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Battle Over The IPhone App Store Spills Into Appeals Court

Apple and the company behind the popular video game Fortnite squared off Monday before three federal appeals court judges who will decide the next round in a high-stakes battle over whether the iPhone app store is an illegal monopoly that stifles competition and drives up consumer prices.

Image: AP


Apple and the company behind the popular video game Fortnite squared off Monday before three federal appeals court judges who will decide the next round in a high-stakes battle over whether the iPhone app store is an illegal monopoly that stifles competition and drives up consumer prices.

The oral arguments laid out in the Ninth Circuit Court of Appeals by lawyers from Apple and Fortnite maker Epic Games came 14 months after a lower court judge issued a ruling largely preserved Apple's exclusive control over the apps allowed on the more than 1 billion iPhones currently in use worldwide. The 75-minute session is a prelude to an appeal court ruling expected come out sometime next year.

A so-called "walled garden" protecting the iPhone app stores includes a payment system that funnels commissions ranging from 15% to 30% on the purchases of some subscriptions and other digital services a set-up that generate an estimated $15 billion to $20 billion for Apple, helping to lift its market value to nearly $2.4 trillion.

Epic lawyer Thomas Goldstein focused much of his 20-minute presentation depicting Apple's walled garden as a pretext for increasing its profits at the expense of other companies responsible for making apps that have helped make iPhones even more popular.

Apple lawyer Mark Perry focused his 30-minute presentation defending the walled garden as a indispensable feature prized by consumers who want the best protection available for the personal information they store on mobile devices that have become like an additional appendage for many consumers. He also described the barrier as a way for the iPhone to distinguish itself from devices running on Google's Android software, which isn't as restrictive and is licensed to a wide range of manufacturers.

Perry even pointed to previous sworn testimony provided by Epic CEO Tim Sweeney, who attended Monday's arguments.  Even as he railed against Apple's ironclad grip on the app store while he was on the witness in last year's trial, Sweeney acknowledged he owns an iPhone himself, partly because of its security and privacy features.

During their questioning, two of the three judges — Milan D. Smith Jr. and Michael J. McShane — seemed to be struggling with whether Epic had done enough to prove its case in the first place, contributing to U.S. District Judge Yvonne Gonzalez Rogers' findings last year that Apple's app store and payment system doesn't represent an illegal market.

At various times, Smith wondered whether Epic had even been able to successfully define the market — key factor in antitrust case — while McShane posed whether Epic had proven Apple had made it to cumbersome and expensive for consumers unhappy with their iPhone to switch to an Android device.

While questioning Epic's Goldstein, Smith at one point observed that Apple seemed to "have made a pretty good case for 'failure of proof'" in the lower court trial. Signaling he didn't believe Epic's contention that Apple has locked consumers into keep their iPhones, McShane pointed out that isn't why he doesn't change the kind of smartphone he uses. "I am too lazy to switch," McShane said. "There are a lot of reasons people don't switch phones."

The third judge on the panel, Sidney R. Thomas, was more muted during the arguments, asking only one question about a complex issue that provided little insight into which way he might be leaning.

 

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