Case: 21-16506, 01/27/2022, ID: 12353959, DktEntry: 56, Page 1 of 48
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`Nos. 21-16506 & 21-16695
`
`IN THE
`United States Court of Appeals
`for the Ninth Circuit
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`
`
`EPIC GAMES, INC.,
`Plaintiff-Counter-Defendant-
`Appellant-Cross-Appellee,
`
`v.
`APPLE, INC.,
`Defendant-Counterclaimant-
`Appellee-Cross-Appellant.
`
`
`
`
`
`
`
`On Appeal from the
`United States District Court for the Northern District of California
`The Honorable Yvonne Gonzalez Rogers
`
`
`
`
`
`No. 4:20-cv-05640-YGR
`
`
`
`
`
`BRIEF FOR THE UNITED STATES OF AMERICA AS AMICUS
`CURIAE IN SUPPORT OF NEITHER PARTY
`
`
`
`
`
`DOHA G. MEKKI
` Principal Deputy Assistant Attorney
`General
`DAVID B. LAWRENCE
` Policy Director
`DANIEL E. HAAR
`NICKOLAI G. LEVIN
`PATRICK M. KUHLMANN
`MATTHEW C. MANDELBERG
` Attorneys
`U.S. DEPARTMENT OF JUSTICE
`ANTITRUST DIVISION
`950 Pennsylvania Ave., NW, Room 3224
`Washington, DC 20530-0001
`(202) 476-0428
`Patrick.Kuhlmann@usdoj.gov
`
`Counsel for the United States
`
`
`
`
`
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`

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`TABLE OF CONTENTS
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`TABLE OF CONTENTS ........................................................................... i
`TABLE OF AUTHORITIES..................................................................... ii
`INTEREST OF THE UNITED STATES ................................................. 1
`STATEMENT........................................................................................... 2
`ARGUMENT ............................................................................................ 7
`I. The District Court Erred in Applying Section 1
`of the Sherman Act ........................................................................... 9
`A. The district court erred in concluding that the
`DPLA—a written “contract”—is not concerted action ............... 10
`B. The district court failed to assess the restraints’ overall
` competitive effect ........................................................................ 15
`II. The District Court Erred in Applying Section 2
` of the Sherman Act ........................................................................ 20
`A. The district court appears to have improperly
`
`evaluated the pricing evidence during the
` monopoly-power analysis............................................................ 20
`B. The district court erroneously equated
` the Section 1 and 2 analyses ...................................................... 24
`III. The District Court’s Opinion Could Be Read
` as Adopting Inflexible Market-Definition Principles
` That Would Improperly Limit the Sherman Act’s Scope.............. 27
` A. Antitrust markets can include products the
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`defendant does not license or sell ............................................... 28
` B. Product markets can be defined around components
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`of a bundled product ................................................................... 31
`CONCLUSION....................................................................................... 39
`CERTIFICATE OF COMPLIANCE ...................................................... 40
`CERTIFICATE OF SERVICE ............................................................... 41
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`i
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`

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`TABLE OF AUTHORITIES
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`CASES Pages(s)
`
`American Ad Management, Inc. v. GTE Corp.,
`92 F.3d 781 (9th Cir. 1996) ................................................................. 17
`
`American Needle, Inc. v. National Football League,
`560 U.S. 183 (2010) ............................................................................... 9
`
`Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc.,
`9 F.4th 1102 (9th Cir. 2021) ................................................................ 17
`
`Bhan v. NME Hospitals, Inc.,
`929 F.2d 1404 (9th Cir. 1991) ............................................................. 17
`
`Brown Shoe Co. v. United States,
`370 U.S. 294 (1962) .................................................................. 27, 28, 33
`
`California v. American Stores Co.,
`495 U.S. 271 (1990) ........................................................................28, 29
`
`California Dental Association v. FTC,
`526 U.S. 756 (1999) ........................................................................15, 18
`
`Capital Imaging Associates, P.C. v. Mohawk Valley
`Medical Associates, 996 F.2d 537 (2d Cir. 1993)................................. 19
`
`Cascade Health Solutions v. PeaceHealth,
`515 F.3d 883 (9th Cir. 2008) ..........................................................11, 32
`
`Close v. Sotheby’s, Inc.,
`894 F.3d 1061 (9th Cir. 2018) ............................................................. 18
`
`County of Tuolumne v. Sonora Community Hospital,
`236 F.3d 1148 (9th Cir. 2001) ............................................................. 17
`
`Continental TV, Inc. v. GTE Sylvania, Inc.,
`433 U.S. 36 (1977) ............................................................................... 12
`
`Copperweld Corp. v. Independence Tube Corp.,
`467 U.S. 752 (1984) .............................................................. 9, 11, 18, 30
`ii
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`

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`Dimidowich v. Bell & Howell,
`803 F.2d 1473 (9th Cir. 1986) ............................................................. 13
`
`DSM Desotech Inc. v. 3D System Corp.,
`749 F.3d 1332 (Fed. Cir. 2014) ............................................................ 33
`
`Eastman Kodak Co. v. Image Technical Services, Inc.,
`504 U.S. 451 (1992) ........................................................................25, 27
`
`FTC v. Actavis, Inc.,
`570 U.S. 136 (2013) ........................................................................20, 21
`
`FTC v. Facebook, Inc.,
`No. 20-3590, 2022 WL 103308 (D.D.C. Jan. 12, 2022)........................ 30
`
`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) .................................................... 20, 24, 26
`
`FTC v. Whole Foods Market, Inc.,
`548 F.3d 1028 (D.C. Cir. 2008)............................................................ 27
`
`Greyhound Computer Corp., Inc. v. International
`Business Machines Corp., 559 F.2d 448 (9th Cir. 1977) ................23, 24
`
`Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc.,
`627 F.2d 919 (9th Cir. 1980) ............................................................... 23
`
`Illinois Tool Works Inc. v. Independent Ink, Inc.,
`547 U.S. 28 (2006) ............................................................................... 12
`
`Image Technical Services, Inc. v. Eastman Kodak Co.,
`125 F.3d 1195 (9th Cir. 1997) ............................................................. 23
`
`Impax Laboratories, Inc. v. FTC,
`994 F.3d 484 (5th Cir. 2021) ............................................................... 16
`
`In re Insurance Brokerage Antitrust Litigation,
`618 F.3d 300 (3d Cir. 2010) ................................................................. 10
`
`In re NCAA Athletic Grant-In-Aid Cap Antitrust
`Litigation, 375 F. Supp. 3d 1058 (N.D. Cal. 2019).............................. 17
`
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`iii
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`International Telephone and Telegraph Corp. v. General
`Telephone & Electronics Corp., 518 F.2d 913 (9th Cir. 1975)............. 28
`
`Jeanery, Inc. v. James Jeans, Inc.,
`849 F.2d 1148 (9th Cir. 1988) ............................................................. 13
`
`Jefferson Parish Hospital District No. 2 v. Hyde,
`466 U.S. 2 (1984) ...................................................................... 12, 34, 35
`
`Klein v. Facebook, Inc.,
`No. 20-cv-08570-LHK, 2022 WL 141561 (Jan. 14, 2022).................... 30
`
`Leegin Creative Leather Products, Inc. v. PSKS, Inc.,
`551 U.S. 877 (2007) ............................................................................. 15
`
`Lim v. TForce Logistics, LLC,
`8 F.4th 992 (9th Cir. 2021).................................................................. 11
`
`McWane, Inc. v. FTC,
`783 F.3d 814 (11th Cir. 2015) ............................................................. 23
`
`Monsanto Co. v. Spray-Rite Service Corp.,
`465 U.S. 752 (1984) ............................................................................. 13
`
`Movie 1 & 2 v. United Artist Communications, Inc.,
`909 F.2d 1245 (9th Cir. 1990) ............................................................. 23
`
`Multistate Legal Studies, Inc. v. Harcourt Brace
`Jovanovich Legal & Professional Publications, Inc.,
`63 F.3d 1540 (10th Cir. 1995) ............................................................. 25
`
`National Society Professional Engineers v. United States,
`435 U.S. 679 (1978) ............................................................................. 17
`
`NCAA v. Alston,
`141 S. Ct. 2141 (2021) .................................................................. passim
`
`O’Bannon v. NCAA,
`802 F.3d 1049 (9th Cir. 2015) ............................................................. 30
`
`
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`iv
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`Ohio v. American Express Co.,
`138 S. Ct. 2274 (2020) .................................................................. passim
`
`Paladin Associates, Inc. v. Montana Power Co.,
`328 F.3d 1145 (9th Cir. 2003) ............................................ 10, 11, 14, 15
`
`Perma Life Mufflers, Inc. v. International Parts Corp.,
`392 U.S. 134 (1968) ............................................................................. 11
`
`Rebel Oil Co., Inc. v. Atl. Richfield Co.,
`51 F.3d 1421 (9th Cir. 1995) ..........................................................22, 23
`
`Robertson v. Sea Pines Real Estate Cos.,
`679 F.3d 278 (4th Cir. 2012) ..........................................................13, 14
`
`Simpson v. Union Oil Co. of California,
`377 U.S. 13 (1964) ............................................................................... 12
`
`Systemcare, Inc. v. Wang Laboratories Corp.,
`117 F.3d 1137 (10th Cir. 1997) ........................................................... 10
`
`Toscano v. PGA Tour, Inc.,
`70 F. Supp. 2d 1109 (E.D. Cal. 1999) .................................................. 14
`
`Toscano v. Professional Golfers’ Association,
`258 F.3d 978 (9th Cir. 2001) ............................................................... 14
`
`Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp.,
`959 F.2d 468 (3d Cir. 1992) ................................................................. 32
`
`United States v. American Express Co.,
`838 F.3d 179 (2d Cir. 2016) ............................................................19, 20
`
`United States v. AMR Corp.,
`335 F.3d 1109 (10th Cir. 2003) ........................................................... 22
`
`United States v. Continental Can Co.,
`378 U.S. 441 (1964) ............................................................................. 27
`
`United States v. Dentsply International, Inc.,
`399 F.3d 181 (3d Cir. 2005) ................................................ 22, 23, 25, 31
`
`
`
`v
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`United States v. E.I. du Pont de Nemours & Co.,
`351 U.S. 377 (1956) ............................................................................. 20
`
`United States v. H&R Block, Inc.,
`833 F. Supp. 2d 36 (D.D.C. 2011)........................................................ 30
`
`United States v. Microsoft Corp.,
`253 F.3d 34 (D.C. Cir. 2001) ........................................................ passim
`
`United States v. Paramount Pictures, Inc.,
`334 U.S. 131 (1948) ........................................................................10, 11
`
`Viamedia, Inc. v. Comcast Corp.,
`951 F.3d 429 (7th Cir. 2020) ............................................................... 25
`
`Wallace v. International Business Machines Corp.,
`467 F.3d 1104 (7th Cir. 2006) ............................................................. 30
`
`Williams v. I.B. Fisher Nevada,
`999 F.2d 445 (9th Cir. 1993) ............................................................... 26
`
`STATUTES
`
`15 U.S.C. § 1........................................................................................9, 30
`
`15 U.S.C. § 2........................................................................................... 30
`
`RULES
`
`Fed. R. App. P. 29..................................................................................... 1
`
`OTHER AUTHORITIES
`
`Phillip E. Areeda & Herbert Hovenkamp, Fundamentals
`of Antitrust Law § 15.04 (4th ed. 2017) .............................................. 19
`
`Julian O. von Kalinowski et al., Antitrust Laws
`and Trade Regulation § 12.02[5] (2d ed. 2017) ................................... 19
`
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`vi
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`INTEREST OF THE UNITED STATES
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` The United States enforces the federal antitrust laws and has a strong
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`interest in their correct interpretation. The United States files this brief,
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`pursuant to Federal Rule of Appellate Procedure 29(a)(2), to address
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`errors in the district court’s analysis of the Sherman Act, which, if
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`uncorrected, could significantly harm antitrust enforcement. The United
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`States takes no position on the merits of the parties’ claims.
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`1
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`STATEMENT
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`1. Epic Games challenges Apple’s control over the distribution of
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`apps and in-app payments on its popular iPhone and iPad, devices with
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`over one billion users. 3-ER-683. Apple’s mobile devices are “walled
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`garden[s],” meaning that a user can acquire apps for her device only
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`through the Apple App Store. 1-ER-5. Apple does not permit competing
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`app stores on its devices, and prohibits the downloading of apps directly
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`from the Web. 1-ER-21.
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`Apple has “benefited” from third-party apps that “enhance[] the
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`experience for iOS devices and their consumers.” 1-ER-6. Developers
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`wanting to distribute their apps through the App Store must execute a
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`standard-form Developer Program License Agreement (DPLA). 1-ER-31-
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`32. The developer pays a $99 annual fee, receives access to certain tools,
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`and can distribute apps through the App Store. Id. The developer agrees
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`to abide by Apple’s App Guidelines, which prohibit certain features and
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`types of apps (e.g., “storefront” apps). 1-ER-39.
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`The developer agrees to use Apple’s in-app purchasing (IAP) system
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`when a user makes certain in-app purchases (e.g., purchasing “premium”
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`content). 1-ER-33-34. Apple charges a 30 percent commission to the
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`2
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`developer. 1-ER-36. An anti-steering provision prohibits the developer
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`from, inter alia, advertising lower prices on other platforms within the
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`app. 1-ER-34-35.
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`Epic develops and distributes video games. 1-ER-7. Its flagship
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`video game, Fortnite, is available on multiple platforms, including (until
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`this dispute) the App Store. 1-ER-16. Epic also operates the Epic Games
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`Store, which is available on multiple platforms, and carries hundreds of
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`games. 1-ER-17-18.
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`Epic requested that Apple allow it to use an alternative to Apple’s
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`IAP system and distribute the Epic Games Store through the App Store.
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`1-ER-27. When Apple refused, Epic activated an alternative payment
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`method for its Fortnite app and filed this lawsuit. 1-ER-28. Apple
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`counterclaimed, alleging contractual claims.
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`2. Epic alleged that Apple violated Sections 1 and 2 of the Sherman
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`Act, as well as California’s Cartwright Act and Unfair Competition Law
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`(UCL). In its primary Sherman Act claims, Epic alleged, inter alia, that
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`Apple’s prohibition on competing app stores and requirement that
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`developers use only its IAP system harmed competition in global
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`aftermarkets for (1) iOS app distribution and (2) iOS in-app payment
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`3
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`processing. Epic alleged that these aftermarkets followed from a
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`“foremarket” of smartphone operating systems. 1-ER-47. Apple
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`disagreed, contending the relevant product market was “digital games
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`transactions,” encompassing all platforms facilitating gaming-app
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`transactions. Id.
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`The district court ruled for Apple on all of Epic’s claims except for
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`part of the UCL claim. The court rejected both parties’ product markets,
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`instead defining a global market for mobile gaming transactions
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`(encompassing Apple and non-Apple mobile devices). 1-ER-128-29. It
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`reasoned, inter alia, that (a) Epic’s foremarket for smartphone operating
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`systems was “misconceived” because iOS is not “licensed or sold to
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`anyone” (and the aftermarkets consequently failed), 1-ER-48, and (b)
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`“IAP is not a product for which there is a market,” 1-ER-130.
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`Regarding Epic’s Section 1 claims, the court concluded that there
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`was not concerted action because the DPLA “is a unilateral contract
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`which the parties agree that a developer must accept its provisions
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`(including the challenged restrictions) to distribute games on iOS.” 1-
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`ER-145. The court also concluded that Epic had not shown that Apple’s
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`restrictions are unreasonable. Epic showed anticompetitive effects
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`4
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`(supracompetitive profits, and reduced choice, innovation, and quality);
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`Apple presented procompetitive justifications, including greater security,
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`user convenience, and vindication of its IP rights; and Epic did not
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`identify less restrictive alternatives. 1-ER-147-53. But the court stopped
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`there, finding Apple’s restraints reasonable without determining
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`whether, on balance, they harmed competition. 1-ER-153. The court also
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`rejected Epic’s tying claim, finding that Apple’s IAP system and app
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`distribution are not separate products. 1-ER-158.
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`The court concluded that Apple had not violated Section 2 because
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`(a) Epic had not shown that Apple has monopoly power and (b) Apple’s
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`restrictions could not constitute anticompetitive conduct under Section 2
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`because they were not anticompetitive under Section 1 and “proving a [§
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`2] violation” is “more exacting.” 1-ER-154-55 (internal quotation marks
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`omitted). The court concluded that Apple “is near the precipice of []
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`monopoly power,” but is “saved by the fact that its [market] share [of 52-
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`57%] is not higher, that competitors from related submarkets are making
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`inroads into the mobile gaming submarket, and, perhaps, because
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`plaintiff did not focus on this topic.” 1-ER-140-42.
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`5
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`Finally, the court held that Apple’s anti-steering provision violated
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`the UCL and enjoined its enforcement. 1-ER-165-71. But this Court
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`stayed the injunction.
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`6
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`ARGUMENT
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`The district court committed several legal errors that could imperil
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`effective antitrust enforcement, especially in the digital economy. The
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`court read Sections 1 and 2 of the Sherman Act narrowly and wrongly, in
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`ways that would leave many anticompetitive agreements and practices
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`outside their protections.
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`On Section 1, the court held that the DPLA—Apple’s written
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`agreement with developers—is not a “contract” subject to Section 1
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`because developers must accept its terms. This carve-out—at odds with
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`text and precedent—would insulate numerous potentially harmful
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`agreements from Section 1 scrutiny.
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`The court also found the challenged restraints “reasonable” without
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`weighing their proven harms and benefits to determine the restraints’
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`overall competitive effects. This failure to confront the rule of reason’s
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`ultimate question—“whether a challenged restraint harms competition,”
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`NCAA v. Alston, 141 S. Ct. 2141, 2160 (2021)—was erroneous and, if
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`upheld, could significantly harm competition and consumers by allowing
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`a minor benefit to condone a major harm.
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`7
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`On Section 2, the court appeared to miss the significance of pricing
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`evidence when assessing monopoly power. It found that Apple sustained
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`supracompetitive prices for years, without regard to its competitors’
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`prices—a textbook example of monopoly power, see United States v.
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`Microsoft, 253 F.3d 34, 58 (D.C. Cir. 2001) (en banc)—but appeared to
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`treat such evidence as insignificant without accompanying evidence of
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`reduced output. Even if the pricing evidence failed to prove monopoly
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`power directly, the court should have considered it as part of the
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`circumstantial evidence of monopoly power, which it apparently failed to
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`do.
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`Additionally, the court stated erroneously that conduct found
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`reasonable under Section 1 cannot violate Section 2 as a matter of law.
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`That is incorrect as a general manner, improperly circumscribing the
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`statute’s reach, and it led the court to omit erroneously the weighing
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`required under Section 2.
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`Last, the district court’s opinion is ambiguous and could be read as
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`resting on rigid legal rules foreclosing a product market including a
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`product that the defendant does not itself license or sell or comprising
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`just one component of an integrated product that the defendant does sell.
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`8
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`There are no such legal rules, however. The lodestar of market definition
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`is “the commercial realities of the industry,” Ohio v. Am. Express Co., 138
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`S. Ct. 2274, 2286 (2020) (cleaned up), and, in some cases, the commercial
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`realities may support product markets for products that the defendant
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`does not license or sell or that are components of a bundle. A contrary
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`rule would cause courts to miss many important dimensions of
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`competition—and hinder effective antitrust enforcement, particularly in
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`the digital economy.
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`I.
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`
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`The District Court Erred in Applying Section 1 of the
`Sherman Act
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`Section 1’s prohibitions are crucial because “[c]oncerted activity
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`inherently is fraught with anticompetitive risk.” Copperweld Corp. v.
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`Indep. Tube Corp., 467 U.S. 752, 768–69 (1984). It is therefore vital to
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`correct the district court’s holdings improperly narrowing its protections.
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`Section 1 prohibits every “contract, combination . . . , or conspiracy,
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`in restraint of trade.” 15 U.S.C. § 1. Thus, a Section 1 plaintiff must
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`prove (1) concerted action (a “contract,” “combination,” or “conspiracy”)
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`that (2) unreasonably restrains trade. Am. Needle, Inc. v. Nat’l Football
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`League, 560 U.S. 183, 190 (2010). The district court misinterpreted both
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`elements.
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`9
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`A. The district court erred in concluding that the
` DPLA—a written “contract”—is not concerted action
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`1. Section 1 expressly reaches “contract[s]” restraining trade.
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`
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`Accordingly, a written contract like the DPLA establishes concerted
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`action. E.g., United States v. Paramount Pictures, Inc., 334 U.S. 131, 142
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`(1948) (concerted action “plainly established” by “express agreements”);
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`In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 323 (3d Cir. 2010)
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`(written agreement is “independently adequate” to establish concerted
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`action); see Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137, 1143
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`(10th Cir. 1997) (en banc) (“To hold otherwise would be to read the words
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`‘contract’ and ‘combination’ out of section 1.”).
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`The district court, however, concluded that the DPLA did not
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`establish concerted action, even though the challenged restraints gave
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`rise to the harm to competition. The court deemed the DPLA “a
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`unilateral contract” because it is “a contract of adhesion” and “a developer
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`must accept its provisions.” 1-ER-96, 1-ER-145. That ruling is
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`irreconcilable with this Court’s holding that “it is sufficient that
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`[plaintiff] has offered evidence that [defendant] signed agreements.”
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`Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1153-54 (9th Cir.
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`2003). The court “improperly graft[ed] an additional requirement”—
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`Case: 21-16506, 01/27/2022, ID: 12353959, DktEntry: 56, Page 18 of 48
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`here, the ability to negotiate the challenged terms—“onto the element of
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`[plaintiff’s] prima facie case requiring that the defendants acted in
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`concert.” Id.
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`It is immaterial that developers “must accept” the provisions of the
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`DPLA. 1-ER-145. A contract of adhesion is still a “contract,” see Lim v.
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`TForce Logistics, LLC, 8 F.4th 992, 1000-01 (9th Cir. 2021), and
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`“acquiescence in an illegal scheme is as much a violation of the Sherman
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`Act as the creation or promotion of one,” Paramount Pictures, 334 U.S. at
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`161; see also Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 917
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`(9th Cir. 2008) (an antitrust conspiracy exists “even though [defendant]
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`participates in the conspiracy only under coercion”). The Supreme Court
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`has found concerted action even where one party “unwillingly complied
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`with the restrictive [] agreement[]” and where acquiescence was
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`“induced” by “the communicated danger of termination.” Perma Life
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`Mufflers, Inc. v. Int’l Parts Corp., 392 U.S. 134, 142 (1968), overruled on
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`other grounds by Copperweld, 467 U.S. 752.
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`Indeed, the district court’s interpretation would upend Section 1
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`jurisprudence, including on vertical restraints. As the court
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`acknowledged, in many vertical arrangements, “the buyer passively
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`accepts conditions set by the vendor.” 1-ER-146. The Supreme Court
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`nonetheless has repeatedly decided Section 1 challenges to vertical
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`restraints embodied in express contracts without pausing to consider
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`whether the counterparty embraced those restraints. E.g., Ohio v. Am.
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`Express Co., 138 S. Ct. 2274, 2282 (2018) (Amex) (“Amex’s business model
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`sometimes causes friction with merchants”); Cont’l TV, Inc. v. GTE
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`Sylvania, Inc., 433 U.S. 36, 40 (1977) (plaintiff challenged a provision in
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`its franchise agreement with defendant). In fact, vertical restraints are
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`especially problematic when a party has market power—sometimes
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`defined as the ability “to force a purchaser to do something that [it] would
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`not do in a competitive market.” Jefferson Parish Hosp. Dist. No. 2 v.
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`Hyde, 466 U.S. 2, 14 (1984), abrogated on other grounds by Ill. Tool Works
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`Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006). Thus, a rule precluding
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`liability if a party imposes a term on its counterparty would remove
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`Section 1 where it is especially needed.
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`Moreover, the district court’s approach would strip the
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`counterparty of a countermeasure to the coercion—a Section 1 suit
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`challenging the restraint and a contractual defense of unenforceability.
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`See Simpson v. Union Oil Co. of Cal., 377 U.S. 13, 21 (1964) (Section 1
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`claim challenging “agreement” imposed on plaintiff “coercively”). Finally,
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`the district court’s approach would needlessly complicate the analysis,
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`requiring courts to explore the minds of the negotiators to determine the
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`nature of a party’s acceptance of the challenged terms.
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`2. The authorities cited by the district court do not support its
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`holding. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 764
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`(1984), explains that when a plaintiff relies on circumstantial evidence of
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`conspiracy (e.g., defendants charging the same price), plaintiff must
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`present some evidence “that tends to exclude the possibility that the
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`[defendants] were acting independently.” Accord The Jeanery, Inc. v.
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`James Jeans, Inc., 849 F.2d 1148, 1155, 1161 (9th Cir. 1988) (customer
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`complaints did not support an inference of concerted action); Dimidowich
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`v. Bell & Howell, 803 F.2d 1473, 1478 (9th Cir. 1986) (refusing “to infer
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`a vertical combination” from a refusal to deal with certain customers but
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`not others). But this precedent is “inapplicable where, as here, the
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`concerted conduct is not a matter of inference or dispute.” Robertson v.
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`Sea Pines Real Estate Cos., 679 F.3d 278, 290 (4th Cir. 2012). Direct
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`evidence—such as a contract—“establishes that the defendants convened
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`and came to an agreement.” Id. at 289; see Paladin Assocs., 328 F.3d at
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`1153 (written agreements are “direct evidence of ‘concerted activity’”).
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`The district court’s reliance on Toscano v. Professional Golfers’
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`Association, 258 F.3d 978 (9th Cir. 2001), was similarly misplaced.
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`There, the plaintiff challenged certain PGA rules incorporated by
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`reference into contracts between the PGA and local sponsors. Id. at 982.
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`In relevant part, this Court affirmed summary judgment in favor of the
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`local sponsors because they “merely accepted the PGA Tour’s rules and
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`regulations and played no role in creating or enforcing them.” Id. at 983.
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`But context is critical. The Toscano plaintiff did not challenge the
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`contracts between the PGA and the local sponsors themselves, but rather
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`alleged a broader conspiracy among the PGA and “certain of its officers,
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`[player representatives on the PGA Board], and the sponsors to boycott
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`[plaintiff].” Toscano v. PGA Tour, Inc., 70 F. Supp. 2d 1109, 1114 (E.D.
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`Cal. 1999). This alleged conspiracy was not embodied in the written
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`agreements executed by the sponsors, and thus Monsanto’s strictures on
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`the use of circumstantial evidence applied. Here, conversely, the
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`contractual terms themselves are being challenged.
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`B. The district court failed to assess the restraints’
` overall competitive effect
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`The rule of reason requires factfinders to “‘weigh[] all of the
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`circumstances’” in order “to assess whether a challenged restraint harms
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`competition.” Alston, 141 S. Ct. at 2160 (quoting Leegin Creative Leather
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`Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007)). Accordingly, the
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`“rule of reason weighs legitimate justifications for a restraint against any
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`anticompetitive effects.” Paladin Assocs., 328 F.3d at 1156. Weighing is
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`how a factfinder determines a restraint’s overall competitive effect when
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`a restraint has both competitive harms and benefits, and there is no less
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`restrictive alternative.
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`The district court failed to do that weighing here. After finding that
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`the challenged restraints have competitive harms and some
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`justifications, and that Epic had not identified less restrictive means of
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`achieving the benefits, 1-ER-147-53, the court erroneously halted its
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`analysis without making the ultimate assessment of reasonableness at
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`the rule’s heart.
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`1. “What is required” under the rule of reason is “an enquiry meet
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`for the case, looking to the circumstances, details, and logic of a
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`restraint.” Cal. Dental Ass’n v. FTC, 526 U.S. 756, 781 (1999). Courts
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`often apply a burden-shifting framework. The “plaintiff has the initial
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`burden to prove that the challenged restraint has a substantial
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`anticompetitive effect.” Amex, 138 S. Ct. at 2284. If that is established,
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`“the burden shifts to the defendant to show a procompetitive rationale
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`for the restraint.” Id. “If the defendant makes this showing, then the
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`burden shifts back to the plaintiff to demonstrate that the procompetitive
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`efficiencies could be reasonably achieved through less anticompetitive
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`means.” Id. However, “[t]hese three steps do not represent a rote
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`checklist, nor may they be employed as an inflexible substitute for careful
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`analysis.”