so, it may be able to continue the case it has commenced in this Court.BACKGROUND Epic commenced these proceedings against Apple on 16 November 2020 seeking, amongst other things, injunctions restraining Apple from contravening three provisions of Part IV of the Competition and Consumer Act 2010 (Cth) (‘CCA’). These are s 46 which prohibits a corporation with a substantial degree of power in a market in Australia from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition; s 47 which prohibits a corporation from engaging in the practice of exclusive dealing; and s 45 which prohibits, amongst other things, a party from making a contract which has the purpose, effect or likely effect of substantially lessening competition. Epic also alleges that Apple has contravened s 21 of the Australian Consumer Law (‘ACL’), being Sch 2 to the CCA, which prohibits unconscionable conduct. Epic contends that Apple has infringed these provisions and will continue to do so. Epic is a developer of gaming apps, including for use on Apple’s iOS devices (ie iPhones and iPads). More generally, it develops games for a wide variety of platforms such as Android devices, Sony’s PlayStation consoles, Microsoft’s Xbox consoles, the Nintendo Switch as well as PCs. The conduct it complains of is twofold. First, Apple requires developers of apps for use on Australian iOS devices only to distribute those apps through Apple’s Australian App Store. Secondly, Apple requires that any app developer use only Apple’s in-app payment processing system for the purchase of in-app content. Typically, Apple deducts as commission 30% of any such payment which results in a very substantial flow of revenue to Apple from its Australian users. If Epic’s suit were successful it would result in Australian users of iOS devices being able to download apps to their devices from locations other than Apple’s Australian App Store and it would mean that other firms would be able to provide payment processing systems for in-app content within the environment of iOS apps. The relationship between Apple and Epic is presently governed by an agreement known as the Apple Developer Program License Agreement which I will call the DPLA. The DPLA imposes the obligations referred to in the preceding paragraph by cll 3.2(g), 3.3.3, 7.2 and cl 3.4(a) in Schedule 2 to the DPLA. Similar obligations are imposed on the developer by cl 3.1.1 and cl 3.2.2(i) of the App Store Review Guidelines. By cl 7.3(iv) of Schedule 2 to the DPLA Apple is empowered to cease distributing apps to end users if the developer has breached the App Store Review Guidelines.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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