Tim Cook took the position as CEO of Apple for the first time. The billionaire of one of the world’s most popular video games led a federal judge through what is known as the Metaverse. And lawyers in masks discussed whether an anthropomorphic banana without pants should be shown in a federal court.
For the past three weeks, Apple has defended itself in a federal courtroom in Oakland, California against allegations of abusing its power over the iPhone App Store in one of the largest antitrust proceedings in Silicon Valley history. Epic Games, the maker of the popular game Fortnite, sued Apple last year for allowing apps to avoid the 30 percent commission the iPhone maker takes on many app sales.
On Monday, the trial, which included esoteric definitions of markets as well as strange video game characters, ended with Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California urging companies to see what, if anything, should change in Apple’s business. The decision on the case as well as the future of the $ 100 billion market for iPhone apps is now in their hands. Judge Gonzalez Rogers said she hoped to reach a verdict by mid-August.
Yet even at a time of antitrust control over the world’s largest tech companies, the trial showed the difficulty of acquiring a corporate titan like Apple worth $ 2.1 trillion.
Epic spared little expense to sue Apple. The Cary, NC-based game maker sacrificed a valuable product when Apple ripped the Fortnite iPhone app from the App Store, which had sales of more than $ 1 billion. Epic also spent millions of dollars on lawyers, economists, and subject matter experts. Still, the trial started at a downside, as antitrust laws tended to favor defendants, according to legal experts prosecuting the case.
While Judge Gonzalez Rogers signaled openness to Epic’s arguments during the trial, a decision in favor of the video game maker could not lead to significant changes in the mobile app market. Any judgment is likely to be involved in appeal proceedings for years. At this point in time, rapid change in the technology industry could invalidate its impact.
“To start a credible antitrust campaign, you have to have a significant war chest,” said David Kesselman, a Los Angeles antitrust attorney who has prosecuted the case. “And the problem for a lot of smaller businesses and smaller businesses is that they don’t have the resources to fight that kind of battle.”
The case centered on how Apple exercises control over the iPhone App Store to calculate its commission on app sales. Businesses big and small have argued that the fee shows Apple is abusing its dominance, while Apple responded that the cut in sales is helping to fund efforts to keep iPhones safe. Regulators and lawmakers have looked into the issue and made it the center of antitrust complaints against the company.
Epic’s lawsuit was the biggest test of those claims yet – and the best shot for app developers looking to weaken Apple’s influence on the iPhone app market. Tim Sweeney, CEO of Epic and a longtime opponent of large technology companies, said he is fighting “for open platforms and policy changes that benefit all developers equally”.
Throughout the process, lawyers, investors, and journalists analyzed Judge Gonzalez Rogers’ comments and questions for clues as to their thinking. When Epic brought its witnesses to the booth, they appeared to agree with Apple’s arguments in some places. But the perspective of their questions changed when Apple presented its witnesses, including Mr. Cook, last week.
In a sharp back-and-forth with the Apple CEO on Friday, Judge Gonzalez Rogers told Mr. Cook that it was clear that his company had made changes to the App Store fees due to public pressure. She then asked him why Apple didn’t want to give iPhone users more choices about where to buy apps. In response, Mr. Cook effectively admitted that Apple wanted to maximize its profits.
On Monday, Judge Gonzalez Rogers’ comments indicated that she believed Apple deserved to benefit from its innovations. But she also questioned some possibilities.
“The 30 percent figure has been around since it was founded. And if there was real competition, that number would move. And it didn’t, ”she said of Apple’s commission for the sale of apps. She also said it was anti-competitive for Apple to prohibit companies from telling customers that they could buy items outside of iPhone apps.
At other times on Monday, she seemed reluctant to force Apple to change its business. “Courts don’t do business,” she said.
Judge Gonzalez Rogers also suggested that the outcome requested by Epic in the case would require a substantial change in Apple’s business, questioning whether there is a precedent for that. “Can you give me an example that survived the appeals test when the court so restricted or fundamentally changed the economic model of a monopoly company?” she asked Epic’s lawyers.
The judge has announced that she expects her decision to be appealed to the U.S. Court of Appeals for the Ninth Circuit. If so, a three-person jury in this court could review their decision. Apple or Epic could then try to appeal this ruling to the US Supreme Court.
If Judge Gonzalez Rogers stands up for Epic, Apple will most likely try to prevent her decision from taking effect until the appeals court weighs it up, and she would likely be open to that request, antitrust attorney Kesselman said. Courts are generally reluctant to force changes to companies that could then be overturned on appeal, so changes to the App Store could take years.
A win for Epic would still be a boost to the broader cartel war against Apple. The Justice Department is investigating Apple’s control of its app store, and some federal lawmakers have stated that app stores are monopoly and ripe for law enforcement. Apple is also facing two other federal lawsuits over its app fees – one from consumers and one from developers – both of which are seeking class action lawsuit status. Judge Gonzalez Rogers will also hear these cases.
Likewise, a win for Apple could undo these challenges. Regulators could be cautious about pursuing a case against Apple that has already been dismissed by a federal judge.
Judge Gonzalez Rogers can also make a decision that doesn’t make any company happy. While Epic wants to be able to host its own app store on iPhones, and Apple wants to continue to work as it has for years, they could order minor changes.
Former President Barack Obama appointed Judge Gonzalez Rogers, 56, to the federal court in 2011. Given her base in Oakland, her cases have often been tech-related, and she has overseen at least two cases in the past with Apple. In both cases, Apple won.
She closed the process on Monday with thanks to the lawyers and court officials who mainly used masks and face shields during the trial. Months ago, in the midst of the coronavirus pandemic, it was unclear whether the trial could be held in person, but Judge Gonzalez Rogers ruled that it was a sufficiently important case and ordered special rules to minimize health risks, including limiting it the number of people in court.
Epic chose to involve its managing director through an additional attorney, and Mr. Sweeney spent the trial in the courtroom, watching him from his attorneys’ table. Mr Sweeney, who is usually productive on Twitter, has not made any public comments in the past three weeks. On Monday, he broke his silence by thanking the Popeyes fried chicken restaurant next to the courthouse.
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