Apple stayed on message while Epic filled out the record
Sure, “hot-tubbing” sounds fun, but in a court context, it’s just a judge encouraging lawyers to argue — which is how Epic v. Apple ended today. Not with a bang but with a quarrel.
In honor of the trial’s final day, a raft of spare lawyers were in the gallery, representing Epic and Apple. But everyone who spoke to the judge — Epic’s Gary Bornstein and the three lawyers who handled the end of the case for Apple, Dan Swanson, Veronica Smith Moye, and Richard Doren — had their backs to the gallery the entire time.
Throughout the trial, Epic’s general strategy appears to have been to stuff the record as full of evidence as possible — just in case it’s needed on the inevitable appeal. To do that, Epic sacrificed telling a coherent story.
Apple, on the other hand, was on brand. It had a clear story and it spent the entire trial hammering it home: Apple controls the App Store because the alternative would be a security and privacy nightmare. Whether it was Swanson, Moye, or Doren at the podium, this story didn’t waver, just as it mostly didn’t waver throughout the rest of the trial. (Tim Cook biffed this by citing a business model and not mentioning security.) Phil Schiller, Apple’s marketing guru, sat at the table with the lawyers throughout the trial; from time to time, I found myself wondering how involved he was in crafting the lawyers’ messaging.
Both parties agreed that the top two issues of the day were market definition and remedies. Who you will agree with in the end is going to depend on how the market is defined, I suspect.
For Epic, we’re talking mobile app stores, and the question of the operating system on the phone is key. After all, even though Samsung and LG and whoever else make phones, from a developer’s point of view that doesn’t matter. You’re making games for Android or iOS. This seems fairly sensible, particularly after Schiller cited extremely minor competition in his testimony: Amazon’s Fire tablets and Microsoft’s failed Windows phone.
It is less clear to me why game consoles should be excluded as competition. Apple, obviously, wants to say there’s a great deal of competition — but to tell the truth, my initial reaction to this antitrust trial was, “But can’t you just play Fortnite on a console?” Epic’s Bornstein mentioned that most consoles aren’t mobile; as the owner of a handheld Nintendo Switch, I strongly disagree! Bornstein had, of course, thought of this — the Switch doesn’t connect to wireless networks, he said, and thus is not truly “mobile.” By this standard, anyone who owns an iPhone that has the functionality for data over the cellular network switched off — perhaps because they are a child and a parent handled this setting, or perhaps because they are just cheap — also doesn’t truly own a mobile phone. That seems incorrect!
Hilariously, Apple’s Swanson pointed out that it is not the ‘90s. What he meant was that we don’t just have one device — multiple devices are much more the norm than they used to be. If all these devices are substitutes for each other, then what does it matter to users if they have to use a PC or a console to get to Fortnite? Some testimony we heard from Apple’s experts earlier in the trial suggested that 80 percent of iOS players were making their in-app purchases elsewhere, Swanson reminded us.
The reason the market definition matters so much is clear: if I agree with Apple’s view that Fortnite is a game, and the competitive market is basically anywhere I can buy a game, Epic has no case. But if I agree with Epic’s view that the relevant market is mobile app distribution, then Apple’s refusal to allow any apps that aren’t in the app store on the iPhone is pretty unquestionably monopolistic. This is where Epic’s failure to tell a clear, simple, and coherent story sets its case back. Even if I agree that Apple has at times deliberately hamstrung its competition — and I do agree with this, otherwise there would be no green bubbles on iMessage — I still can’t say in simple language why consoles aren’t an acceptable substitute for gaming on mobile phones.
But leave that aside. I’m not the judge, after all! And Judge Yvonne Gonzalez Rogers pointed out that it was possible Epic’s proposed remedy — allowing other app stores onto the iPhone and allowing side-loading of apps — destroyed consumer choice. After all, she suggested, people are generally aware of Apple’s tightly controlled ecosystem and are choosing it on purpose. Besides, she noted, the cost of apps in Google’s store was roughly the same.
Well, Epic’s Bornstein said, that’s because it’s a duopoly. There is only one place in the record where Apple concerns itself with pricing pressure: a 2011 email from Schiller, asking if at some point Apple may have to lower their commission. Apparently, pricing competition still hasn’t caused Apple to lower its commission, unless a lawsuit counts as “competition.”
See, Apple’s small developer program, which dropped the commission for certain studios, seemed to be the result of this lawsuit more than anything else. (“The issue with the $1 million Small Business Program, at least from what I’ve seen thus far: that really wasn’t the result of competition. That seemed to be a result of the pressure that you’re feeling from investigations, from lawsuits, not competition,” Gonzales Rogers said last week.) This skeptical line of questioning suggested, at least to me, that Gonzales Rogers agreed there isn’t competitive pressure on Apple’s pricing. That’s probably welcome news for Epic.
The day’s other hot topic was remedies — if Apple does indeed have a monopoly and is acting anti-competitively with it, what should be the outcome? Epic wanted to prohibit the restrictions that make the App Store the sole option for downloading apps on iOS — which would mean allowing both side-loading and other game stores on the iPhone. Epic also wanted to get rid of the requirement that in-app transactions for digital goods must use Apple’s in-app purchase processor.
To Apple, this just meant that Epic wants to use Apple’s IP — like developer tools — without paying for it. After all, Apple’s Doren pointed out, the company could have only allowed its own apps on the iPhone, as it did with the very first one (which was promptly jailbroken so other apps could be loaded, but never mind).
Gonzalez Rogers seemed skeptical about the remedies. Besides the IP question, which there was a healthy back-and-forth about, she asked Epic’s Bornstein to cite some cases where courts required businesses to totally change their business model. Well, there’s Microsoft, Bornstein said. Yes, but that case had been brought by the government, and Epic is not the government. In fact, Gonzalez Rogers said, Epic hadn’t shown her a single comparable antitrust case where the kind of ruling Epic was requesting had been granted by a court.
Setting aside the fact that I am not a mind reader nor a judge, what I heard in court today didn’t sound like a win for Epic. Yes, the record is stuffed full of times Apple behaved badly. But the question isn’t whether Apple has always behaved well. I walked out of court feeling Apple had the upper hand.
Of course, all the evidence Epic crammed on the record may serve them beyond an appeal. After all, Amy Klobuchar has said she’s watching this trial closely. So even if Epic loses this battle, its strategy may win the war — by creating new antitrust laws.