Apple CEO Tim Cook faced a grueling round of questions Friday regarding the company's App Store practices during a hearing that was part of the Epic Games Inc. antitrust lawsuit trial.
Epic filed its suit against Apple in August 2020 after its popular game Fortnite was pulled from the App Store. The game was removed after Epic added a payment system in the game that circumvented the App Store's in-app purchase method, which Apple contended was a breach of contract.
In his testimony, Cook, who took the stand for the first time since the Epic trial began, defended the company's App Store practices, saying security and privacy were crucial in its decision to offer only one vetted App Store and one in-app purchase method.
Now in its third week in the U.S. District Court for the Northern District of California in Oakland, Calif., Epic's legal team is looking to tear down Apple's argument by lobbing examples of discrepancies on Apple's part when it comes to its privacy argument. Judge Yvonne Gonzalez Rogers, who is presiding over the trial, also pressed Cook about the company's commission fees, which comes at a 30% price tag for developers offering digital services and earning more than $1 million in annual revenue.
During the hearing, Judge Rogers referenced a survey that revealed 39% of developers, like Epic, were very or somewhat dissatisfied with how the App Store is handled.
"It doesn't seem to me that you feel, again, the pressure to change the manner in which you act to address the concerns of the developers," she said during Friday's hearing. The lawsuit is expected to last until the end of May.
Cook pushed on commission fees
During the trial, Cook said the 30% commission fee, which is central to Epic's lawsuit, goes toward providing customer service and amenities, which include app updates and developer tools, to app companies like Epic. Alternative payment methods are prohibited.
Epic argues that the 30% cut Apple gets for purchases made through the App Store is too high. Although Apple recently reduced the commission fee to 15% for developers making under $1 million in annual revenue, it has maintained the 30% commission fee for high-revenue developers like Epic. Cook confirmed during the hearing that the majority of App Store revenue comes from gaming apps.
Cook argued that of the App Store's 1.8 million apps, a large portion of the apps are free and developers don't have to pay the commission fee, thus driving a significant number of consumers to the App Store. That traffic benefits high-revenue earners like Epic.
"If we had an above-market commission, people just wouldn't develop for us," he said.
Cook said the App Store has been significant for both developers and consumers. "I think it's been an economic miracle," he said. "When I think about where it started with just 500 apps -- there's now 1.8 million -- and the number of jobs it's created in the United States. There are almost 2 million people in the U.S. that are in the iOS job economy."
However, Judge Rogers questioned the large number of developers displeased with the practice. App developers like Spotify are also pushing back against Apple and its commission fees.
"I understand this notion that somehow Apple is bringing the customers to the games, but after that first interaction, the developers of the games are keeping the customer," Judge Rogers said. "Apple is just profiting off that, it seems."
Cook said app developers are allowed to communicate with customers about lower-priced purchasing options through means outside of the App Store, and that some of the dissatisfaction from developers could stem from the large amount of apps rejected from the store during the vetting process.
Epic questions Apple's privacy argument
One of the main reasons Apple gives for vetting apps for the App Store is privacy and security concerns, a cornerstone argument that Epic legal counsel attacked heavily Friday.
On the security front, Cook said that, according to third-party data regarding malware on iPhones versus Android and Windows devices, there was a substantial difference. He said that while 1% to 2% of malware affected iPhones, those numbers were much higher -- 30% to 40% -- in Android and Windows devices.
I think it's important to know that sometimes there is a conflict between what the developer may want and what the user may want.
Tim CookApple CEO
Privacy, too, is a key focus for the company, Cook said. "Privacy from our point of view is one of the most important issues of the century, and safety and security are the foundation that privacy is built upon," he said.
However, Epic's legal counsel attacked Apple's commitment to privacy by questioning certain aspects of the company's business such as removing apps at the request of countries like China, as well as its iCloud partnership with Guizhou-Cloud Big Data for its mainland China customers, which Epic's legal counsel pointed out is partly owned by state-run China Telecom.
"When Apple agrees to share user data with a Chinese state-owned entity and Apple agrees to take apps down off the App Store, that's a situation where its commitment to privacy and its financial interests are in conflict with one another," Epic's legal counsel argued.
Cook said Apple protects user privacy in China, but when it comes to taking down apps, the company is required to comply with the laws of countries in which it operates, just like any other company.
He also pointed to recent privacy efforts the company introduced such as the App Tracking Transparency feature and Apple Privacy Nutrition Labels that he said some app developers applaud and some aren't happy with.
"We're making decisions in the best interest of the user," Cook said. "I think it's important to know that sometimes there is a conflict between what the developer may want and what the user may want."
The trial includes one more week of hearings before a final verdict is issued.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington Star-News and a crime and education reporter at the Wabash Plain Dealer.
