Apple Epic Trial

Judge in Fortnite case holds Tim Cook's feet to the fire over App Store competition

Judge Yvonne Gonzalez Rogers saved the most pointed questioning of the entire trial for Apple CEO Tim Cook.

Judge in Fortnite case holds Tim Cook's feet to the fire over App Store competition

Gonzalez Rogers expressed deep skepticism of Apple's claims that it operates the App Store the way it does out of the goodness of its heart.

Photo: David Paul Morris/Bloomberg via Getty Images

Judge Yvonne Gonzalez Rogers, who is presiding over the Epic v. Apple antitrust trial, saved her best for last. As Apple CEO Tim Cook prepared to leave the stand on Friday afternoon on the 15th and final day of courtroom testimony, Gonzalez Rogers took nearly 10 minutes — the longest singular line of questioning she's put to a witness in the trial — to grill Cook about both the business model of the App Store and the very nature of its relationship with developers.


The end result was the best hint yet how Gonzalez Rogers is thinking about the Fortnite dispute, which one of Epic's many complaints she finds credible and how she may decide to rule when the trial ends. In particular, the judge seems concerned about the rigidness of the 30% cut and Apple's rules against allowing developers to communicate ways to purchase digital goods off-platform.

Subscribe to our Gaming newsletter for even more on the Epic v. Apple trial — and the latest news and analysis on the business of gaming.

At the beginning of her questioning, she got Cook to admit that gaming, and in particular in-app purchases for mobile games on the iPhone, generate the majority of the App Store's revenue. From there, Gonzalez Rogers forced Cook to answer a series of increasingly uncomfortable questions about whether Apple's conduct with regard to game developers is fair and not in fact anticompetitive.

"What is the problem with allowing users to have choice, especially in a gaming context, to find a cheaper option for content?" she asked Cook, who answered that users have "a choice between many different Android models and an iPhone" if they're looking for choice. "If they wanted to go and get a cheaper Battle Pass or V-Bucks, and they don't know they've got that option, what is the problem with Apple giving them that option?" Apple's App Store guidelines forbid developers of notifying users of alternative payment options, and both sides have argued in court about the limits of Apple's restrictions, though Cook has clarified that developers can ask for a user's email address and market to them over email.

Cook, who seemed taken aback at the line of questioning, said Apple needs to get a return on its intellectual property investment, and that's essentially why the App Store takes 30% and why the model has been so rigid over the years. "The gaming industry seems to be generating a disproportionate amount of money relative to the IP you have given them, and everyone else. In a sense, it's almost as if they're subsidizing everybody else," Gonzalez Rogers said.

Read more: Tim Cook argues only Apple can protect iOS users from themselves

Even Cook's rather deft attempts to deflect didn't seem to work out well for Apple. He said that Apple allows free apps on the iPhone, as well as apps selling physical goods without requiring they pay a commission, because "it increases the traffic on the store dramatically." Gonzalez Rogers said that using that logic, the App Store's design is not about a return on investment so much as it is about controlling access to the iPhone customer base. And with regard to games, "You're charging the gamers to subsidize Wells Fargo."

Cook said the gamers transact on the platform, so the game makers owe Apple the cut. "People do lots of things on your platform," Gonzalez Rogers said, to which Cook replied, "There are clearly other ways to monetize, but we chose this one because we think it's the better way." The judge shot back again: "It's also quite lucrative."

"I understand this notion that somehow Apple's bringing the customers to the users. But after that first time, after that first interaction, the [developers] are keeping the customer with the games. Apple's just profiting off that, it seems to me," Gonzalez Rogers said, nearing the end of her questioning. (At that point, Cook simply said, "I view it differently than you do.") The judge added, "It doesn't seem to me you feel any pressure or competition to actually change the manner in which you act to address the concerns of the developers."

Read more: Apple's Craig Federighi throws Mac security under the bus

The judge also hammered Cook over the App Store commission reduction last year, as part of its new small business program, saying it "seemed to be a result of the pressure that you're feeling from investigations, from lawsuits, not competition," and she also took issue with Cook deflecting by using the game console market. "When other stores reduced their price, Steam reduced their price, you felt no pressure to reduce your price," she countered.

The general takeaway is that Gonzalez Rogers expressed deep skepticism of Apple's claims that it operates the App Store the way it does out of the goodness of its heart. Apple executives have reiterated throughout the trial that they built iOS and the App Store this way out of concern for user security and privacy and for an end-to-end experience. But Gonzalez Rogers says there were also clear financial incentives to do so and that it appears Apple is incapable of responding to any concerns that may threaten the benefits it receives. Her back-and-forth with Cook struck at the heart of the dispute between Apple and Epic Games and what it says about the larger relationship between a platform owner and the developers of its most successful software segment.

Read more: Fortnite made Apple hundreds of millions of dollars

It was also an astonishingly rare moment to see one of the most powerful executives in the country be forced to answer questions without a public relations handler and a well-prepared script, in effect laying bare a fundamental disconnect in how Apple appears to see its business and the reality of its public perception. What happens next could still very well end in Apple's favor, or it could result in a rather minor adjustment to App Store guidelines — perhaps even something more.

Update May 21st, 5:25PM ET: Clarified that Friday, May 21st was the final day of courtroom testimony and the evidentiary portion of the trial. The case will conclude on Monday, May 24th.

Theranos’ investor pitches go on trial

Prosecutors in the Elizabeth Holmes fraud case are now highlighting allegations the company sought to mislead investors.

The fresh details of unproven claims made about the viability of Theranos' blood tests and efforts to conceal errors when demonstrating testing equipment added to the evidence against Holmes, who is accused of fraud in her role leading the company.

Photo: David Paul Morris/Bloomberg via Getty Images

The Theranos trial continued this week with testimony from Daniel Edlin, a former product manager at the blood-testing startup, and Shane Weber, a scientist from Pfizer. Their testimonies appeared to bolster the government's argument that Holmes intentionally defrauded investors and patients.

The fresh details about audacious and unproven claims made about the viability of Theranos' blood tests and efforts to conceal errors when demonstrating testing equipment added to the evidence against Holmes, who is accused of fraud in her role leading the company.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporting fellow at Protocol, based out of Los Angeles. Previously, she worked for Ernst & Young, where she researched and wrote about the future of work, emerging technologies and startups. She is a graduate of the University of Southern California, where she studied business and philosophy. She can be reached at acounts@protocol.com.

The way we work has fundamentally changed. COVID-19 upended business dealings and office work processes, putting into hyperdrive a move towards digital collaboration platforms that allow teams to streamline processes and communicate from anywhere. According to the International Data Corporation, the revenue for worldwide collaboration applications increased 32.9 percent from 2019 to 2020, reaching $22.6 billion; it's expected to become a $50.7 billion industry by 2025.

"While consumers and early adopter businesses had widely embraced collaborative applications prior to the pandemic, the market saw five years' worth of new users in the first six months of 2020," said Wayne Kurtzman, research director of social and collaboration at IDC. "This has cemented collaboration, at least to some extent, for every business, large and small."

Keep Reading Show less
Kate Silver

Kate Silver is an award-winning reporter and editor with 15-plus years of journalism experience. Based in Chicago, she specializes in feature and business reporting. Kate's reporting has appeared in the Washington Post, The Chicago Tribune, The Atlantic's CityLab, Atlas Obscura, The Telegraph and many other outlets.

Protocol | Policy

8 takeaways from states’ new filing against Google

New details have been unsealed in the states' antitrust suit against Google for anticompetitive behavior in the ads market.

Google is facing complaints by government competition enforcers on several fronts.

Photo: Drew Angerer/Getty Images

Up to 22%: That's the fee Google charges publishers for sales on its online ad exchanges, according to newly unredacted details in a complaint by several state attorneys general.

The figure is just one of the many details that a court allowed the states to unveil Friday. Many had more or less remained secrets inside Google and the online publishing industry, even through prior legal complaints and eager public interest.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Protocol | Workplace

This tech founder uses a converted Sprinter van as an office on wheels

The CEO of productivity startup Rock likes to work on the road. Here's how he does it — starting with three different WiFi hotspots.

Kenzo Fong, founder and CEO of the 20-person productivity software startup Rock, has been working out of his converted Mercedes-Benz Sprinter van since the pandemic began.

Photo: Kenzo Fong/Rock

Plenty of techies have started companies in garages. Try running a startup from a van.

In San Francisco, one software company founder has been using a converted Mercedes-Benz Sprinter van — picture an Amazon delivery vehicle — as a mobile office.

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.
Protocol | Policy

Most Americans want AI regulation — and they want it yesterday

In a poll, people said they wanted to see artificial intelligence technologies develop in the U.S. — alongside rules governing their use.

U.S. lawmakers have only just begun the long process of regulating the use of AI.

Photo: Louis Velazquez/Unsplash

Nearly two-thirds of Americans want the U.S to regulate the development and use of artificial intelligence in the next year or sooner — with half saying that regulation should have begun yesterday, according to a Morning Consult poll. Another 13% say that regulation should start in the next year.

"You can thread this together," Austin Carson, founder of new nonprofit group SeedAI and former government relations lead for Nvidia, said in an email. "Half or more Americans want to address all of these things, split pretty evenly along ideological lines."

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

ai
Latest Stories