MW Apple v. Epic: Tim Cook offers strong defense of App Store
By Jon Swartz
Apple Inc. Chief Executive Tim Cook offered a strong defense of the App Store in federal court early Friday to rebuff Epic Games Inc.'s claims that the digital platform is a monopoly.
The App Store has been one of the most important job growth segments in the last decade but Apple does not have a dominant share in mobile devices, Cook said in testimony that is effectively concluding Apple's defense in the three-week-old antitrust case. (The latest: Cook is currently being cross-examined by Epic lawyer Gary Bornstein.)
Among other things, Epic is seeking an order that would require Apple to permit so-called "sideloading" and alternative app stores. The consequences of such a move, Cook warned, would create a "toxic mess" on the App Store and compromise consumers.
Apple $(AAPL)$ has made "many, many" improvements since the App Store launched in 2008, Cook said, with "massive" investments to ensure consumer and developer security but has not abused the store's "economic miracle" to gain an unfair competitive advantage.
"We invest like crazy in [research and development]," he said, noting Apple has spent $100 billion since the introduction of the iPhone in 2007, and $50 billion over the last three years. (According to Apple's 2020 10-K SEC filing, it was $14.2 billion in 2018, $16.2 billion in 2019, and $18.8 billion in 2020.)
Cook's comments mirrored what he told a House subcommittee nearly a year ago, and has since said publicly. His appearance on the stand effectively echoed what Apple executives and expert witnesses have said all week: The 12-year-old App Store is an innovative, safe haven for developers and consumers that is part of a larger online store ecosystem that includes competition from Samsung Electronics Co. Ltd. , Microsoft Corp. $(MSFT)$, Google parent Alphabet Inc. $(GOOGL)$(GOOGL), Sony Group Corp. (6758.TO), Nintendo Co. Ltd. , and others.
Apple has also driven home the notion that gamers can easily switch between the App Store and other gaming platforms with non-iOS devices. Epic maintains the App Store is a "walled garden" designed to extract onerous 30% commission fees from developers. (Apple has pointed out that 30% is the industry standard.)
Final arguments in the closely watched case are scheduled Monday in Oakland, Calif., before federal Judge Yvonne Gonzalez Rogers, who will decide the bench trial. Gonzalez Rogers is expected to ask each side of attorneys highly technical and marketing questions before eventually issuing a decision.
On Friday, the judge said she was "troubled" by the App Store's 30% commission fees. "The lack of competition on the 30% is something that is troubling," she said.
(Cook testified that Apple's commission rate has decreased over time. About 85% of the apps are free, with no commission charged to them. The remainder 15% or 30%, the former for second-year subscriptions or video partners.)
According to an Apple legal strategist, a crucial question facing Judge Gonzalez Rogers will be, Is iOS an essential platform for Epic and its wildly popular game, Fortnite, to survive? "That's a pretty high threshold," the strategist said.
Epic has also posited that the App Store became a monopoly sometime around 2010, and exhibited behavior that cemented that notion -- another tough point to prove, the strategist said.
Cook's testimony is bookending the testimony of Epic CEO Tim Sweeney, which kicked off the trial on May 3.
Epic and Apple will submit their final legal briefs on May 28 by noon PST.
-Jon Swartz; 415-439-6400; AskNewswires@dowjones.com
$(END)$ Dow Jones Newswires
May 21, 2021 12:53 ET (16:53 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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