In what has become an annual tradition, the last day of the Supreme Court term was marked by blockbuster opinions on several hot-button topics. But hidden among the resolution of this year’s cases was an interesting note about next year’s docket. The Court agreed to review a contempt order in Apple’s years-long antitrust fight with Epic Games. At the center of the fight is a deceptively technical question with a long history: How literally should courts read their own orders when policing fast-moving industries?
Epic Games sued Apple in 2020, alleging that Apple’s requirement that developers use Apple’s payment system to process in-app purchases violated federal and state antitrust laws. Epic sought to sidestep Apple’s 30 percent commission. The court found no violation of federal law but held that Apple’s anti-steering provision (which prevented developers from suggesting alternative payment methods) violated California law. So it enjoined Apple from “prohibiting developers from including in their apps and their metadata buttons, external links, and other calls to action that direct consumers to purchasing mechanisms” other than Apple’s system. Apple repealed the anti-steering provision, replacing it with a commission of 12-27 percent on these new link-out purchases. The judge found Apple in contempt, holding that the new commission violated “the spirit” of the original injunction.
“Contempt” is a weighty determination, tantamount to finding the party has defied the court’s authority. It can lead to significant consequences. In this case, the court prohibited any commission on link-out purchases and referred various Apple executives for criminal investigation. Because of this importance, most circuit courts limit contempt to violations of an order’s clear and unambiguous text: whether the injunction has forbidden the precise conduct upon which the contempt allegation is based. This leaves little room for doubt that the party had notice that its actions violated the court’s order. But alone among the courts, the Ninth Circuit adopted a more permissible standard, allowing contempt findings for violations of “the spirit of an injunction.” The Supreme Court took the case to determine the appropriate standard.
The narrower, text-based standard is the better option. Before being found in contempt, a party must be on notice that its behavior is prohibited. The injunction’s text is clearer than an amorphous spirit of the law, providing more certainty about the line between permitted and prohibited conduct. This case illustrates that principle. The injunction said nothing about commissions on link-out purchases. Although the trial court’s contempt order prohibited any commissions, the Ninth Circuit vacated this restriction, finding that this prohibition was unduly prohibitive. Apple could charge a commission on link-out purchases, reflecting the use of its intellectual property and ecosystem to help generate the sale, as long as the rate does not effectively deter link-out purchases. When does a rate become prohibitive? The court did not answer, instead remanding to the trial court for analysis. But the need for additional clarity illustrates the folly of finding Apple in contempt for its failure to predict with certainty where that line is.
This clarity is especially important when regulating fast-changing, innovative industries such as tech ecosystems. Ambiguity can chill good faith attempts to grow and innovate while complying with the injunction. Here, the judge found Apple acted in bad faith by seeking a rate that would make link-out purchases uneconomical. But the market for link-out purchases did not exist until the injunction created it. For Apple, this intervention represented a potential significant revenue loss. The Ninth Circuit recognized that Apple was free to recoup some of this loss by recapturing link-out revenue. Could Apple have pursued less direct alternatives, such as raising the modest $99 app registration fee for apps pursuing link-out revenue? Without clear guidance and facing the threat of criminal sanctions, Apple would likely forego legal revenue streams for fear of crossing a line.
Old telecom hands will recall that similar issues arose following the consent decree breaking up the Bell monopoly. Because Judge Harold Greene interpreted the decree purposively, the Regional Bell Operating Companies routinely petitioned for permission before entering new lines of business rather than risk contempt, disadvantaging them at a time of significant industry innovation. And like the Apple court, Greene’s purposive interpretations were sometimes reversed by a circuit court that read the consent decree more narrowly. Congress ultimately replaced this judicial decree with the Telecommunications Act of 1996.
When the injunction does not speak directly to the conduct in question, the proper step is to seek a modification of the injunction rather than a contempt order. This allows the court to clarify its order before punishing a party for misconduct. It also incentivizes courts to draft clear injunctions. As the lawmaker, the court should bear the burden of clarifying what is prohibited, rather than allowing ambiguous drafting to chill lawful conduct.