SAN FRANCISCO — Apple and the company behind the popular video game Fortnite on Monday stood before three federal appeals judges who will make the next decision in a high-stakes battle over whether Apple has created an illegal monopoly through its exclusive control of its iPhone app store. Such monopolies usually stifle competition and raise consumer prices.
The oral arguments presented in the Ninth Circuit Court of Appeals by attorneys from Apple and Fortnite maker Epic Games come on the heels of a lower court ruling in September 2021 that largely preserved Apple’s control over the apps it allows over a billion iPhone all over the world. The 75-minute hearing was a prelude to an expected ruling from the Court of Appeal, likely to be issued sometime next year.
The so-called “walled garden” that protects the iPhone App Store includes a payment system that funnels Apple’s 15% to 30% commission revenue on purchases of certain subscriptions and other digital services through the storefront. The setup generates an estimated $15 billion to $20 billion for Apple each year, helping lift its market value to nearly $2.4 trillion.
Epic lawyer Thomas Goldstein described Apple’s walled garden as an excuse to increase its profits at the expense of companies making the apps that helped make iPhones so popular.
“The only thing Apple’s walled garden hides is competitors,” Goldstein said.
Mark Perry, Apple’s attorney, has defended that walled garden as an indispensable feature for consumers who want the best available protection for their personal information. He also described Barrier as a way for the iPhone to differentiate itself from devices that run on Google’s Android software, which is not restricted and licensed to a wide range of manufacturers.
Perry bragged to the three judges: “Apple made the decision to make this the most secure and private device the world has ever known.” He added: “What the Walled Gardens hide are crooks, ‘ponies’ and hackers.
Perry noted earlier testimony by Epic CEO Tim Sweeney, who attended Monday’s arguments. As a witness at last year’s trial, Sweeney admitted that he owned the iPhone himself, in part because of its security and privacy features.
During their interrogation, two of the three judges – Milan D.
At various times, Smith has questioned whether Epic has even been able to successfully identify the respective market — a key factor in antitrust cases — while McShane has asked whether Epic has proven that Apple has made it too cumbersome and expensive for consumers unhappy with the iPhone. Switch to your Android device.
While questioning Epic’s Goldstein, Smith noted at one point that Apple appeared to have “made a very good argument for failure of proof” in the trial. Noting that he didn’t believe Epic’s claim that Apple had locked consumers on their iPhones, McShane indicated that’s not why he didn’t change the type of smartphone he’s using. “I’m too lazy to switch,” McShane said. “There are a lot of reasons why people don’t switch phones.”
The panel’s third judge, Sidney R. Thomas, asked only one question about a complex case that offered little insight into which direction he might be leaning.
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