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: Apple v. Epic: It’s closing argument time in blockbuster trial

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Three weeks, more than a dozen witnesses, and hundreds of exhibits later, Apple Inc. and Epic Games Inc. are making their final arguments in the iconic trial on Monday.

So far, Epic and Apple
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lawyers are wrangling over the relevant market in question: Epic claims the App Store is a monopoly that “locks in” developers and consumers with no digital substitute. Apple counters that plenty of options exist.

“Our view is there is no economic substitute for getting an app on the phone,” Epic attorney Gary Bornstein said. “There are substitutes for the App Store.”

Countered Apple lawyer Daniel Swanson: “If you take Epic’s definition, Apple is a monopolist. XBox is a monopolist. Everyone is a monopolist. Developers write across these devices. The question is, did Apple raise prices in the App Store. You have to look at the ability to switch. Can consumers and developers switch somewhere else?”

Judge Yvonne Gonzalez Rogers, meanwhile, is peppering each side with tough questions.

“Well, Apple is not just being sued by Epic. It is also being sued by a class of developers,” Judge Gonzalez Rogers pointedly said. “It’s not just Mr. Sweeney.” (Tim Sweeney is Epic’s CEO.)

“If I decide the relevant market is gaming, there’s not a monopoly, but there is evidence showing anticompetitive conduct,” Gonzalez Rogers said. “Well, if I decided the market was mobile games, how would that impact your analysis?”

“I would be rather sad,” Swanson replied. “But the monopoly power would go away. We think other devices that iPhone owners have would come into play.”

The antitrust trial started May 3 with fiery opening statements from the combatants. Epic contended the iPhone maker had constructed a latter-day digital distribution monopoly through onerous fees on its App Store; Apple countered it had built an “economic miracle” that had enriched thousands of developers while protecting the privacy of billions of people.

Ultimately, antitrust experts told MarketWatch, the case boils down to whether Epic executives and economic witnesses established Apple unfairly wielded the power of the App Store — a business with nearly 80% profit margins that helped developers make more than $70 billion since its launch in 2008 through early 2017 and now reaches 1 billion devices — to create a mobile operating system monopoly.

Apple countered App Store is one of many available online stores from Google parent Alphabet Inc.
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Microsoft Corp.
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Sony Group Corp.
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and more. And that there are plenty of non-iOS devices for digital-gaming transactions, blowing a hole in Epic’s narrow market definition.

Ned Barnes, an Epic expert witness, calculated that the App Store profit margin increased to 78% in 2019 from 75% in 2018. He said the App Store generated $22 billion in commissions for Apple last year.

To get there, both companies presented witnesses who encountered slashing cross-examinations.

Epic cross-examinations were “gotcha” tactics that exposed the soft underbelly of some App Review methods and underscored the profitability of the App Store, according to an Apple legal strategist.

Apple, conversely, has scored points by proving it has sunk billions of dollars into development of the App Store, and maintains a 30% commission fee — the industry standard for years. Last year, it lowered that percentage to 15% for smaller developers.

The trial is being closely watched amid investigations in the U.S. and overseas into Apple’s considerable market sway, and a New York Times investigation that posits Apple Chief Executive Tim Cook made comprises on individuals’ data to do business in China, where Apple gleans about 20% of its revenue.

An Apple spokesman said the company used its most advanced encryption technology in China, and it removed apps only to comply with Chinese laws.

Gonzalez Rogers on Friday said she had a “considerable” amount of evidence to sift through. “That will take some time” she said of her decision, which will come in writing either in the summer or fall.

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