Epic vs. Apple: The court case has begun

[dvernb]

Epic Games, the maker of the hit video game "Fortnite," brought Apple to federal court Monday for the start of what is expected to be a weeks-long blockbuster trial centered on Apple's iron grip of a major slice of the mobile economy.

The lawsuit that prompted the trial is about one app developer, Epic, a $29 billion company based in Cary, North Carolina, but the outcome could have far-reaching consequences for companies in Silicon Valley and the future of how money moves on smartphones and other devices.

If Epic wins, Apple, a $2.2 trillion company, could be forced to reshape the policies of its highly lucrative app store, which has been the target of growing pressure from Washington and the European Union.

What exactly is the case about?

Epic accuses Apple of running its App Store as an illegal monopoly because it only allows in-app purchases on iPhones to be processed by Apple's own payment system. There are more than 1 billion iPhones globally, and the payments usually charge a 30% commission.

Epic says that fee, which critics call "the Apple tax," is applied unfairly and falls heavily on smaller app developers, who then are at a disadvantage trying to compete with Apple's own apps that avoid the fee.

 
The money made from the commission is an important revenue stream for Apple, part of the fees and subscriptions that generated $54 billion in the last fiscal year.

Apple says the tax is necessary to safeguard the privacy and safety of apps on Apple devices.

Epic estimates Apple's profit from its App Store's fees is nearly 80% — a figure Apple calls "simply wrong."

More:

https://www.npr.org/2021/05/04/993273526/the-epic-versus-apple-trial-has-begun-heres-what-you-need-to-know

 

[dvernb]

More:

Apple CEO Tim Cook will take the witness stand Friday to defend the company’s iPhone app store against charges that it has grown into an illegal monopoly — one far more profitable than his predecessor Steve Jobs envisioned when it opened up 13 years ago.

The technology company is counting on Cook’s appearance to put the finishing touches on Apple’s defense against an antitrust case brought by Epic Games, maker of the popular video game Fortnite.

Epic is trying to topple the so-called “walled garden” for iPhone and iPad apps that welcomes users and developers while keeping competition out. Created by Jobs a year after the iPhone’s 2007 debut, the App Store has become a key revenue source for Apple, a money-making machine that helped power the company to a $57 billion profit in its last fiscal year.

Epic is trying to prove that the store has morphed into a price-gouging vehicle that not only reaps a 15% to 30% commission from in-app transactions, but blocks apps from offering other payment alternatives. That extends to just showing a link that would open a web page offering commission-free ways to pay for subscriptions, in-game items and the like.

Apple fiercely defends the commissions as a fair way for app makers to help pay for innovations and security controls that have benefited both iPhone users and app developers, including Epic. Apple says it has invested more than $100 billion in such features.

It also argues that App Store commissions mirror fees charged by major video game consoles — Sony’s PlayStation, Microsoft’s Xbox and Nintendo’s Switch — as well as a similar app store run by Google for more than 3 billion mobile Android devices. That is roughly twice the number of active iPhones, iPads and iPods that rely on Apple’s store for apps.

Apple’s ironclad control over the App Store is already under investigation by regulators and lawmakers in Europe and the U.S.

 
Epic lawyers are expected to spend several hours grilling Cook on the stand. The questioning is likely to dissect the strategies Cook has drawn up since taking the CEO job nearly a decade ago, just a few months before Jobs died of cancer in October 2011.

The App Store ranks among Apple’s biggest successes during Cook’s reign. Since beginning with just 500 apps in 2008 the store has ballooned to 1.8 million apps, most of which are free. Apple has drawn upon its commissions and exclusive in-app payment system to help more than double the annual revenue of its services division from $24 billion in fiscal 2016 to $54 billion last year.

This boom wasn’t something Jobs foresaw. Shortly after the store opened, Jobs publicly said Apple didn’t expect the App Store to be very lucrative. Epic’s lawyers have repeatedly cited those comments as evidence that Apple reshaped the store to fuel its earnings growth once the popularity of mobile apps became clear.

Exactly how profitable the App Store is has been a point of contention throughout the three-week trial. An accounting expert hired by Epic estimated that its profit margins range from 70% to 80%, based on a review of confidential Apple documents. But Apple has insisted those numbers aren’t accurate because they don’t reflect expenses spread throughout the company’s operations.

Phil Schiller, a longtime Apple executive and former Jobs confidant, conceded earlier this week that the company’s commission system had generated more than $20 billion in revenue through June 2017. Epic lawyer Katherine Forrest had presented him with that estimate, based on numbers that Apple publicly released in mid-2017.

Epic’s questioning of Schiller may foreshadow how Epic’s lawyers intend to go after Cook, who is generally unflappable in public and tightly focused on his message when dealing with reporters and lawmakers.

Epic’s lawyers have repeatedly referred to internal exchanges involving Jobs and other executives to depict Apple as using its investment in security and personal privacy as an excuse for preserving the huge profits that flow from its app store.

During Schiller’s testimony, for instance, Epic’s lawyers submitted a 2008 email Jobs sent to Schiller and another executive. In that note, Jobs wondered whether Google was taking aim at the then-nascent ad market that was emerging on the iPhone, which relies on operating software called iOS. “The more energy they devote to iOS the better,” Jobs wrote to Schiller.

Forrest then challenged Schiller with two questions. “You wanted Google to be beholden to Apple?” she asked, soon following with, “You were basking in the power to destroy a company’s business?”

Schiller answered no to both questions.

https://www.nbcnews.com/tech/tech-news/apple-brings-ceo-tim-cook-court-defense-app-store-rcna996




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[dvernb]

Still more (highlights):

Apple boss Tim Cook took the witness stand for the first time in his company's major legal battle with Epic Games over an alleged monopoly.

During his appearance, Mr Cook argued that keeping control of the App Store helped keep iPhones secure.

He also said he did not know if the App Store made a profit, telling the court Apple did not break down the figures.

Facing questions about the level of profit the App Store generates from the 30% commission it takes on sales, he said: "We don't have a separate profit and loss statement for the App Store." Instead, he said that he had a "feeling" that it was profitable - but could not share figures with the court.

Judge Yvonne Gonzalez Rogers also questioned Mr Cook, asking about a survey that showed 39% of developers are dissatisfied with the app store. Mr Cook said he was not familiar with the survey but said there was a "friction" because Apple rejected 40% of apps weekly.

Lol. Much more here:

https://www.bbc.com/news/technology-57199547

 

[Merlin]

He "don't have a separate P&L statement for the App Store"? Did everyone in the court room burst into laughter on that utterly unbelievable and patently untrue lie? What kind of fools does he take his customers as? Don't answer that question. The current state of things proves people will believe anything on the web, tv or movies. But for us who learned how to think for ourselves and question everything we read, heard or saw this is an absurd statement from a corporate overlord. Of course they know down to the penny and if they don't that is malfeasance the the share holders should demand his removal and call for a special prosecutor to investigate Apple.

But the state of things today makes such bull***t possible.

 

[dvernb]

Apple avoids major concessions in App Store settlement

Apple Inc. settled a wide-ranging class action lawsuit with U.S. app makers Thursday without agreeing to major changes to its policies, a victory for a company facing criticism that it wields too much power.

The settlement will include US$100 million worth of payments to app makers ranging from US$250 to US$30,000 per developer, according to law firm Hagens Berman, which represented plaintiffs claiming Apple overcharged them fees for distributing their programs through the iOS App Store. A new advertising policy, meanwhile, will make it easier for developers to promote alternative pricing plans and ways to pay -- without Apple taking a cut. 

Apple has long allowed developers to advertise external payment methods -- such as Netflix Inc. pointing users via email to sign up on its website instead of the app -- but has frowned upon the practice. The new policy ensures Apple won’t ban developers for these communications. It doesn’t, however, let developers advertise outside pricing or payment methods within the apps themselves. The settlement also addresses only U.S. app developers, leaving Apple’s global position unchanged.

The company is “clarifying that developers can use communications, such as email, to share information about payment methods outside of their iOS app,” Apple said in a statement. 

Critically for Apple, the settlement excludes more significant App Store changes that were sought by some outside developers and legislators. The company is still requiring developers to sell their apps -- as well as in-app items and subscriptions -- using Apple’s payment system, which takes between 15 per cent and 30 per cent in commissions. Apple reduced the cut to 15 per cent for developers that generate US$1 million or less annually last year. On Thursday, it committed to continuing that policy for the next three years.

The settlement also doesn’t require Apple to allow third-party app stores or the so-called sideloading of software. And the company doesn’t have to further reduce its revenue share. The accord will require approval from Judge Yvonne Gonzalez Rogers, who is overseeing this lawsuit. She is also the judge in Apple’s lawsuit with Epic Games Inc., which has contested the App Store policies as well. It’s unclear if this settlement will affect her opinion in that higher-stakes suit with the maker of Fortnite.

“This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem,” Meghan DiMuzio, executive director of the Washington-based Coalition for App Fairness, wrote in response. “Allowing developers to communicate with their customers about lower prices outside of their apps is not a concession and further highlights Apple’s total control over the app marketplace.”

Apple’s App Store practices have come under increasing scrutiny in recent months, with critics saying the tech giant is too dominant in the industry. U.S. Senators have griped about the “gatekeeper control” that Apple and Google have with their mobile operating systems and have hauled the companies into congressional hearings. And South Korea is poised to become the first country to impose curbs on the companies’ app marketplaces.

With Thursday’s agreement, Apple said it would retain recent changes to the App Store search engine for the next three years. “At the request of developers, Apple has agreed that its Search results will continue to be based on objective characteristics like downloads, star ratings, text relevance and user behavior signals,” Apple said. 

The Cupertino, California-based company is also expanding the number of price points developers can offer from fewer than 100 to more than 500, and it will publish an annual App Store transparency report. 

That report “will share meaningful statistics about the app review process, including the number of apps rejected for different reasons, the number of customer and developer accounts deactivated, objective data regarding search queries and results, and the number of apps removed from the App Store,” according to Apple. And the company plans to detail more information about its app review process on its website. 

https://www.bnnbloomberg.ca/apple-avoids-major-concessions-in-app-store-settlement-1.1644678


For a 5.2 trillion dollar company 100 million is barely a drop in the bucket. If they had gone to court with this they wold have been skinned.

They've escaped again!

 

[Makara]

i remember in the early 90s everybody felt sorry for Apple and Steve Jobs after Bill Gates did the dirty on Steve Jobs re Windows o/s only to find out that Jobs and Apple were no shrinking violets either he was just as ruthless as Bill Gates and Apple is a bigger bully than Microsoft ever was  hard to believe back then ... i  refuse to buy Apple products the last apple product i bought was the Ipod Touch and that lasted all of 8 months

 

[Merlin]

I admit I have an iPhone. The third one. The 5se, the 7plus and now the 8plus.  They are pricey but so simple to use for me. Android has too many features and I get lost in them. I can't use one . I mean it's not that they aren't stylish with all the latest stuff and my iPhone seems basic by comparison. I don't use many apps on it. I keep it simple. Besides I could never afford the ones I'd really like to have.

All that considered Apple is only one of the monopolies among so many. They all have skyscrapers full of lawyers. No one can challenge them. No one really tries. The federal government goes after cartels of illegal business but makes no real progress combating the really powerful monopolies.

 

[Makara]

my current phone is Xiaomi Redmi K20 uses Andriod ... like Apple O/S it's full of CIA/NSA spyware (control is the game) i would like to see another O/S is developed free of CIA/NSA spyware even if it's Huawei's own O/S or another o/s say from Europe that is secure from government spyware .... don't get me wrong i do like the functionality of Andriod i just don't like the idea that my mobile phone is never truly turned off  Apple is the same ... admittedly it was neither Goggle or Apple's choice in the matter they were bullied and threatened by the CIA & the NSA ... all hard drives not manufactured in China contains CIA hardware Spyware installed as standard due to the CIA bullying Taiwanese and Japanese hard drive companies like Fujitsu.

The CIA like it's sister organisation the NSA are the enemy of the people they cite fighting terrorism the truth is it's all about control as Edward Snowden proved they are the biggest threat to our freedom and liberties 

 

[Merlin]

I suppose China isn’t a totalitarian state and the people are free and never spied upon.

All governments grow corrupt given enough time and power.

 

[dvernb]

When Trump accused the Chinese of having spyware on their equipment I couldn't help but laugh.

The kettle calling the teapot soot ass.

Lol.

 

[Merlin]

I know, right?  :rolling_on_the_floor_laughing:

 

[Makara]

I suppose China isn’t a totalitarian state and the people are free and never spied upon.

All governments grow corrupt given enough time and power.

the whole point of blocking Huawei's 5 G network was not about Chinese spying on the west EU ... if EU went Huawei 5G network it would be much harder for the CIA and NSA to spy on us  and much easier for the CIA/NSA to put pressure on Erikson/Nokia to open up their 5 G network to them, that was the security America was concerned about ..... it's all about control ... what was shown by Snowden that the CIA/NSA spy more on Americans than anyone else ... the CIA and NSA are virtually unaccountable to anyone including congress .... they even had/have their own private army/death squads in Afghanistan  called Zero units .... those zero units are the reason the Taliban received overwhelming support from Afghans ...... below is a link to google search of "CIA zero units"  the UK's MI5 & 6 are complicit as they use the UK spy centre GCHQ to do the dirty work on Europe and beyond so it's not entirely a sole American operation 

https://www.google.co.uk/search?q=CIA+Zero+units&sxsrf=AOaemvKbwBn7WqWHjxRM_IC6S8g_hWd01w%3A1630259174573&source=hp&ei=5scrYa_UIIiQ8gKahLLACA&iflsig=ALs-wAMAAAAAYSvV9omhPBvSEJ6aHG4nzyyYHPobk0r0&oq=CIA+Zero+units&gs_lcp=Cgdnd3Mtd2l6EAMyBggAEBYQHjoOCC4QgAQQsQMQgwEQkwI6DgguEIAEELEDEMcBEKMCOggIABCABBCxAzoICC4QsQMQgwE6CwgAEIAEELEDEIMBOgUIABCABDoECCMQJzoFCAAQkQI6CwguEIAEEMcBEK8BOgUILhCABDoLCC4QgAQQsQMQkwI6EQgAEIAEELEDEIsDEKgDENIDOggILhCABBCxAzoLCC4QgAQQyQMQkwI6BQgAEJIDOg4ILhCABBCxAxDHARCvAToOCAAQgAQQiwMQqAMQ0gM6BwgAEIAEEAo6CAgAEBYQChAeULqscViY23Fgs-VxaABwAHgAgAF0iAHTCZIBBDEyLjKYAQCgAQG4AQI&sclient=gws-wiz&ved=0ahUKEwiv3_XX5NbyAhUIiFwKHRqCDIgQ4dUDCAo&uact=5

 

[dvernb]

Apple can no longer force developers to use in-app purchasing, judge rules

A U.S. judge on Friday issued a ruling in “Fortnite” creator Epic Games’ antitrust lawsuit against Apple's App Store, striking down some of Apple’s restrictions on how developers can collect payments in apps.

The ruling says that Apple cannot bar developers from providing buttons or links in their apps that direct customers to other ways to pay outside of Apple’s own in-app purchase system, which charges developers commissions of up to 30 percent. The ruling also said that Apple cannot ban developers from communicating with customers via contact information that the developers obtained when customers signed up within the app.

The ruling comes after a three-week trial in May before Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California. Apple shares moved down about 2.5 percent on news of the decision.

The decision strikes down a core part of Apple’s App Store rules, which prohibit developers from telling users about other places they can go to pay the developer directly rather than using Apple’s payment mechanisms. Gonzalez Rogers issued a nationwide order that allows developers to put into their apps “buttons, external links, or other calls to action that direct customers to purchasing mechanisms.”

But Gonzalez Rogers stopped short of granting Epic some of its other wishes, such as forcing Apple to open the iPhone up to third-party app stores.

The judge ruled Epic failed to demonstrate Apple is an illegal monopolist, but did show the smartphone giant engaged in “anticompetitive conduct” under California laws.

The judge issued a nationwide injunction blocking Apple “anti-steering provisions” — rules that limit app developers from pointing users outside of Apple’s ecosystem.

The judge said these rules “hide critical information from consumers and illegally stifle consumer choice.

https://www.nbcnews.com/tech/apple/apple-app-store-decision-judge-rules-epic-fortnite-rcna1969

 

[Merlin]

Baby steps. Appeals to follow.

 

[Makara]

about time ... Apple is a bully and has gotten to big for it's own boots ... like Intel was to motherboard manufacturers not to support AMD chips in the late 90s and early 2000s ... the even threatened Dell and Gateway that they would withhold Intel processors from them if they sold Desktops/Laptops with AMD processors inside ... nowadays Intel is not the dominant force it once was and the same will happen with apple with the growing popularity of Samsung and Huawei handsets .... it's the Apple stores that are accounting for the majority of there profits nowadays