Thread by @thedextriarchy

Final day of Epic v. Apple starts in 10, with my colleague @mslopatto in the courtroom! Apple seems like it’s in a relatively strong place fighting sideloading, but last week ended with some tough payment questions for Tim Cook:

theverge.com/2021/5/21/2244…

https://twitter.com/thedextriarchy/status/1395751112293208068

Court’s testing audio lines now, and we’re about to begin. Judge Yvonne Gonzalez Rogers said last week that she was interested in talking about remedies (i.e. what changes Apple could actually make if it is violating antitrust law in some way.)

Testimony ended Friday, and today we’re scheduled to have 3 hours of back-and-forth where both parties will answer questions from Judge Rogers, in lieu of extended closing arguments.

Judge Rogers is thanking the courtroom artist @courtart for the excellent sketch seen in this piece

wsj.com/articles/apple…

Rogers asks both sides’ counsel for their top two issues.

Both agree: market definition and remedies

The judge is referring to presenting documents with an ELMO, which today I learn is a special courtroom projector: cacd.uscourts.gov/clerk-services…

Judge telling Phil Schiller about a funny story where she needed to have an iPod brought in for an earlier case and had forgotten that they didn’t have built-in speakers.

Arguments start with talking about the distinction between foremarket (i.e. competition in phone sales) and aftermarket (competition for in-app purchase sales) and whether Apple has a monopoly in one or both.

Apple argues that it has lots of different device competition, while Epic is focusing on the idea that there’s a platform duopoly and competition between iOS/Android.

Epic is also focusing on the aftermarket — i.e. competition within the sales of digital goods inside the iOS ecosystem.

“With whom specifically are they competing?” judge asks.

Epic’s attorney says the two operating systems are competing for developers/consumers.

Apple’s attorney argues Epic’s definitions are designed to open the door to Epic suing other companies like Google (which it does have a suit pending against.)

Judge asks Epic’s Gary Bornstein about substitutes in the market.

“I think it’s critical that we make clear what the product is in this market,” says Bornstein. Apple has argued it’s digital game transactions, Bornstein says it’s app distribution.

“There is no substitute for getting the Fortnite app” or other apps on iOS except for the App Store, says Bornstein.

He says the potential substitutes would be an alternative app store or direct sideloading. Conversely, loading the same app on Android/console isn’t a substitute.

Judge to Epic’s counsel: “Your formulation seems to ignore the reality that customers choose an ecosystem, right?"

Judge continues: "There’s a lot of evidence in this trial that in the foremarket of devices, it is Apple’s business strategy to create a particular kind of ecosystem that is incredibly attractive to its purchasers…"

“If you buy the Xbox or you buy into a variety of these particular walled-off gardens, you know that that’s what you’re buying into and you choose to make that decision."

Judge: "There seems to be competition and that’s what I said it’s somewhat of a dynamic area right now because competition is good and people are trying to figure out ways to access those consumer choices. But your economic substitutes destroy that consumer choice."

Epic’s Bornstein says people aren’t aware of what kinds of costs they’re going to incur inside the App Store. “If you’re thinking about a $1,000 purchase of an iPhone, you are going to not be as interested in the 30% commission you might pay on a bunch of $0.99 in-app purchases."

Judge says she hasn’t seen evidence that people aren’t making an informed choice. “They’re two different ecosystems that they’re moving into,” and they know this.

Bornstein disagrees: Customers are “not focused on and not terribly aware of these downstream costs."

Judge: “The cost of the games &c. that they’re getting on the Android vs. what they’re getting on the iOS aren’t distinctly different. … So from a consumer perspective, the reason they don’t think about it is because it’s currently all the same."

Bornstein says the issue is that if one platform decided to dramatically change its commission/app pricing, there’s “very little reason to believe” that this will cause switching.

Apple’s Daniel Swanson disagrees with Bornstein and says the issue is moot. “The evidence shows that iPhone owners all have PCs and Macs, they have laptops,” as well as consoles, tablets, “a whole boatload of devices. This is not a case where there’s one device out there."

Judge notes to Apple: "The 30% number has been there since the inception. And if there was real competition, that number would move. And it hasn’t."

Judge: “If the relevant market here includes developer-side competition, so far there doesn’t seem to be anything that is in the market itself that is pressuring Apple to compete for developers."

Swanson says the commissions now are de facto lower than they were under physical distribution. “It’s not a monopoly price. It’s a competitive price.” He notes price didn’t go up when Apple (according to one Epic witness) allegedly became a monopoly in 2010.

Swanson says that meanwhile, Apple has increased its device quality without raising commissions. iOS games can “hold their own now with some of the best games on consoles and PCs. That is quality competition."

“It may not feel fair” that some people pay more than others (addressing Cook’s testimony), “but that doesn’t mean there isn’t competition in this market."

Judge notes that there’s another class action suit pending against Apple. “Apple’s not just being sued by Mr. Sweeney and his company. They’re being sued by an entire class of developers,” she says.

Swanson says Apple isn’t making massively more in commissions with the App Store than other platforms like Steam. (Even though, as he notes, Apple allegedly doesn’t know exactly how much the App Store makes.)

Epic’s Bornstein comes back to whether Apple feels competition. “I think the record is clear there is nothing, literally nothing except one document I’ll talk about,” where Apple employees ask “do we need to do something to stay competitive on price?"

“But you can’t ignore the quality issue,” judge says — notes that Sweeney acknowledged iPhone supports many more games now. “There is an enormous amount of innovation on the iPhone that is in fact allowing these games to be played and which game developers are benefiting from."

Bornstein says “sure they innovate on the iPhone, because they want to sell more iPhones” to consumers. But they don’t innovate on the App Store itself.

Rogers remains skeptical of this — says growing the iPhone market helps developers.

Rogers asks why App Store programs like the “reader rule” (which exempt some digital purchases from commission) don’t count as Apple responding to developers’ needs. Bornstein says that wasn’t a response to competition, among other issues.

Rogers: What if we defined the market solely as mobile gaming, not games in general? Switch, iOS, Android.

Bornstein wants to exclude the Switch because it has no cellular connection and “people don’t tend to carry them around with them all the time."

Everyone is confused now about whether the iPad should count as a mobile gaming device. Judge settles on "Android/iOS mobile gaming” as a category.

Bornstein seems relatively satisfied with the idea of this as a category.

It’s not the market Epic advocated for (they want all iOS app distribution), but Bornstein says it makes more sense than Apple’s category where the market is all digital game transactions.

Judge asks Apple’s lawyer: how would it affect you if I decided the relevant market was mobile gaming?

Apple’s lawyer: “That would make me very sad."

Judge and Apple’s Swanson now talking through the tests that would be required to demonstrate anti-competitive conduct is taking place.

Judge says there’s some California legal precedent that violating the “spirit” of antitrust laws can be a legal issue even without a strict traditional monopoly under the Sherman Act.

So there’s the possibility that Apple could be violating the law and have to change its behavior *only* in California, judge says.

Now we’re moving onto more market definition questions.

We’re discussing the FTC v. Qualcomm case, where an appeals court reversed a win for the FTC — trying to compare whether this is a similar case. en.wikipedia.org/wiki/FTC_v_Qua…

I’m not strong on this part of the law, but the court is going over the test for whether Apple had a “less restrictive alternative” that would have produced the results it wanted around the App Store while being less anti-competitive.

We’re wrapping up relevant markets, with Epic’s Bornstein making final points. He’s objecting to defining the market as games.

1) “Epic of course is not just a games company.” (Judge says yes, she gets it.)
2) Antitrust law looks at aggregate markets, not individual companies.

Get the feeling Judge Rogers is extremely done with “what is a game” discourse.

Apple complains Epic has decided to “lump non-substitutes together” in order to create one giant lump iOS transactions market.

Bornstein is trying to raise complaints that developers have, even of free apps that don’t pay commissions — like people getting ads placed above their searches. Rogers is skeptical.

Judge points out there are 1.8 million apps in dozens of categories. “I think as a practical matter, if you have 100,000 apps in a category, and people are complaining they’re not at the top of the list?” That’s not necessarily a reasonable complaint, she says.

Meanwhile, “yes, there are some complaints about search,” Apple’s lawyer says, but developers are still happy with the App Store.

Judge notes that this trial has probably been great advertising for Down Dog, the yoga app whose creator testified in the first week.

Epic points out the report about the App Store’s allegedly high profit margins as he wraps up. Even though Apple says it doesn’t track these numbers, “the numbers are the numbers, and the numbers don’t lie.”

Judge expresses doubt about this, says Tim Sweeney admitted Epic also doesn’t do itemized profits & loss. Lawyer says that Apple clearly produced charts that show numbers (even if it said they weren’t totally accurate/fair), and there’s no evidence Epic had comparable ones.

We’re done with market definition and going to talk about company conduct with Apple’s Veronica Moye. She’s trying to counter a report the judge cited last week that showed 39% of App Store developers were dissatisfied.

https://twitter.com/leah_nylen/status/1396867347944771591

“The record is replete with examples of responsiveness” to developer feedback at Apple, says Moye.

Apple’s Moye going through all the commission reductions that Apple has made since the App Store launched, i.e. the Video Partner Program and the Small Business Program.

Moye: Even if the Small Business Program was introduced because of litigation (something judge suggested), it’s still pro-competitive.

“Does that mean that we have to wait for people to sue Apple?” judge asks. “How can you reasonably say that should be a competitive driver?"

Epic’s Bornstein argues Apple’s APIs, etc. aren’t part of the App Store, and developer satisfaction surveys are skewed by people liking tools like APIs but liking the App Store much less.

Judge to Epic’s lawyer: “You made a reference to the lack of price decrease,” but there are other factors like output/quality. “What specific direct evidence is there of anticompetitive effects?"

Epic’s Bornstein cites higher prices and lower innovation specifically in the market for app distribution and in-app payment options. (As opposed to phone tech, etc.)

Judge asks him to be more specific, but he sticks with “lower prices” and “higher quality”.

Apple’s Moye disagrees with Epic about Apple’s developer tools not being a part of the store. “These tools are provided to developers so they can have apps on the store,” and Apple invests many resources into building them.

Moye reiterates that consumers specifically buy an iOS device for “Apple’s long-standing brand promise” of better safety and security, and if they want an alternative model, they’re free to get an Android device.

Moye is criticizing Epic’s last-minute “desperate attempt” to “scrounge up” witnesses unhappy with Apple. (They were trying to bring someone on Friday.) Judge says “that’s not quite fair” — notes Down Dog and Match Group had testimony ready right at the beginning of the trial.

Conversely Moye says Apple didn’t try to engage in “theatrics” like Epic’s strategy of calling up developers.

Now we’re talking about anti-steering provisions, comparing to the AmEx case that found they were legal. Judge says Apple’s “hiding” of alternate payment options could be anticompetitive even under that precedent.

Apple’s Moye says there’s “nothing unique or unusual” about adding anti-steering rules for efficiency.

Rogers jumps in: Cook said himself it wasn’t about efficiency! “I understand Apple has a right in my view for its intellectual property,” but that’s a different reason.

If you’re coming new to the anti-steering stuff, here’s what was happening earlier in the trial: theverge.com/2021/5/11/2243…

Moye: “We believe it’s a legitimate business justification to not have people have links on the App Store —”

Judge stops her: Okay, why not just a note saying there are more options online?

Moye says it would be like having a sign at Nordstrom’s telling people to buy at Macy’s.

Judge Rogers says that if you go to Nordstrom’s you might not see a Macy’s sign, but you can see signs indicating you can pay through several methods, i.e. Visa/MasterCard/AmEx — so what if App Store payment processing is more like that?

Epic’s Bornstein is going over the finer points of exactly how developers are allowed to market to users:

https://twitter.com/leah_nylen/status/1396876545868894215

Here’s a little more context on the provision that Apple and Epic are currently arguing about the meaning of:

https://twitter.com/StephenNellis/status/1396876596795957248

Apple’s argument is basically that developers can totally email consumers with promotions, but they can’t specifically send targeted emails to users who have just signed up telling them they can get something cheaper by going elsewhere.

“Epic has not raised a legal claim here saying it has been harmed as a result of any anti-steering provisions,” Moye says — in fact, no evidence anyone has.

Judge notes Down Dog certainly said they were harmed. There’s a little back-and-forth, but judge sticks to her guns on it.

Judge Rogers and Epic’s Bornstein are talking about the circumstances under which developers can get email addresses. Bornstein complains devs have to go through a separate step of asking for one — Rogers says that might be privacy-preserving for the user.

Bornstein says if we’re doing a mall analogy, it would be like if you shop at a chain store like Under Armour, that store could have signs saying it has outlets at other locations — even though stores are paying the mall to be there.

Apple’s Moye says either way, there’s still no evidence Epic was harmed by anti-steering rules.

Moye says also, Apple having anti-steering rules is proof it *does* have competition because it’s trying to stop developers from referring users to those competitors.

Epic’s lawyer calls this “economic nonsense."

We’re going to take a 15-minute recess now.

We’re coming back on the record now.

On remedies now. Judge starts with Epic’s Bornstein: says it bothers her that Epic doesn’t seem interested in paying for access, and if it is, it doesn’t have a good explanation for how it would collect money. “I still don’t understand where you expect this to go."

Bornstein: Apple doesn’t need to give away access — “just as a baseline, that is not what Epic has obligated.” But they should be barred from structuring their charges in a way that has anti-competitive effects.

Bornstein says he just wants Apple to get rid of specific anti-competitive restrictions. Apparently there’s a chart:

https://twitter.com/mslopatto/status/1396886877664284678

“But the effect of both of these is that Epic Games would pay Apple nothing,” judge says.

Bornstein says Apple could choose to charge businesses differently — they just can’t charge in a way that has these anti-competitive effects.

More chart info:

https://twitter.com/mslopatto/status/1396887242648350722

The goal is charges that are “driven by the market rather than being driven by the monpoly,” says Bornstein.

“They want a compulsory license of all Apple’s intellectual property,” counters Apple lawyer Richard Doren.

Doren: “Under that model, nothing would be paid to Apple for the use of its intellectual property, for the use of the platform.”

Meanwhile, Doren says Epic would be stopping Apple from conducting a meaningful review of third-party app stores — and even if it did, it would be doing that for free while other stores made the money.

Bornstein says that IP licensing is important but still not a get-out-of-jail-free card from antitrust scrutiny. Doren says that’s oversimplifying — the scrutiny only kicks in during very specific circumstances.

Apple’s business model is pro-competitive, Doren insists. But Bornstein says he’s just hearing “we have IP, we can license it however we want, competitive consequences be damned. That’s it. Full stop.” He calls it “shocking.”

Judge: "Mr. Bornstein, I don’t hear him saying that."

Apple does not claim that IP is a global immunization, a vaccine, one might say, from liability,” says Doren. But it’s still legitimate, and “what Epic seeks here is a compulsory license without compensation."

Judge jumps in. “Courts do not run businesses … In the cases where courts have found antitrust conduct, how have the courts fashioned remedies to deal with the antitrust conduct?"

"Have they in fact said: you, billion-dollar company, trillion-dollar company, you must fundamentally change the business model under which you are operating?” judge asks. “Give me some example” of a case requiring a fundamental change to the model of a business.

Bornstein notes the US/Microsoft antitrust case. Doren says that was a government case, and the remedy involved discrete prohibitions on behavior — not mandatory sharing.

Bornstein accuses Apple of trying to “scare the court” by reading out Epic’s infosec expert Mickens’ earlier testimony, where he responded to a lot of questions about app store policies by saying a court could decide them.

Judge notes that Epic also sued Google. “On Google’s platform, there are many stores, and yet Epic sued them anyway.” So how would opening up iOS solve the problem, “given that Epic has also sued Google on the exact model” that he’s saying iOS should use?

Bornstein says that Epic is suing Google over separate rules, and the cases are different, even if they cover similar issues.

Apple and Epic’s lawyers are still going back and forth about what Epic’s proposed changes would mean. Apple’s Doren says Epic would make it give up its ability to do anything but cursory app scans, Epic’s Bornstein insists Apple can still run the App Store like always.

The problem is that Apple is the only store in town right now. If it had competition, it could still metaphorically stock its shelves the way it wanted, but people could also choose to go elsewhere.

Judge Rogers notes that Epic “may or may not have ulterior motives, we haven’t even talked about that.” She says it’s not “particularly relevant” to this case, though, even if she thinks it’s clear Tim Sweeney would have taken a special deal with Apple if one had panned out.

Judge Rogers: “Be clear, right? Epic is here because if relief is granted, they go from a multibillion-dollar company to a maybe-trillion-dollar company, who knows. But they won’t do it out of the kindness of their heart."

Epic’s lawyer says Sweeney/Epic have a “commitment” to helping other developers too, it’s not just self-interest.

Bornstein says it would be “unfair” to insist Epic is only in this for the money. Which, I mean, lol.

(Everyone is in this for money! It’s still worth considering the case on its merits because it’s an issue that self-evidently does apply to lots of places besides Epic.)

Judge Rogers coming back to Apple’s claims that Epic’s remedies would destroy Apple — says that clearly Android functions and is very popular. Doren says Epic would turn iOS into a “poor imitation” of Android and remove users’ choice to get something that works differently.

Itch.io being inside the Epic Games Store is getting another mention here — Doren complains that Apple would get a “store within a store within a store” here, and it would have no meaningful way to manage quality control.

All right, we’re going to have closing remarks now. Bornstein is back to the idea that Apple clearly has options that would let it feasibly open up iOS, saying Apple’s lawyers are just trying to scare the court into thinking nothing can be done.

Apple’s Doren says Bornstein is just making stuff up about how Apple could reasonably manage iOS under its proposed remedies. He cites Apple’s expert witness Aviel Rubin’s testimony to talk about security threats that Epic (allegedly) wouldn’t let Apple deal with.

Bornstein describes Apple’s argument as “we’re doing a really good job, your honor, please let us continue to do a really good job,” and “we’re the benevolent overlord of this ecosystem.” But “that is not a defense under the antitrust laws."

Epic’s Bornstein expresses appreciation for the judge hearing the case — Apple’s Doren says that on this point, they both agree.

Judge has her own compliments! She says that these attorneys have “really been a terrific example of what lawyering is and can be,” and that’s not always the case.

Judge thanks the lawyers for demonstrating that “you can be fierce advocates and still be professional."

Haha okay, so the August 13th thing was a joke! She says it was about the anniversary of the Fortnite hotfix. (I definitely did not get this joke! In my defense, it’s a little hard to read tone over the conference line.)

“I want to get to this while the memory of testimony is fresh,” the judge says, but no promises about a date. There are thousands of pages of testimony to review.

I’m not sure why this is giving me such strong Hellraiser vibes, but here we are

https://twitter.com/leah_nylen/status/1396901022166102022

judge rogers has such rulings to show you

Anyhow, the court has been adjourned, and Apple is doing some last-minute discussion about exhibits being entered into evidence.

And here we are — officially the end of the trial! Thanks to everyone who’s been following along, and to @leah_nylen, @nickstatt, @Shannon_Liao, @doratki, and the other people whose livetweets I’ve been following alongside the audio feed.

More thanks to @tomwarren, @russellbrandom, @StarFire2258, @mslopatto, and the rest of the Verge team that’s been going obsessively through documents and (in Liz’s case) actually showing up at the courthouse doing pool reports.

I’ll be posting a little more on-site coverage (and a short tangentially related videogame) about the trial over the next week — but beyond that, I’ll just be waiting for the verdict along with everyone else.