Apple CEO Tim Cook will take the witness stand on Friday in a high-stakes trial over whether his company is abusing its market power that is unfolding in a courtroom in Oakland, Calif.
Cook will be under oath and answering questions in-person from Apple lawyers and from attorneys for Epic Games, the maker of the popular videogame Fortnite, which is accusing Apple of being an illegal monopoly.
Why is this a big deal?
While Cook has testified before Congress, this will mark the first time he has ever taken the witness stand in a trial.
He will be answering likely hours of questions under oath about one of Apple’s most controversial business practices.
The trial comes at a time when there are growing questions about the ironclad grip Apple has over its sizable chunk of the mobile economy.
What has the trial been about?
Cook’s testimony is capping a three-week trial that has been focused on a 30% commission Apple charges on most purchases made inside of its App Store. Epic Games says consumers should have more options for processing payments, not be forced into paying “the Apple tax.”
Is this about Epic? Or about all developers?
If Epic CEO Tim Sweeney is to be believed, he launched the legal battle against Apple on behalf of all developers, some of whom, he says, are too afraid of Apple retaliation to speak out.
Documents that emerged during the trial shed light on Sweeney’s campaign, which Epic internally called Project Liberty.
Epic executives saw the effort as an attempt to turn the public against Apple and, as they put it: “to create narrative that we are benevolent.”
How does Apple defend the commission?
Apple says the fee is the industry standard (leading consoles like Nintendo Switch, Sony PlayStation and Microsoft Xbox charge the same rate) and the money goes toward safeguarding the privacy and security of apps.
What may Epic lawyers ask Tim Cook about?
They will likely point Cook toward statements made by his predecessor, Steve Jobs, who said when the App Store was launched in 2008 that it was never expected to be profitable. Epic’s experts say Apple’s profits from the App Store are nearly 80%, but Apple disputes that figure.
Cook is also expected to be asked about an email from Apple executive Phil Schiller who suggested Apple’s 70-30 split could be lowered after the company’s App Store reached $1 billion in profit.
What could the judge in the case order?
In its lawsuit, Epic asks the judge to make Apple “take all necessary steps to cease unlawful conduct and restore competition,” which is open for some interpretation — and it can apply just to Fortnite, or to all iPhone apps.
But if Epic wins, Apple may have to open its “walled garden” of an App Store to alternative payment processers. Epic says if consumers had more options, the market competition would force Apple to lower its 30% fee, which is invisible to consumers but that developers say is baked into the price of paid apps and in-app purchases.
If Apple wins, nothing changes. Whatever happens, there will likely be a long appeals process.
This trial is just about an App Store fee?
In a literal sense, yes, but it is also about so much more.
Critics of Apple view this case almost as an effort at revenue redistribution. The argument goes that it is about time Apple share some of its wealth with developers since, as Epic sees it, Apple became a tech behemoth through unfair and illegal systems and policies.
Is this a David versus Goliath story?
Not exactly. This trial is really a fight between two rich companies: Apple, worth more than $2 trillion, the most valuable company in the world, versus Epic Games, a company worth around $30 billion, thanks largely to Fortnite’s wild success.
Why is Silicon Valley so interested in this trial?
The App Store fees might seem like a small thing in the vast world of Apple, but regulators in the U.S., Europe, Japan and Australia have all been investigating the controversial fee.
The criticism of Apple’s commission is a window into a larger critique of the company: that it is one that creates systems and policies that lock out rivals.
The question is: Are Apple’s rules hyper-competitive, or anti-competitive? The former is legal; the latter is illegal under anti-trust laws.
And this trial is just the latest example of growing scrutiny of the tech industry’s largely unchecked might and whether more should be done to rein in Silicon Valley’s power.
Since lawmakers in Washington have been slow to pass regulations on the industry, battles over tech company practices are increasingly playing out in court.
To Apple, the 30% fee is hugely important because not only does it generate billions of dollars, but it’s part of the an increasingly vital revenue stream for “services,” fees and subscriptions that have driven Apple’s record profits (especially since iPhone sales peaked years ago).
Since Epic sued, Apple has cut the commission in half for small developers making less than $1 million a year. That affects most developers. But Apple makes 95% of its money from the big guys, which all pay the full 30% commission.
When will the judge reach a verdict?
U.S. District Court Judge Yvonne Gonzalez Rogers presiding over the 3-week trial. She has lots of evidence and testimony to weigh. Anti-trust case law tends to favor corporations, so legal scholars say it would be surprising if Epic wins, but nobody knows what will happen.
After Cook’s testimony Friday, the trial will wrap up the following week. It could take weeks or months before the judge makes a decision.
