In Antitrust Trial, Tim Cook Argues Apple Doesn’t Hurt App Makers

Tim Cook, testifying on Friday in a trial that would undermine Apple’s efforts to fend off rising scrutiny of its energy, defended his enterprise from accusations that it damage app makers whereas on the hunt to increase its income.

Mr. Cook, who took the witness stand for the primary time as Apple’s chief govt, answered pleasant questions from an Apple lawyer and confronted pointed questions from each an opposing lawyer and the federal choose who will determine the case.

The trial’s consequence may preserve Apple’s dominance of the $100 billion app market or upend it. Epic Games, creator of the favored recreation Fortnite, is suing Apple, claiming that the iPhone maker has created a monopoly with its App Store and makes use of that energy to take an unfair reduce from different corporations that depend on the App Store to achieve prospects.

An Epic victory would invigorate an increasing antitrust combat in opposition to Apple. Federal and state regulators are scrutinizing Apple’s management over the App Store, and the European Union lately charged Apple with violating antitrust legal guidelines over its app guidelines and charges. Apple faces two different federal lawsuits about its App Store charges — one from builders and one from iPhone homeowners — which might be searching for class-action standing.

Mr. Cook’s testimony got here towards the top of a three-week trial in an Oakland, Calif., federal courtroom that has homed in on the facility that Apple yields with its App Store and the 30 p.c fee it takes on gross sales of most digital items and subscriptions.

He entered the courthouse on Friday morning from an underground storage quite than its important entrance, which allowed him to keep away from photographers gathered outdoors the entrance of the constructing. About 7:30 a.m., journalists noticed him going by safety checks inside and shouted questions. Mr. Cook, carrying a darkish grey go well with, white shirt and grey tie, held up his hand in a peace signal.

For over an hour, an Apple lawyer led Mr. Cook by complaints in opposition to Apple, permitting him to elucidate why Apple performed enterprise a sure method — and why it wasn’t harming app builders.

Mr. Cook testified that Apple confronted loads of competitors, and he stated commissions that Apple collected from app builders helped fund higher safety within the App Store. “There’s a conflict between what the developer may want and what the consumer may want,” he stated. He added that Apple had lowered app-store charges for a lot of builders a lot smaller than Epic.

In a cross-examination, an Epic lawyer took purpose at Mr. Cook’s credibility and questioned why Mr. Cook stated he didn’t know some particulars of Apple’s enterprise, together with the revenue margins made by the App Store, which one outdoors knowledgeable testifying on behalf of Epic stated could possibly be as a lot as 80 p.c.

Mr. Cook stated that was improper. He stated the App Store was worthwhile, however Apple had not tried to find out exactly how worthwhile, partly as a result of it will be troublesome primarily based on how Apple structured its prices.

The Epic lawyer challenged that declare, displaying Mr. Cook inner Apple paperwork that prompt the corporate may calculate the App Store’s profitability. Mr. Cook countered that the paperwork confirmed incomplete figures.

The Epic lawyer then hung out on a subject tangential to the trial however appeared meant for example hypocrisy at Apple: The method the corporate operates in China, which undercuts Apple’s public enthusiasm for client privateness. The New York Times reported this week that Apple had put its Chinese users’ data at risk and aided the Chinese government’s censorship by proactively removing apps.

While Mr. Cook said Apple had to follow the laws in China, the Epic lawyer noted that other companies uncomfortable with Chinese policies had left the country. “I know of nobody in the smartphone business who’s not selling into China,” Mr. Cook replied.

The most concerning moment for Mr. Cook and Apple came at the end of his testimony, when Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California joined in the interrogation of Mr. Cook.

Throughout the trial, Judge Gonzalez Rogers has asked pointed questions of witnesses from both Apple and Epic, and her back-and-forth with Mr. Cook on Friday revealed particularly intense scrutiny of Apple’s arguments. Why couldn’t Apple allow iPhone owners to have more options to purchase apps, she asked, especially if it meant lower prices for consumers?

“If you allow people to leak out like that, we would, in essence, give up our total return on our” intellectual property, Mr. Cook replied.

The judge asked whether Apple’s decision last year to reduce its commission on app sales for developers making less than $1 million a year was designed to deflect scrutiny of Apple’s App Store policies. Mr. Cook acknowledged scrutiny was a factor, but he added that Apple mostly wanted to help small developers affected by a weak economy during the coronavirus pandemic.

Judge Gonzalez Rogers then brought up a survey that said 39 percent of app developers were dissatisfied with how Apple managed the App Store. “It doesn’t seem to me that you feel, again, real pressure or competition to actually change the manner in which you act to address the concerns of the developers,” she said.

The judge’s biggest challenge in deciding the case may be defining the market that Epic and Apple are fighting over.

Epic’s lawyers have argued that the case is about iPhone apps and that a game maker has to go through Apple’s “walled garden” to reach the more than a billion people who use the devices. That stifles innovation, Epic claims, and allows Apple to enforce strict rules and harm app developers by charging excessive fees. The company wants to host its own digital storefront within Apple’s.

Mr. Cook said on Friday that “I’m not a gamer,” but he argued that Epic distributes its games in a number of ways, including on web browsers, gaming consoles and personal computers. Many of those platforms charge a commission similar to that of the App Store. If gaming is the market, Apple has argued, then there are many competitors — like Microsoft, Sony and Nintendo — and Apple cannot have a monopoly.

Judge Gonzalez Rogers expressed frustration over the market semantics. “One side will say it’s black, the other says it’s white — typically it’s somewhere in the gray,” she said last week.

Earlier in the trial, Trystan Kosmynka, a senior director at Apple, testified that the company rejected 40 percent of total app submissions in 2020. Apple could not effectively police which apps find their way onto iPhones if Epic had its own app store, Mr. Kosmynka said.

Epic responded with a flurry of internal Apple emails showing times when harmful apps made it past Mr. Kosmynka’s team. One app, which was released during the Black Lives Matter protests over the summer, was a game that allowed users to shoot cannons at protesters.

Apple tried to show why allowing an app store within an app store could be problematic. Its lawyers criticized Epic’s digital storefront for not maintaining tight enough control, saying companies had managed to use it to sell games that they called “offensive and sexualized.”

In an attempt to tie Epic to unsuitable content, Richard Doren, a lawyer for Apple, brought up Peely, a cartoon banana in Fortnite that sometimes wears a tuxedo and sometimes goes nude. Mr. Doren implied that it would have been inappropriate to display Peely without a tuxedo in a federal court. Matthew Weissinger, vice president of marketing at Epic, clarified that Peely, naked or suited, was not scandalous.

“It’s just a banana man,” he said.

The fight between the companies began in August, when Epic violated Apple’s rules by circumventing Apple’s payments system in the Fortnite app. Apple removed Fortnite from the App Store, and Epic immediately sued the company and began a promotional campaign around the suit.

Mr. Sweeney said he had.

“And you just ignored that and went on your own,” the judge responded.

The trial will wrap up on Monday, but Judge Gonzalez Rogers said a ruling would probably take months. “Hopefully, before Aug. 13,” she said. She also said her decision would probably be appealed, meaning the trial could be just the first chapter of a longer fight.

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