Thread by @thedextriarchy

Day 10 of Epic v. Apple about to start. Yet another day of expert witnesses: David Evans, Ned Barnes, Peter Rossi, and James Mickens, all from Epic’s side. Will more lawyers fail to buy lives on Candy Crush? Who can say! theverge.com/2021/5/13/2243…

https://twitter.com/thedextriarchy/status/1392854413983817728

Lawyers are discussing whether to have extended closing statements — judge says she’s heard opening statements, read hundred of pages. “Perhaps for the public you want to do this, I just don’t know how it’s going to be any different."

Judge would prefer a back-and-forth where she questions both sides, but she also says she needs time to go over expert witness testimony.

“Your experts, upon which much of antitrust law is based, they talk past each other frequently,” says judge. “They make assumptions that they sometimes respond to and other times do not."

“Until I have a chance to go back and really assemble and reassemble and look at all this evidence, another single presentation doesn’t really help me."

“It is those factual issues that are going to drive my decision … without the factual evidence in the record, you can’t do that.” Closing statements don’t really help Judge Rogers look at the factual issues, basically.

Not a legal term, sorry — Epic’s lawyer asked to reserve an hour of time to lay out a closing statement, judge wants a back-and-forth instead.

https://twitter.com/sladewatkins/status/1393222468404486146

Looks like the trial will last at least until May 24th, incidentally.

Spotify also made a motion for reconsideration of some files — not sure precisely what that refers to.

To reiterate, there’s a back-and-forth wrap-up between Apple and Epic tentatively scheduled for May 24th. We’ve got lots more witnesses on the list to get to next week, although there’s a tentative indication that an Apple witness has dropped out — no idea who.

David Evans — who kicked off this week’s whole expert-witness-palooza — is now back to argue against the Apple witnesses who have since said he was wrong.

Evans is arguing against Apple experts’ testimony — one performed an analysis showing that the App Store had seen strong growth and quality maintenance even after (allegedly) getting monopolistic market power around 2010.

Evans says change can happen gradually and you can’t divorce Apple’s success from overall tech industry growth.

The court is arguing over whether to show a slide that was in Apple expert Lorin Hitt’s presentation that wasn’t part of his actual testimony — judge says information is in written report, so they can proceed.

Evans is addressing this paragraph from Hitt — he’s saying this doesn’t show that there’s meaningful substitution, because Hitt didn’t account for people who spent money on both platforms, but don’t end up spending more on their other console to compensate after the iOS ban.

Imagine someone who plays Fortnite on iOS and console and spends $20 a month before Fortnite is banned, Evans says.

"It’s possible that $20 moves entirely to the game console, that the user decides after Fortnite is removed to simply switch all that spending over to the game console…"

“...Another possibility is a smaller amount, so it might be that instead of spending $20, that individual spends $5."

Judge asks — “What if they spend $20 on other games on iOS?”

Evans says yes, but “that would be a different form of substitution for the user.”

Evans says he doesn’t agree with another Apple expert, Richard Schmalensee, that calling iOS a monopoly would also make game console stores a monopoly. Evans says it’s a “very, very different business."

Consoles are a smaller market where people buy based around understanding the set of games they’re going to buy, while smartphones are more open-ended and “foundational” in the computing market.

Judge brings up the fact that he keeps saying “foundational,” asks if that would make them utilities in his opinion. “What it sounds like you’re saying to me is that these are so fundamental they’re utilities.”

Evans says he wouldn’t necessarily attach that term to them.

“It’s a matter of gradation. The electric company that I depend upon to have electricity for me to function, economists would attach the word utility to that” as a result of history of regulation, Evans says.

“I’m not prepared to say that not being able to access a smartphone at this point in time rises to the same level of not being able to use electricity or water, but on the other hand they are very, very important, increasingly important technology.”

“I’m having a hard time understanding the gradation you’re [explaining] given how essential you claim this is,” judge says.

Evans: “I don’t want to suggest that as foundational platforms they are something where I would say to Congress that you should think about regulating these companies like we would regulate electric utilities in the past.”

Judge asks — do you think the government should break Apple and Google up?

“I’m a moderate on that topic, your honor. … I believe it would be a mistake to go down the road of regulation and extreme solution.”

Apple cross-examining Evans now. Asking if there’s “any” mobile OS provider that has let developers use its platform entirely commission-free. Evans says that Android is an example of this kind of platform, since you can sideload.

“This is why in China it’s possible for the Android ecosystem there to support both direct distribution and numerous competing app stores.” Evans touches on the fact that Epic has sued *Google* too, but says that’s because of specific App Store developments he doesn’t get into.

An Epic v. Google trial could get very weird if Epic has to start arguing against any praise its witnesses gave Google in the Apple trial.

Apple lawyer asks about the “duty to deal” question — keeps going back to the suggestion that Epic is just trying to force Apple to let Epic use its tech for free.

Apple bringing up a statement its expert Hitts made yesterday — that developers have been steadily raising prices on in-app purchase transactions without any kind of commission increase from Apple.

Hitts said it indicated that developers and not Apple are driving increases, and that they’re able to do this because they’re offering higher-quality stuff.

Evans doesn’t offer an explanation for this.

Lawyer raises anti-steering rules, specifically in the context of an American Express case where the Supreme Court found anti-steering rules constitutional.

“Do you understand that the American Express anti-steering provisions prevent merchants from implying a preference for non-AmEx cards?” lawyer asks.

Evans says yes, elaborates a little on it — says he agrees that these restrictions are “pro-competitive."

Lawyer characterizes the AmEx case as being about not having to let merchants direct users to cheaper competitors. “I think it’s much more narrow than that,” says Evans.

“It’s targeted to a situation where a consumer who probably has multiple cards walks into a store that probably has an American Express logo on it” and probably has a desire to use her American Express card, “and then the merchant tells the consumer to not use that card.”

“It’s that targeted setting that the American Express anti-steering rules are targeted to,” says Evans.

Lawyer disagrees and asks again if it’s about letting AmEx stop merchants from directing them to competitors. (Clearly intends the answer as ‘yes.’)

Lawyer says AmEx doesn’t stop merchants from mentioning cash, etc, just direct competitors. Evans and the lawyer debate this for a little while but basically come down on that.

If you want an overview of Epic v. Apple this week, including the utterly bizarre Naked Banana Incident, I talk about it on the Vergecast with @backlon, @reckless, and @mcsquared96 theverge.com/2021/5/14/2243…

Judge Rogers asked about the credit card metaphor earlier this week — there’s an open question about whether Apple’s anti-steering rules are like AmEx not letting a merchant tell somebody to use Visa instead, or like AmEx banning merchants from even displaying a Visa sign.

Surely a competitor has “no right to take a free ride” on the coattails of its competitor, Apple lawyer asks.

Talking about where Apple banning a third-party store would cross the line into anti-competitive behavior. Evans says he understands that “rogue” app stores could be banned.

Judge asks — does that include app stores that offer pornography?

Evans says that in theory that could be a hard line Apple could draw, but “it’s not like the iPhone is designed in a way” that stops people from accessing pornography through things like the Safari browser.

Evans also says you can download Facebook on the iPhone and find beheading videos there, so… that escalated quickly.

“Would a rogue app store include one that distributed apps that were not compliant with Apple’s policies with respect to user policy?” Apple lawyer asks.

Evans says there are “scenarios” where “that denial could have competitive implications."

“The road I don’t want to go down is one where Apple has the right to basically go back to being a monopolist and making all the decisions about what can happen in the system,” Evans says.

Apple’s lawyer is telling Evans to go back to a section of his report where he favorably talks about how Android’s store model works in China.

Evans takes issue with the lawyer saying he called China a “shining” example, and they’re having the world’s most passive-aggressive argument about it.

Evans says “the road I would like to see Apple travel” is Apple having competition. He says that doesn’t mean he wants a market that “replicates China.” But “I do take China as an example of another situation where there has been essentially unbridled competition in app stores."

Lawyer has seized on the China comparison — asks Evans if there’s rampant malware and piracy on Android phones in China. “Isn’t it true that there is rampant disregard of developers’ intellectual property rights by Chinese Android app stores?"

“Isn’t it true that most Android app stores in China” charge a 50% commission? Evans says yes but it’s negotiable and developers can use their own app stores for direct distribution too.

Lawyer says Evans said his testimony wouldn’t have any impact on console stores, but he notes that Sony has been sued on the same grounds since this trial started, implying that’s not true gameinformer.com/2021/05/06/son…

We’re going to take a 20-minute break; I’ll be back at 1:35ET.

(There’s a sealed session after that so I might not have anything to tweet for a little, though.)

synthpop hell forever

update: synthpop hell ended, purgatorial conference call murmurs have begun

We’ve got a few last questions for David Evans. About the finer points of defining a market for the case.

Evans is excused. Our next witness is Epic-called Ned Barnes. Barnes came up before the trial because he estimated Apple’s App Store had an operating margin of 75-78%, a number Apple has disputed: theverge.com/2021/5/1/22414…

hold up, new game definitions dropped gamesindustry.biz/articles/2021-…

Okay, back to Barnes. As mentioned before, he’s been called up to talk about Apple’s profits from the App Store, something that Apple says can’t be meaningfully separated from other parts of its business.

Barnes takes an example from Apple’s expert Schmalensee, who compared the App Store to a company that invested in high automation and few employees — Schmalensee said you’d see very high profit margins on paper, but those wouldn’t account for the upfront cost. Barnes disagrees.

Barnes says that depreciation expenses would still apply while calculating operating profit, so you’d still get an accurate estimate.

I’m just going to be upfront here, I don’t know anything about forensic accounting.

Barnes is being asked about shared costs — “an expense that has benefits to more than one business unit or product line or service line” in a business. Apple has said it has a lot of these, Barnes says it’s “very common” to allocate costs across divisons.

Barnes talking about net measurement: when a hypothetical app is sold for $10 and $7 goes to the developer and Apple gets the $3, Apple recognizes this as revenue. (As opposed to recognizing it as $10, a gross sale.) Says there are standard accounting guidelines here.

Apple’s lawyer is up now, turning questions around on how *Epic’s* accounting works. Barnes says he wasn't asked to analyze Epic’s financials, but agrees he would believe earlier testimony from Tim Sweeney about how its finances work.

Apple asked Sweeney if Epic had products and services that couldn’t have precise profits calculated because they’re part of a holistic business. (i.e. the same thing Apple is claiming about the App Store.) Sweeney had agreed.

Barnes says it’s “outside the scope of his analysis,” he doesn’t have an opinion on whether that’s proper or improper for Epic.

I don’t think anybody expects Barnes to have answers on this line of questioning, but it undercuts Barnes’ claim that he could meaningfully parse out profits for the App Store.

(By which I mean, Apple’s strategy is that it’s supposed to undercut it.)

“If you don’t have an opinion, it’s fine to say so,” says Apple lawyer, but she insists he answer whether “it’s a good way to run a business, to focus on innovation” rather than individually calculated profit and loss. Barnes keeps resisting.

Lawyer is asking if Barnes is assessing Apple witnesses’ credibility here — Barnes says he wasn’t

https://twitter.com/leah_nylen/status/1393274329811623936

All of this tbh feels kind of frustratingly tangential to the issues the judge will end up deciding on — like, the entire back-and-forth is Apple and Epic throwing down over precisely *how* ridiculously high Apple’s profits almost certainly are

Apple’s exact profit margin just isn't the primary factor in whether it’s violating antitrust law.

Perfectly reasonable for Apple and Epic to mount every argument they think will help their cause, but after 60+ hours of trial this is like a filler episode.

extremely sensible rebuttal but i still think barnes should be talking about the banana

https://twitter.com/leah_nylen/status/1393277109209112589

“Have you ever worked at Apple, sir?”

“I have never been employed at Apple, no.”

Lawyer mocking (in lawyer, ofc) the idea that Barnes managed to determine Apple’s operating margins from outside the company in ways that contradict Apple’s own witnesses.

Moving to Barnes’ analysis of online marketplaces that he can compare with Apple’s App Store. “You did not make any effort to demonstrate that the companies you identified were comparable to the App Store?” Barnes says he was just looking for consistency of accounting methods.

Lawyer says he didn’t calculate, say, operating margins for the Microsoft Store, Google Play Store, Samsung Galaxy Store, and PlayStation Store — instead it was stores like Rakuten, which sell physical goods.

Barnes couldn’t break this out because Sony, Google, etc. didn’t break out numbers in a way he could analyze.

Epic’s lawyer is going back to the Sweeney line of questioning — he’s asked if Sweeney’s testimony influences his conclusions.

“It has no effect,” says Barnes. “I wasn't investigating how Epic does its internal reporting."

“I was investigating Apple’s internal reporting of the Apple App Store, and I was able to determine based on documents I viewed I was able to do my own estimate,” Barnes says. "I was able to verify that Apple [collects these numbers] in the ordinary course of business."

Another Epic expert witness coming up: Peter Rossi, a UCLA statistics and marketing professor.

We’re reading some new document numbers out to enter into evidence, some under seal.

Rossi designed a survey that tried to measure a hypothetical where Apple digital/physical products were increasing in price while prices on, say, the Play Store or websites were not.

So say “the Apple App Store increases prices by 5%,” for instance, with no indication that they’ll go down — so the scenario is supposed to simulate a long-term change.

Judge: How did you deal with the fact that consumers know prices are always low in December around the holidays, and then prices go up in January, when the survey was conducted? Rossi says consumers don’t have that expectation around apps/in-app purchases.

Judge asks if he’s actually done research on consumer expectations — Rossi says he hasn’t. We move on.

example of the question in the survey:

https://twitter.com/leah_nylen/status/1393287703672860676

We’re going to take a break till 4:15ET.

Rossi is back on the stand, answering more questions about his survey on hypothetical App Store price increases.

Apple’s lawyer is coming to cross-examine him — same one who eviscerated Ned Barnes earlier today, I believe.

Apple lawyer is asking whether the survey indicated a “permanent” change to Apple prices. As Rossi has said previously, it doesn’t. She’s now comparing this to earlier question drafts.

One of the drafts explicitly told people that they would be paying higher prices in the future.

Apple lawyer is also asking whether Rossi’s survey hit the same target population as the people who play Fortnite — his survey is 17+ years old, while Apple asserts most of Fortnite’s core userbase is younger teenagers.

(Should say “much,” not “most,” sorry – but they’re asserting 13-16-year-olds are a huge part of Fortnite’s market.)

We’re going through the survey now — drilling into the actual numbers going on

https://twitter.com/leah_nylen/status/1393306300721795072

Upshot is the survey found a low percentage of people who would switch devices based on a price increase, but Apple is suggesting Rossi phrased the survey in a way that made people less likely to do so — not necessarily reflecting a real-world result

https://twitter.com/Shannon_Liao/status/1393306952470573062

Epic’s lawyer back up — asking why he didn’t include 13-16-year-olds. Rossi says that a lot of these would be “joint purchases” with adult input, and also you need parental consent to survey 13-16-year-olds, which often produces unreliable results.

The most random fallout of this trial so far: Roblox ctrl-f’d “games” with “experiences” all over its service, after Apple made a huge deal out of how it’s allowed on the App Store because its developers don’t make games theverge.com/2021/5/14/2243…

Rossi is stepping down, and now we’re going to get James Mickens, a computer science professor at Harvard and Epic witness.

Mickens is Epic’s third expert witness to be employed at one point by Microsoft.

We’re starting with a line of questioning about his work with Microsoft, establishing he has no “ongoing relationships” with anyone there except a collaboration with a researcher in an area unrelated to his testimony here.

Mickens is here to analyze the security of the iPhone/App Store.

Mickens looked at evidence drawn from other analyses and press coverage in addition to his own expertise. Came to four conclusions.

1: “When we look at the benefit that the app review provides, that App Review actually provides minimal additional security benefits that an OS alone could provide.”

1/2, sorry, are that the security is mostly enforced by iOS and “the safety of your experience on the iPhone i slargely guaranteed by iOS, not the App Review process.”

3: You can already get software onto the phone outside the official process
4: Opening up the iPhone to third-party stores wouldn’t seriously compromise security

“Do you have an opinion as to why the Android has more security issues than the iPhone?” judge asks.

“I believe that they are in the same rough equivalence class of suscepitbility to malware” and other threats, Mickens says.

There’s not a difference between security on iOS and Android?

"I don’t think there is a meaningful difference,” says Mickens.

We’re getting a "high-level summary" of how an operating system works. That seems like it will have to be very high.

Mickens draws a restaurant analogy: You’re the customer, the chef controls what happens in the kitchen, but there’s a “waitstaff layer” that lets you interface with the chef.

In a computer, you have layers: the hardware at the bottom is like the kitchen, apps are the customers at the top, the operating system is the middle layer.

Mickens uses the term “middleware” to refer to software in the OS, which is confusingly (as lawyer notes) different from the way economists earlier in the trial have described “middleware” as third-party software.

Mickens is bringing up the topic of malware now. He does not define the restaurant equivalent of malware. Boo.

Okay we get a different analogy instead: “it’s a person who wants to achieve some task,” and this person is in an office with a big shelf full of books and records. To learn things they have to put specific books on the desk.

The bookshelf is a storage device. The person is the application, and the desk is memory. The app needs to work on tasks by pulling information from storage into memory, and there are memory protection techniques that can help stop malware from tampering with the storage.

Again, Mickens does not explain how this protection works in terms of the analogy, or why someone needs to specifically protect the books on their desk instead of the shelf behind them. This guy is bad at metaphors.

The only way an application can interact with the outside world is if an app asks the OS to perform a behavior on behalf of that act, says Mickens. Called a “system call."

“By having the apps on the iPhone or any computing device, isn’t that in fact a risk of someone inadvertently having something like that on their device and then all of a sudden the whole system is compromised?” judge asks.

Mickens says sandboxing can help with those concerns. If only there were some kind of metaphor for what sandboxing does.

There’s one final layer he hasn’t described: signatures. “A signature is basically a note that you can attach to a piece of digital content that provides attribution and integrity."

Are any of these on-device security layers dependent on how an app arrives on the device, lawyer asks?

No, says Mickens. They’re totally independent of how an app arrived on the phone. It’s “all about what that application tries to do when it gets there."

“Have you ever created an app yourself?” judge asks.

Yes, says Mickens, but never one that was distributed publicly. And he’s never gone through the release process with Apple.

Review process: First of all, developer has to register with Apple so they can sign apps. Developer then has to submit that signed app to centrally managed review process.

https://twitter.com/leah_nylen/status/1393317768758497289

When someone tries to download the app, the iPhone checks to see if Apple signature checks out. If not, it doesn’t install.

We’re going through the potential threats to privacy and the ways apps need to prompt users for consent when it collects different types of data, as well as legal compliance — app needs to satisfy laws of any given jurisdiction.

The "high-level takeaway point from this" is there are 3 properties an OS can provide by itself, 2 properties both an OS and an App Store struggle with, so “the app review provides minimal additional security properties,” says Mickens.

User consent for private data, he says, is one category where both OS and App Store struggle.

The OS is “uniquely well-situated” to enforce consent for data that is gathered from the actual phone. Human-entered, human-generated sensitive data is difficult, though, because there are “so many ways” a user can enter that data.

It’s also hard for an App Store reviewer to test all parts of an application, and for a human or automated analyst to figure out how all data might be shared.

It’s also hard for an OS or an app reviewer to verify that something is legally compliant.

“But you’re not suggesting there’s no value to human review, are you?” judge asks.

No, says Mickens, but “the benefit of human review is marginal at best."

Mickens cites Trystan Kosmynka, former head of App Store review, as saying the average app gets 6-12 minutes of review. (This was actually calculated using external data by Epic and then just not outright disputed by Kosmynka, IIRC.)

“Is the App Store the only way apps can be distributed on an iPhone?” lawyer asks.

No — additional ways, says Mickens.

The enterprise device management program is one. Company can register with Apple so internal developers can deploy apps directly onto people’s phones.

There’s also a special internal distribution process for Apple engineers. Engineer can install an app that hasn’t been signed by anyone through this method.

“You can imagine that if we would allow a 3rd-party app store on your iPhone,” it might have different specific methods of distribution, but it could still enforce security.

Now comparing iOS with macOS distribution channels. macOS has the Mac App Store, there’s also third-party distribution with notorization (i.e. developers need to register with developer program), which is more minimal review.

“Is iOS more secure than macOS?” judge asks.

“I would not say it is meaningfully more secure,” says Mickens.

Mickens is describing the last model of macOS distribution, where apps aren’t reviewed or even notorized — totally not checked by malware.

Mickens says that iOS and macOS share important elements technically. Judge asks if he has insider info — he says no, but some of this technical info is openly available.

There’s a shared kernel called Darwin on iOS and macOS, plus some shared OS functionality that provides the “plumbing that makes sandboxing possible."

Mickens is moving into features that are unique to macOS/iOS — he ways macOS has distinct security features, but many of these could be applied on iOS.

Malware scanners could be implemented on iOS, for instance, says Mickens. iOS could prompt user if there’s an application that isn’t signed.

if iOS was opened up to 3rd-party distribution channels, you could still have the crucial on-device security features.

“If iOS were opened up to third-party app stores, that would not prevent users from using the regular App Store,” and it wouldn’t stop Apple from reviewing those apps. “These things can coexist."

“Apple could still use whatever internal processes it had to scan for malware, to look for desired aesthetic qualities for apps,” says Mickens.

love to look for desired aeshetic qualities

Lawyer asks, why has Mickens focused on macOS and iOS?

Mickens says: because these are two OSes that Apple has advertised as being incredibly secure. But one allows a variety of distribution channels outside full review by Apple — and Apple still says macOS is secure.

Judge asks what proportion of apps in iOS go through the App Store as opposed to the other, less vetted methods. Would it change his analysis if there was only a tiny number that Apple could have close relationships with?

“I think that it’s a subtle and complex topic,” Mickens says. Even in that world, “you would still want to provide client-side OS security mechanisms, because you need insurance."

Judge asks, but could the numbers be so small that it’s just an acceptable risk, which wouldn’t work if you had full-fledged third-party app stores?

Mickens acknowledges that scalability (the term he assigns here) is potentially an issue, but a limited one.

“You’ve made a good point about this third-party access,” judge says, but she wonders if he’s done any research on the numbers. Sounds like no.

The judge says she’s citing a @techreview article about how iOS has additional security. I think she might be talking about this one? technologyreview.com/2021/03/01/102…

With that, we’re wrapping up Day 10 and Week 2! We’ll be back with more testimony, and presumably at least a few more metaphors, on Monday.