Apple on trial: Antitrust case brought by Epic Games gets underway

Fortnite maker Epic Games has accused Apple of being a ‘Venus fly trap’ and a price-gouging monopoly at the beginning of a major antitrust trial that could decide the future of the tech giant’s fast-growing app store.

Lawyers for Epic Games and Apple traded barbs as they outlined their cases during opening statements in federal court in Oakland, California on Monday.

While Apple depicted its app store as an invaluable service beloved by consumers and developers alike, Epic Games attacked it as a breakthrough idea that has morphed into an instrument of financial exploitation that illegally locks out competition.

Epic attorney Katherine Forrest accused Apple of turning its online marketplace into a monopoly ‘walled garden’ that lures in developers and users before squeezing money out of them.

Apple essentially planted a ‘flower in the walled garden (that) was turned into a Venus fly trap,’ she argued in her opening statements.

‘The evidence will show unambiguously that Apple is a monopoly,’ Forrest went on to claim.

A major antitrust trial that could decide the future of Apple's fast-growing app store will get underway in California today after Fortnite maker Epic Games accused the tech giant of creating an illegal monopoly. Court documents related to the case are wheeled into Oakland Federal Court on Monday

A major antitrust trial that could decide the future of Apple's fast-growing app store will get underway in California today after Fortnite maker Epic Games accused the tech giant of creating an illegal monopoly. Court documents related to the case are wheeled into Oakland Federal Court on Monday

A major antitrust trial that could decide the future of Apple’s fast-growing app store will get underway in California today after Fortnite maker Epic Games accused the tech giant of creating an illegal monopoly. Court documents related to the case are wheeled into Oakland Federal Court on Monday

Apple brushed off Epic’s arguments as a case brimming with unfounded allegations made by a company that wants to get rid of the app store commission to increase its own profits while freeloading off an iPhone ecosystem that has cost more than $100 billion to build. 

The federal court case was brought by Epic Games after Apple removed Fortnite from its app store last year when the video game maker added its own in-app payment system to avoid having to pay the iPhone maker fees. 

The trial centers of two Apple practices that have become cornerstones of its business: Apple’s requirement that virtually all third-party software for iPhones be distributed through its app store, and the requirement that developers use Apple’s in-app purchase system, which charges commissions of between 15-30 percent.

The trial, which threatens to upend Apple’s iron control over its app store, is expected to last most of this month.

Epic laid out evidence drawn mostly from Apple’s internal documents in an attempt to prove the company has built a digital ‘walled garden’ during the past 13 years as part of a strategy crafted by its late co-founder, Steve Jobs. 

The formula, Epic contends, is designed to make it as difficult as possible for consumers to stop buying its products and services. 

Elsewhere in her opening statement, Forrest highlighted expert testimony that will be submitted during the trial that estimated Apple reaped profit margins of 75-78 percent during 2018 and 2019, even though Jobs publicly said the company didn’t expect to make large sums of money from the app store when it opened in 2008. 

The app store is now an integral piece of a services division that generated nearly $17 billion in revenue during the first three months of this year alone.      

The federal court case was brought by Epic Games after Apple removed popular video game Fortnite from its app store last year when the video game maker added its own in-app payment system to avoid having to pay the tech giant fees

The federal court case was brought by Epic Games after Apple removed popular video game Fortnite from its app store last year when the video game maker added its own in-app payment system to avoid having to pay the tech giant fees

The federal court case was brought by Epic Games after Apple removed popular video game Fortnite from its app store last year when the video game maker added its own in-app payment system to avoid having to pay the tech giant fees

Epic CEO Tim Sweeney arriving in court on Monday

Epic CEO Tim Sweeney arriving in court on Monday

Apple CEO Tim Cook

Apple CEO Tim Cook

Both Apple CEO Tim Cook (right) and Epic CEO Tim Sweeney (left arriving in court on Monday) will testify in a Oakland, California federal courtroom as part of the antitrust trial

Karen Dunn, Apple’s attorney, pointed to Epic’s internal documents outlining a strategy called ‘Project Liberty’ that paved a way for Fortnite to purposefully breach its app store contract last summer and set up a showdown over the fees.

‘Rather than investing in innovation, Epic invested in lawyers, PR and policy consultants in an effort to get all of the benefits Apple provides without paying,’ Dunn said.

‘Apple did not create a secure and integrated ecosystem to keep people out, it did that so it could invite developers in – without compromising the privacy, reliability, and quality consumers wanted,’ Dunn said.

She argued that if Epic is successful, ‘The result for consumers and developers will be: Less security. Less privacy. Less reliability. Lower quality. Less choice. All of the things the antitrust laws seek to protect.’ 

Reflecting the high stakes riding on the case, both Epic CEO Tim Sweeney and Apple CEO Tim Cook – Jobs’ hand-picked successor – will testify during the trial. 

Sweeney took the stand after the opening statements, but Cook isn’t expected to appear until near the end of a trial that is only allowing a handful of mask-wearing people inside the courtroom because of pandemic restrictions.

While the trial will involve moments of high intrigue that could divulge closely guarded secrets, the nuts and bolts of the case will likely hinge on more mundane matters such as market definitions.

Epic contends the iPhone has become so ingrained in society that the device and its peripheral services such as the app store has become a market by itself. As part of that argument, Epic contends Apple should be forced to open up its walled garden to alternative options, such as allowing other app stores and payment options besides its own.

‘The garden could have a door,’ Epic lawyer Forrest insisted. ‘It was artificially closed.’

A member of Apple's legal team rolls exhibit boxes into the court on Monday ahead of opening statements in the antitrust trial

A member of Apple's legal team rolls exhibit boxes into the court on Monday ahead of opening statements in the antitrust trial

A member of Apple’s legal team rolls exhibit boxes into the court on Monday ahead of opening statements in the antitrust trial

Epic has accused Apple of transforming its once-tiny digital storefront into an illegal monopoly that squeezes mobile apps for a significant slice of their earnings. Apple takes a commission of 15 to 30 percent on purchases made within apps

Epic has accused Apple of transforming its once-tiny digital storefront into an illegal monopoly that squeezes mobile apps for a significant slice of their earnings. Apple takes a commission of 15 to 30 percent on purchases made within apps

Epic has accused Apple of transforming its once-tiny digital storefront into an illegal monopoly that squeezes mobile apps for a significant slice of their earnings. Apple takes a commission of 15 to 30 percent on purchases made within apps

Apple is seeking a far more broader market definition that would encompass the consoles, computers and other devices that people use to play video games. The company also is pointing to the roughly 2 billion other smartphones that run on Google’s Android software, which allows alternative ways to download apps.

The different way that Google manages apps on Android is one example that Apple believes proves that consumers have other choices, but many of them prefer keeping their digital experiences within a carefully controlled walled garden.

Epic is ‘asking us to remove our competitive advantage,’ Apple lawyer Dunn said. ‘Epic wants us to be Android, but we don´t want to be.’

Epic also is suing Google in a separate case accusing that company of illegally gouging apps through its Play store for Android devices.  

Apple’s highly successful formula has helped turn the iPhone maker into one of the world’s most profitable companies, one with a market value that now tops $2.2 trillion.

Privately held Epic is puny by comparison, with an estimated market value of $30 billion. Its aspirations to get bigger hinge in part on its plan to offer an alternative app store on the iPhone. 

The North Carolina company also wants to break free of Apple’s commissions. 

Epic says it forked over hundreds of millions of dollars to Apple before it expelled Fortnite from its app store last August after Epic added a payment system that bypassed Apple.

Epic then sued Apple, prompting a courtroom drama that could shed new light on Apple’s management of its app store. 

Neither side wanted a jury trial, which means the decision lies with US District Judge Yvonne Gonzalez Rogers, who already seems to know her ruling will probably be appealed, given the stakes in the case.

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