April 18, 2024

CAT denies Apple’s application to dismiss competition-based class action case

On April 12, 2024, the Competition Appeal Tribunal denied an application filed by Apple, Inc. and related entities (“collectively, Apple”) to have a competition-based class action lawsuit summarily dismissed.  Dr. Sean Ennis, who filed the suit in July 2023, now serves as the proposed class representative (“PCR”) seeking approximately $1 billion in damages on behalf of more than 1,500 app developers in the UK.  The suit accuses Apple of abusing its dominant position in the market by charging app developers excessive fees or unfair commissions in violation of UK competition law (Section 18 of the Competition Act 1998 (“18 CA98”)) and/or EU competition law (Article 102 of the Treaty of the Functioning of the European Union (“Article 102 TFEU”)).

Apple challenged the Tribunal’s jurisdiction to decide this matter on three grounds.  First, Apple challenged the Tribunal’s ability to hear collective opt-out proceedings related to commissions charged for transactions carried out through Non-UK Storefronts or Non-EU Storefronts prior to January 1, 2022, and consequently requested an order striking out that part of the proceedings, or for reverse summary judgment.  Second, Apple argued that commissions carried out through Non-UK or Non-EU Storefronts did not affect trade within the UK or between Members States and that such claims were, therefore, beyond the territorial scope of 18 CA98/Article 102 TFEU and ultimately outside of the jurisdiction of the Tribunal.  Finally, Apple requested an order to set aside the Tribunal’s decision to permit alternative service on Non-UK Proposed Defendants arguing that there were no exceptional circumstances to justify a departure from traditional service.

The hurdle that has to be cleared in order to strike out proceedings in England is very high.  The claim (or part of the claim) has to be one that there is no realistic chance of succeeding. This does not mean that the Tribunal has to be persuaded on a balance of probability basis that the claim is more likely than not to succeed.  The Tribunal has to be persuaded that the claim is so hopeless, that the class representative should not even be allowed the opportunity to try to prove it.

The Tribunal unanimously decided not to summarily dismiss the PCR’s case. First, the Tribunal found that the PCR had a realistic prospect of successfully establishing that the “excessive” commission claims were governed by UK law and that the transactions carried out through Non-UK Storefronts were within the territorial scope of 18 CA98 and/or Article 102 TFEU.  According to the Tribunal, the PCR could reasonably meet these burdens by showing that transactions carried out through Non-UK or Non-EU Storefronts were either implemented in the EU/UK or that it was foreseeable that such transactions would have an “immediate and substantial effect” on trade in the EU/UK.  Based on the evidence provided, the CAT ultimately ruled that the Tribunal was “clearly and distinctly” the appropriate forum for a trial on the PCR’s claims concerning commissions derived from Non-UK Storefronts.

The Tribunal also denied Apple’s request to set aside the order for alternative service on Non-UK Proposed Defendants.  The Tribunal acknowledged that the PCR’s request to permit alternative service was tied to the collective proceedings in Kent v Apple Inc Case No 1403/7/7/21 (“Kent proceedings”), a separate matter before the Tribunal that deals with nearly identical issues as the current case, including competition law infringement and “unlawful” commissions charged by Apple.  In order to prevent the loss of an opportunity for the PCR to catch up with the Kent proceedings and have similar issues determined jointly, the Tribunal found that this constituted an exceptional circumstance that justified the Tribunal’s original order for alternative service.  The Tribunal also ruled that the PCR did not breach his duty of full and frank disclosure when he requested permission to serve out of the jurisdiction.

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