Apple pushes back against Epic claims to defend app payment system


Epic Games Inc. v. Apple Inc. got into the weeds Tuesday, as the gaming company’s main economic witness clashed with an attorney for the iPhone maker.

David Evans, chairman of Global Economics Group, picked up where he left off Monday. For a second day on the stand, he asserted Apple
has maintained a monopoly for more than a decade over the iOS in-app payment solutions for digital content, which has harmed consumers by raising prices for developers, who pass on some portion of their fees to consumers.

“Apple has substantial market power” in smartphone operating systems, Evans said Monday. Apple and Google’s Android, he concluded, are a duopoly that have controlled 100% of the smartphone OS since 2013. Globally, excluding China, the split is 60%-40% Android; in the U.S., it’s about even, he said.

Read more: Epic takes aim at Apple’s financial advantage in App Store model

When pressed by Apple attorney Daniel Swanson, Evans said he “guess we’ve been retained” in the Google Play antitrust litigation. Swanson pointed out Evans previously had not testified in antitrust litigation during a grinding cross-examination that got into the weeds of defining in-store app payments.

Apple’s game transactions are not substitutes for digital game transactions on the Sony PlayStation store nor Valve Corp.’s Steam, according to Evans. “They are not significant substitutes in the way we use the term,” he said.

Swanson countered, however, that 11 apps use their own payment processing: Grubhub Inc.
Wish, StubHub , Uber Technologies Inc.
DoorDash Inc.
Lyft Inc.
Instacart , Postmates , Amazon Shopping
Walmart Inc.
and eBay Inc.

“When I go to the App Store, it’s because there’s an app I want to get,” Evan replied. “I don’t go to the App Store and troll around for apps that have in-app purchases.”

Evans, whom Epic is leaning heavily on to prove its case, has detailed Apple’s monopoly in smartphone operating systems as the relevant market in question in the federal trial in Oakland, Calif.

Smartphones and consoles are different types of markets, he stressed, with iOS and Android examples of a “general purpose operating system” used for multiple apps while games consoles are a special operating systems dedicated to gaming. It is Epic’s contention that Apple has abused its dominance on the App Store to charge developers 30% commission fees; Apple counters that 30% is the industry average on similar app stores run by the likes of Google

Samsung Electronics Co. Ltd.
Sony Group Corp.
and others.

On Tuesday, Apple poked a hole in Epic’s assertion during the trial that fraud is rampant on the App Store because of a slipshod review process. Apple said its review team stopped more than $1.5 billion in potentially fraudulent transactions last year by keeping nearly a million risky and vulnerable apps out of the store.

Apple’s case could start as early as Friday. Apple Chief Executive Tim Cook is scheduled to be the last witness.

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