Apple CEO defends app store controls
Apple CEO Tim Cook has described the company’s ironclad control over its mobile app store as the best way to serve and protect iPhone users, but he faced tough questions about competition issues from a judge about allegations that he oversees an illegal monopoly.
The rare courtroom appearance yesterday in Oakland, California by one of the world’s best-known executives came during the closing phase of a three-week trial revolving around an antitrust case brought by Epic Games, maker of the popular video game Fortnite.
Epic is trying to topple the so-called ‘‘walled garden’’ for iPhone and iPad apps that welcomes users and developers while locking out competition. Created by Apple cofounder Steve Jobs a year after the iPhone’s 2007 debut, the Apple App Store has become a key revenue source for the company.
The trial focuses on Epic’s contention that Apple has turned its store into a pricegouging vehicle that not only reaps a 15 to 30 per cent commission from in-app transactions, but blocks apps from offering other payment alternatives. That ban extends to showing a link that would open a web page offering commission-free ways to pay for subscriptions, in-game items and the like.
Under friendly questioning from a company lawyer, Cook delivered polished remarks that sometimes sounded like a commercial for the iPhone and other Apple products. But the normally unflappable CEO occasionally seemed flustered while being grilled by Epic’s lawyer, Gary Bornstein.
His unease was particularly evident when pressed about the level of profits in a store that Jobs initially thought would be lucky to break even. He seemed to stumble slightly again when when Bornstein confronted him about a deal in China that could compromise user privacy, even as the company maintains that protecting its customers’ personal information is a top priority.
Cook, though, never wavered during nearly four hours of testimony from his position that Apple’s grip on the app store helps it keep things simple for a loyal customer base that buys iPhones knowing they are getting ‘‘something that just works’’.
‘‘They buy into an entire ecosystem when they buy an iPhone,’’ said Cook.
After the lawyers were finished with their questioning, US District Judge Yvonne Gonzalez Rogers asked why Apple could not allow rival stores to offer an in-app transaction option on iPhones, iPads and iPods that might charge lower commissions. This is something Epic is fighting to make happen.
She also wondered about the fairness of a commission system requiring the makers of video games to pay the bulk of the commissions, while digital services offered in other industries such as banking don’t pay anything, even though they are using the technology that powers iPhones.
‘‘The gaming industry seems to be generating a disproportionate amount of money relative to the [intellectual property] that you are giving them and everybody else. In a sense, it’s almost as if they are subsidising everybody else,’’ Gonzalez Rogers said.
Cook agreed about the subsidy, but insisted there was still a fair balance because video game makers were able to reach a wider audience of consumers who became players while visiting the store looking at other apps.
He took issue with the notion that most app makers were unhappy with the store’s current setup. ‘‘We turn the place upside down for developers,’’ Cook said.
The judge said she hoped to release her decision before August 13, in a written ruling that could reshape the technology landscape.