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Judge Nails Apple CEO As He Struggles To Answer Questions In Epic Case

Apple whose products are expensive, but not necessarily superior to justify their premium prices, appear to have hit a problem in their antitrust trial bought by Epic Games. who see the big iPhone maker as nothing more than “rip off merchants”?

It took a US Judge only seconds to rattle Apple CEO Tim Cook who was being grilled over Apple’s app marketplace which has been deemed anticompetitive.

U.S. District Judge Yvonne Gonzalez Rogers

Bloomberg now claim that Apple’s chances of winning the antitrust case appear less certain after U.S. District Judge Yvonne Gonzalez Rogers needled Cook on why the iPhone maker won’t give users the option to buy lesser-priced virtual goods and content directly from developers — and only allows purchases through Apple’s own App Store, an issue at the heart of the case.

Her question was brutally simple “What is the problem with allowing users to have choice, especially in the gaming context, to have a cheaper option for content?” Gonzalez Rogers asked.

Legal experts had given Apple the advantage going into the trial, but there was a palpable shift during the intense exchange in the final minutes of Cook’s testimony when the judge voiced scepticism about Apple’s argument that the benefits of its tight controls on how apps are vetted and marketed outweigh Epic’s antitrust claims.

In his first time testifying in a trial, Cook answered questions for more than two hours in the US Federal Court in California, as the three-week trial in a high-stakes battle between the companies’ winds toward its close.

Cook desperately tried on several occasions to explain that App Store rules and restrictions are aimed at ensuring a safe and secure platform for consumers and developers.

The judge wasn’t satisfied with Cook’s answers.

Cook said that consumers “have a choice today” of buying cheaper Android phones over iPhones.

If Apple allowed developers to have links in their apps that point to alternative payment systems, “we would in essence give up our total return on our IP,” Cook responded, referring to the company’s proprietary intellectual property.

Gonzalez Rogers didn’t seem convinced and suggested that the App Store “could monetize in a different way.” Gaming apps seem to be making “a disproportionate amount of money relative to the IP you have given them, and everyone else,” she said. “In effect, it’s almost as if they’re subsidizing everyone else.”

Epic sued in August after Apple pulled Fortnite from the App Store because the developer had created a workaround so it wouldn’t have to continue paying a 30% fee on customers’ in-app purchases. Epic claims App Store policies hurt developers and thwart competition.

Cook claimed that it would be “terrible” for iPhone and iPad users if the judge ordered the company to allow third-party app marketplaces, in addition to its own App Store, as Epic is demanding.

“It would be a huge convenience issue, but also the fraud issues would go up” because customers would have to enter credit-card information multiple times, Cook said.

Epic claims the App Store generates extraordinary margins, reflecting that Apple abuses its market power.

An attorney for game maker pressed Cook on his company’s insistence that it doesn’t break out App Store profit separately from other units in the company. One expert witness testified that internal documents obtained from the iPhone maker revealed that the App Store had operating margins of almost 78% in fiscal year 2019. But Cook stood his ground, saying the numbers are inaccurate.

When Apple’s attorney asked whether Cook or Epic’s expert was in a better position to fully understand the context behind the numbers, the CEO said: “I am.”

Under cross-examination by Epic’s attorney, there were multiple occasions when Cook said he didn’t know the answer or couldn’t remember. He was also contradicted by evidence that Epic introduced. In one instance, Epic’s attorney played a clip of Cook’s remarks from a Berkshire Hathaway shareholder meeting in which he said iOS faces competition from Google’s Android right after he testified that the two operating systems don’t compete.

When Gonzalez Rogers was questioning the CEO, she brought up how banks don’t pay Apple a cut for transactions that take place through their apps. “You’re charging the gamers to subsidize Wells Fargo,” she said.

Cook said game makers give Apple a share of their revenue because the company provides a platform for game transactions.

“People are doing lots of things on your platform,” Rogers quipped. “It’s just the choice of a model.”

Cook responded that there are “clearly” other ways to make money from the App Store, but Apple “chose this one.”

“It seems to be lucrative and focused on purchases being made” impulsively by users, Gonzalez Rogers said.

Rogers also pointed to a survey submitted in the case on how some developers are dissatisfied with App Store policies. “It doesn’t seem to me you feel any pressure or competition to address the concerns of the developers,” she said.

Cook disagreed.

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