On Friday, Apple’s Chief Executive Officer (CEO) Tim Cook took the witness stand to defend the iPhone App Store. Epic Games, the company that created Fortnite, is currently fighting Apple in an antitrust case; Epic Games believes the App Store runs an illegal monopoly. Its vision no longer aligns with Steve Jobs’ intentions.
What We Know:
- U.S. District Judge Yvonne Gonzalez Rogers interrogated Cook about Apple’s in-app purchase business model at the end of his testimony. Epic Games and their defense team aims to prove the App Store transformed into a “price-gouging vehicle” that reaps a 15%-30% commission from in-app transactions and stops apps from providing alternative payment methods.
- Rogers questioned many of Cook’s responses. For example, she initially asked him why he would not permit users to pay lower fees for games. She also requested to know if Apple takes issue with giving users information to obtain the same in-app purchases through a web browser and bypass Apple’s 30% fee. Her inquiry suggested a compromise between Apple and other companies like Epic in which Apple would let them link app users to other payment options. Rogers even expressed doubt Apple only made their Small Business Program out of concern during the COVID-19 pandemic. Finally, she mentioned seeing a survey that showed 39% of developers felt dissatisfied with the App Store.
- Cook answered every question and doubt. In response to Roger’s first inquiry about lower prices, he said users could decide between buying an iPhone or an Android device. After inquiring about various payment methods, Cook stated Apple has “fierce competition” for developers and users. When Rogers claimed Apple began their Small Business Program overpressure from investigations and lawsuits, Cook declared he only wanted to protect the tinier companies. Regarding the survey, Cook disagreed and announced Apple “turns the place upside down for developers.”
- Before Rogers’ probe, lawyers for Epic Games questioned Cook. They asked him if the iPhone competes with Android in the operating system market. Cook declined to answer it, mentioning that customers buy devices, not operating systems. Attorneys also interrogated him on Apple’s deal with Google to be the iPhone’s default browser, citing an estimated $10 billion per year payment. Cook replied that he could not remember how much Google pays. Furthermore, Cook rejected the Apple lawyers’ hypothesis that the lack of iMessage on Android stops iPhone users from switching to competitors. He referred to the fact that one could easily turn off iMessage on Apple devices.
- Cook also testified that Apple faces plenty of smartphone rivalries and that in the U.S., the iPhone only holds a “high 30s” percentage of market share. Additionally, they possess a 15% international market share. According to Cook, handset contestants consist of Samsung, Vivo, Oppo, Huawei, and Google, while app store rivals include Google Play, Microsoft Xbox, and Sony PlayStation.
- The trial concluded on Monday. Before retiring, Rogers implied that she would like to promote more competition but would want to do so without breaking a commission system “that reaps billions of dollars” for Apple.
- Although she displayed scrutiny for many of Apple’s decisions, she also scorned Epic for some of theirs. For instance, she informed Epic’s attorneys that Apple maintains a “rigidly controlled ecosystem” and that consumers choose to participate in it. Epic lawyer Gary Bornstein told her iPhone users do not understand the consequences of being locked into the “ecosystem” and that they often do not pay attention to in-app purchase costs “that are tiny compared to the price of an iPhone.”
- However, Rogers did not think that information showed Apple was a monopoly. Instead, other declarations made it clear she may determine Apple engages in anticompetitive behavior. He also wondered if Apple could grant apps the ability to remind users that they can use a web browser to pay without “posting a direct link to the checkout stand.” She compared this action to merchants displaying which credit cards they accept at the cash register.
Rogers will release her decision on the Epic v. Apple case during the summer.
