Thread by @leah_nylen

Ok. Back to #epicvapple. Evans is still on the stand, now being questioned by Apple's lawyer Daniel Swanson. Swanson has asked a lot of questions about how Apple's App Store competes with Android App Stores.

Evans says they don't. “Android app stores do not meaningfully constrain” Apple, he said.

Apple has an approximately 50 percent market share, split with Google for operating systems, he says. But "Apple has monopoly power because of the inability of developers and users to substitute" Android App Stores for Apple's App Store.

Apple's App Store provides two services: app distribution and in-app payments, Evans says. (there was a long discussion about whether both of those are "transactions" in an economic sense)

Evans says Apple's game transactions are not substitutes for digital game transactions on the Playstation store or Steam. "They are not significant substitutes in the way we use the term," he says.

Evans says he did not look at transaction data for other platforms, Android Play Store, PC or Mac stores.

Evans relied on data from a survey by another Epic expert Peter Rossi that asked consumers about in-app purchases and subscriptions. The survey did not ask about download transactions, Evans confirms.

They are talking about price elasticity of demand, an economic term that seeks to figure out how demand for a product changes when prices increase.

If the price change leads to a large increase/decrease in demand that's "elastic." If the price doesn't change demand much that's "inelastic." (Swanson/Evans are arguing about whether an 11 percent change should be to elastic or inelastic)

Swanson asks Evans about Uber/Lyft. "Uber and Lyft do not give drivers the choice to select their own payment solutions, do they?" Swanson asks. No, Evans says, it’s like in American Express, the apps are providing a service to two-sides.

"In your terminology, Uber and Lyft do not give drivers the choice to select their own payment solutions," Swanson says. No, they do not, Evans says.

Swanson points out that in his written testimony, Evans identifies 11 apps that use their own payment processing: Grubhub, Wish, StubHub, Uber, DoorDash, Lyft, Instacart, PostMates, Amazon Shopping, Walmart, and eBay

"Would you say they are tying the payment solution?" Swanson asks. "Not at all," Evans says.

Swanson asks if Evans would characterize it is a tie when Apple charges for an initial download. He says no, but Swanson is comparing apples and oranges.

In-app payments involve transactions between developers and consumers. That is a separate market from when Apple charges for a download, where it is acting as a distributor of apps, Evans says.

“When I go to the App Store, it’s because there’s an app I want to get,” Evan says. “I don’t go to the App Store and troll around for apps that have in-app purchases.”

(In case you haven't figured it out yet, Swanson's job is to try and poke holes in Evans' analysis by asking a lot of questions that make it seem unclear or ridiculous. Epic will do the same thing when Apple's expert Richard Schmalensee is on.)

Swanson says that Evans has said Apple's conduct foreclosed competition. "I'm trying to understand who the competitors are," he says.

Evans says it's payment solutions. A company like Paypal would be a competitor, but so are developers who use particular payment processors, like Stripe, to create a substitute to Apple's IAP.

Taking our morning break. Back in 20 mins.

Evans agrees that output has grown in Apple's App Store since it opened in 2008 and even after it gained monopoly power.

Evans agrees it wasn't anticompetitive of Apple to decline to allow developers to use alternative App Stores before 2010 (since in his view it didn't have monopoly power then)

Swanson notes that the DOJ/FTC's IP guidelines indicate that ordinarily a company isn't required to create competition with its own technology. Evans agrees, but notes the caveat "ordinarily"

Swanson asks whether Evans has written that using profit margins is a “flawed approach to assessing market power.” Evans said he believes profit margins "should be used with caution"

Evans agrees that iPhones, iPads and iOS apps are related services. Swanson asks whether it makes more sense to consider all iOS revenues and costs services together. Evans says no, noting that Apple has created internal profit/loss statements for the App Store

Swanson says he only has confidential questions left, so Epic's Gary Bornstein will do redirect now and then they'll do closed testimony at the end.

Swanson had asked Evans during his cross about whether a calculator app could substitute for a zombie game app (the answer was no). Bornstein asks him to explain more. Both the zombie game and the calculator are customers of Apple's distribution platform, Evans says.

“They are all customers of a platform that is providing a common service to all of them," Evans says.

YGR breaks in. "On one side you have developers developing apps. And on the other side 1 billion customers. What we really have is a distribution channel. You have a distribution channel that connects these two groups."

YGR: But "Apple has put a tollbooth. Apple has said if you want to make certain kinds of purchases you’ve got to go through my tollbooth to get to the consumer."

Evans: Apple has said our platform is the only distribution channel and for a certain set of apps we are going to erect a tollbooth that charges for something else, which is the transactions the developer is doing with its own consumer.

YGR: But the platform or the channel is all technology developed by the owner. And that particular platform is Apple.

YGR: All these channels are going across proprietary technology to go to the consumer. "On one of these many channels is a tollbooth. What you are saying is we want to have either free or develop own channel over your proprietary platform."

Evans says he likes her channel analogy. One channel is distribution and for iOS Apple has said there is only one channel for distribution, the App Store, Evans said. There are additional channels for consumers who want to interact with the developers after app download

And for those channels, "Apple set up a tollbooth on those particular transactions" for digital goods and services, Evans says.

YGR says consumers don't have to use the app. “You can go to the web and get v-bucks. You can go to Steam and get v-bucks” Consumers are not using the app for the transaction.

Evans acknowledges that it is "theoretically possible" for a Fortnite user to go the web to buy V-Bucks instead of using the app. But Apple forbids developers from telling users. Developers cannot go to the "user and tell them 'you could go to the web and get this more cheaply'"

Evans: "The problem here is a combination of both requiring Epic to use IAP in the iOS Fortnite app in combination with also putting a whole set of barriers that doesn’t make it impossible but makes it much more difficult for Epic to communicate to the iOS app user"

YGR: "So if there was no anti-steering provision that would be fine because the customer could choose." Antitrust law doesn’t care about Epic games; it cares about competition and the consumer.

Evans said that solution would work "for the time being." "If the anti-steering provision went away, that wouldn’t eliminate Apple's market power, but it would diminish it."

That solution doesn't work for apps that don't have a web version or for consumers who are out and about and don't have immediate access to a computer, he said.

YGR: If a person is out they are "using a mobile device for which someone has proprietary software" and invested resources. "If they want to wait, they can wait. If they want the convenience, isn’t that a fine option for a consumer? Isn’t that a fine option for both parties?"

Evans: "By and large in the world we live in now, we are smartphone based and app based for much of what people do. I don’t believe that’s really a realistic option."

YGR sealed the courtroom so Swanson can ask Evans to respond to some confidential questions. Hopefully back in about 10 mins, at which point we'll go over to Susan Athey.

Came back but going to lunch now. The court is in recess till 1:15 PT/4:15 ET.