By Jon Swartz
Developers continued to share their travails regarding Apple Inc. in the third day of Epic Games Inc.’s historic antitrust lawsuit against the iPhone maker Wednesday.
Attorneys representing Epic maintained a laser-like focus on the tactics imposed by Apple’s (NAS:AAPL) App Store — the crux of their assertion that Apple is a price-gouging monopolist that abuses its dominance for competitive reasons, citing its 30% commission fee.
Lori Wright, vice president of Xbox business development at Microsoft Corp. (NAS:MSFT) , explained how the App Store rejected Microsoft’s cloud-game service xCloud because Apple believed it would need to approve every game streamed on xCloud. This confused Microsoft, she said, when Netflix Inc. (NAS:NFLX) and Spotify (NYS:SPOT) Technology did not face the same restrictions.
Last week, Microsoft said it would lower its commission fee for developers of PC games sold through the Microsoft Store to 12%, as of Aug. 1, saying it wanted to remain competitive in the market. Epic’s Games Store also charges 12% commissions. Wright said there is no plan to change the fees for Xbox consoles.
An Apple attorney, in cross-examination of Wright, noted that Microsoft — in particular, company president Brad Smith — has been critical of the App Store, and strongly hinted that Microsoft is working in concert with Epic to assist its case. The lawyer added that xCloud was not allowed on the App Store for technical and third-party-publishing content reasons, and that the xCloud web browser has been a good option for iPhone users.
Microsoft, the Apple attorney concluded, pointed out that Microsoft makes $600 million to $700 million a year through a business partnership with Epic.
Epic attorneys, meanwhile, carefully laid out the difference in gameplay between specialized gaming devices like consoles and more general-purpose electronics like smartphones and laptops. The crux was that those fenced into the iOS platform paid a premium for an inferior, less-satisfying experience.
Andrew Grant, an engineering fellow at Epic who followed Wright’s testimony, pointed to “more fluid” graphics and crisper controls on consoles and surround-sound features on personal computers that the iPhone can’t match. Earlier, Aashish Patel, director of product management at Nvidia Corp. (NAS:NVDA) , made similar claims.
In pushing back at Epic’s witnesses, Apple’s legal team repeatedly highlighted the number of gaming platforms for consumers, and improved gaming functionality on iOS.
The contrasting lines of questioning illustrated what antitrust experts claim is the case’s core legal issue: How Judge Yvonne Gonzalez Rogers, who is presiding over the bench trial, defines the relevant market — which is essential in proving whether a monopoly exists in a market.
Apple contends the apps market for mobile-game distribution is broad, with Android, Xbox and laptops as other options. Epic argues the market for this case should be narrowly defined as only iOS, where Apple has 100% market share. This, experts say, presents a high legal hurdle.
“These cases are often postures in an ongoing trade dispute to move the other side to make concessions,” Larry Downes, project director at the Georgetown Center for Business and Public Policy’s Evolution of Regulation and Innovation project, told MarketWatch. “The decision will be made based on evidence, not the judge’s facial expressions and words. Antitrust law has just not changed in decades.”
An expert-heavy portion of the expected three-week trial sparked a brief delay Wednesday when Judge Rogers expressed concern that Apple and Epic were bending the rules with ever-shifting opinions from more than a dozen expert witnesses. Attorneys from both companies engaged in civil minutiae for about 30 minutes to address the issue.