A trial with major implications for the technology sector kicked off with dramatic testimony from video game company Epic Games’ CEO.
(CN) – The first day of the three-week trial with profound implications for the future of competition in the technology sector got underway as the CEO of Epic Games Tim Sweeney testified that Apple is running a monopoly through its App Store function in its operating system.
“I wanted the world to see that Apple exercises total control over all software on iOS, and it can use that control to deny users’ access to apps,” Sweeney testified at the federal courthouse in Oakland, California, on Monday.
Apple attorneys argued Sweeney is using the lawsuit as a scheme to increase Epic’s profits while taking advantage of a sophisticated ecosystem invented and built by Apple to disseminate its popular video game Fortnite to consumers.
“Rather than investing in innovation, Epic invested in lawyers, PR and policy consultants in an effort to get all of the benefits Apple provides without paying,” Apple attorney Karen Dunn said in opening arguments Monday.
Both sides made their case to U.S. District Judge Yvonne Gonzalez Rogers, who will decide the case in lieu of a jury, in sparsely attended proceedings due to ongoing coronavirus restrictions.
While Apple pointed to internal documents at Epic Games and a strategy called “Project Liberty” to challenge the fees Apple charges game developers for access to the App Store, Sweeney acknowledged he installed a video game with its own in-app purchase system in contravention to Apple’s rules to highlight what Epic Games characterized as a “walled garden.”
“When they pick up the iPhone, users enter a different world,” said Epic Games attorney Katherine Forrest. “They are locked into a closed platform where they can only download apps from Apple, and each and every time they purchase in the app, a 30% tax is imposed.”
Forrest said Apple has meticulously built its App Store into a closed system designed to make it necessary for consumers to use its products and services to get other services they like. The scheme was built by Steve Jobs, who despite claiming the company made little money with the App Store in 2008 began reaping profits soon after, Forrest said. Apple made profits of 75% in recent years, the attorney said, by making companies like Epic Games pay a high commission in order to give users access to their product.
Apple countered by saying 30% was lower than the 70% industry standard at the time Epic Games began paying the company and said it was impossible to have monopoly power when Google Android Systems has nearly 2 billion users worldwide. During cross-examination, Apple attorney Richard Doren grilled Sweeney on why Epic seemed to have no problem paying 30% commissions to game consoles like PlayStation, Xbox and Nintendo Switch.
Dunn also argued Apple’s fees are justified to keep the App Store safe from hacking and to ensure the apps are trustworthy.
“A $20 billion company has decided that it doesn’t want to pay for Apple’s innovations anymore,” she said. “So Epic is here, demanding that this court force Apple to get into its App Store untested and untrusted apps — something that Apple has never done.”
Apart from courtroom theatrics, the legal question at the heart of the antitrust case is the definition of the market in question. Epic Games wants the judge to focus solely on the App Store, saying Apple should allow other app stores and alternative ways to download games onto its devices.
“The garden could have a door,” Epic lawyer Forrest insisted. “It was artificially closed.”
Apple says the true market should extend beyond its ecosystem and factor in Android’s Play store, alternative ways to download apps on Google products, and various video game consoles where a large number of Fortnite users play.
Apple notes Google offers users alternative ways to download video games and says many Apple customers prefer a more tightly controlled and vetted process.