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Epic Games and Apple are battling it out in what’s being called one of the most important tech antitrust cases in years.


Angela Lang/CNET

Fortnite maker Epic Games sees Apple as overly controlling, opportunistic and unfair. Apple says Epic doesn’t want to follow the rules. Together, they could remake the way we see antitrust in the age of big tech.

Over the past few days, Epic and Apple have been sharpening their arguments in a California courtroom, making their case to Judge Yvonne Gonzalez Rogers

Epic’s lawyers and executives attacked Apple’s App Store, highlighting scam apps, stories from upset developers who complained Apple played favorites and instances where Apple generally didn’t deliver on its promises. 

“The mistakes that I’ve been shown originated from customer and developer complaints,” Trystan Kosmynka, a senior director of marketing at Apple, said in court Friday. Rather than seeing these messages as signs the App Store team is struggling to do their jobs, he said the activity shows people trust the store and want to help keep it safe. “I’m glad they’re passionate and email our executives reporting the concerns and that we investigate them quickly and improve on it,” he said.

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Apple, meanwhile, attacked Epic in questions to marketing director Matthew Weissinger, attempting to undercut his complaints Apple doesn’t help market Fortnite as much as Microsoft, Sony and Nintendo do for their Xbox, PlayStation and Switch. “We create all sorts of engagement, hours of engagement inside of Fortnite,” Weissinger testified Monday. “And then, at the last minute, Apple kind of injects themselves and says, ‘We require 30% on this as well.”http://www.cnet.com/”

The dueling narratives were just the latest example of how Epic and Apple are using the court to air grievances while knocking one another’s businesses. What’s unclear is whether these efforts will work. The proceedings are a bench trial, meaning Judge Rogers will be the one deciding the case, not a jury.

Epic’s hit Fortnite game was kicked from Apple’s App Store in August last year after Epic CEO Tim Sweeney approved a change to the app, purposely breaking Apple’s rules against using alternative payment processing. Apple says its payment processing and strict app store rules are important to the company, helping it stand out from Google’s competing and more widely used Android software, which allows “side-loading” apps and alternative app stores.

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Fortnite is one of the most popular games in the world.


Epic

The outcome of the lawsuit could change everything we know about how Apple’s App Store works, as well as Google’s Play store too. Apple could be forced to disregard its concerns over app security, allowing alternative app stores and payment processing into its devices. Legal experts, lawmakers and regulators are closely watching as well, seeing the case as a first look at how antitrust laws could apply to tech giants.

Judge Rogers has also taken opportunities throughout the past week to ask her own tough questions of both sides of the courtroom as they made their arguments.

When Kosmynka described Apple’s review process, he added that the App Store team told developers it would approve 50% of apps in 24 hours and 90% within 48 hours, depending on the app. So Rogers asked if Apple delivered on those promises. “Absolutely,” Kosmynka said, revealing that Apple currently approves 96% of apps within 24 hours.

She also challenged Apple’s argument that restricting the app distribution to just the App Store is a worthwhile tradeoff. “One of the problems with limiting competition is that you don’t get innovation, or at least that’s one of the concerns,” Rogers said. She also asked if Apple’s had an outside party independently review what’s on the App Store and pay bounties, similar to how tech companies do for security researchers who find vulnerabilities in their products.

Meanwhile, she pushed back on Epic’s attempts to paint Apple’s business model of making a profit off every iPhone, as opposed to initially selling their product at a loss like console manufacturers do. Epic argued the model incentivizes hardware makers to partner with developers because royalties from those game sales help make up the cost on the console.

After Epic’s Weissinger testified that despite giving Fortnite advertising space on the App Store homepage, Apple didn’t seem as invested in Epic’s success as console makers, who sponsored in-person and in-game events as part of their marketing. The console makers, she said, “were promoting their product whenever you did a collaboration with them.” So how was it different from Apple?

Weissinger said it came down to the types of people Apple funneled to Fortnite too. Console gamers are there to play a video game. The App Store has a lot more people who might be looking for than a Fortnite fix. “It’s not necessarily people making the purchase, it also is like, all sorts of random folks who are going through that experience. It might be somebody looking for a fitness app or something like that,” he said. The App Store, he argued, “just provides a less qualified audience or less qualified consumer.”

Below are some of the things we learned during the court trial:

  • Opening salvos and Sweeney’s testimony. When Katherine Forrest began her opening statement for Epic Games in its battle against Apple in a California court on May 3, she blasted the iPhone maker as a monopolist, holding app makers hostage to its onerous licensing terms and commission structure, taking up to 30% off subscriptions and other sales without explicitly telling users. But when she asked a seemingly benign question of Sweeney on Tuesday, she revealed potential hypocrisy on her side too.

    In the summer of 2020, Sweeney sent emails to Apple executives, asking them to allow his company to offer its own app store for iPhones, effectively an alternative to the system Apple’s used since 2008. Apple has only allowed app developers to offer programs to iPhone and iPad users by submitting apps to its store where they go under review before being offered for sale or for free. Apple also requires all app developers to use its payment processing service if they want to sell subscriptions or in-app items, like a new look for a character or a power-up for their next turn.

    Sweeney at the time appeared to be seeking a separate and special deal with Apple, something that didn’t fit with the company’s blustery lawsuit in which Forrest had claimed, “Epic is suing for change, not just for itself, but for all developers.” 

    “The market will not self correct,” she added. That requires the intervention of force, more powerful than even the largest company in the world has ever seen: Our justice system.”

    The next day, on May 4, she asked the soft-spoken Sweeney whether he’d have accepted a side deal with Apple, effectively getting special treatment while other app developers continue losing out. “Yes, I would have,” he said.

  • Sweeney prefers an iPhone. When Apple’s lawyer asked if part of the reason Sweeney prefers the device is Apple’s treatment of customer data, privacy and security, he responded, “correct.” He’d been handed Android devices but confirmed he gave them away.
  • Not just Project xCloud. Microsoft has been vocally complaining about Apple’s app review process and its rules against game streaming services, like its formerly named Project xCloud Xbox service. In cross-examination with Nvidia’s Aashish Patel, a director of product management who helped oversee its GeForce Now streaming service, Apple’s lawyer said a streaming app from Nvidia had also been denied. In a steady stream, Apple’s lawyer asked, “You’re not a neutral observer in this dispute, correct?”http://www.cnet.com/”You want Epic to win this case, correct?”http://www.cnet.com/”Just maybe you’re upset that Apple has rejected your app as a native app and you’re not happy about that?” Patel said he was disappointed.
  • Xbox loses money — kinda. One of Epic’s arguments is that Apple’s business model is to profit from the iPhone at sale. Microsoft’s Xbox and Sony’s PlayStation follow the razor-and-razor-blades model, where they sell the console at a loss (the razor) and then sell the video games and accessories at a profit (razor blades). Though this has been commonly known, a Microsoft representative confirmed during trial that its Xbox itself has never turned a profit.

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If you’re flying with American Airlines through July 15, be prepared.


American Airlines

American Airlines is canceling some flights through mid-July due to a surge in travel demand as the pandemic fades in the US, as earlier reported by CNN. Weather and labor shortages are factoring into the cancellations as well, a spokesperson said.

The airline apparently had 120 cancellations on Saturday and expects to cancel 50 to 80 flights each day. If you’re due to fly with the airline through July 15, you should already have a notification if your flight has been canceled.

For context, American Airlines confirmed it had a total of 5,930 flights scheduled for Monday.

“The first few weeks of June have brought unprecedented weather to our largest hubs, heavily impacting our operation and causing delays, canceled flights and disruptions to crew member schedules and our customers’ plans,” a spokesperson said in a statement emailed to CNET. 

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“That, combined with the labor shortages some of our vendors are contending with and the incredibly quick ramp-up of customer demand, has led us to build in additional resilience and certainty to our operation by adjusting a fraction of our scheduled flying through mid-July.”

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Microsoft CEO Satya Nadella

Satya Nadella speaks at a Microsoft event in 2019.


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Microsoft’s board of directors this week voted to appoint CEO Satya Nadella as the chairman of the board, making him even more influential in steering one of the world’s tech giants.

In a press release, Microsoft said the board unanimously elected Nadella to the new position. He replaces John Thompson, who will move into a lead independent director role, on the heels of a blockbuster fiscal year — and as the company approaches a $2 trillion market capitalization. Apple has been the only company to reach that value.

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Microsoft has a typically busy year ahead of it, starting with its expected unveiling of a redesigned Windows operating system next week. The company is also in the midst of rolling out its newest gaming systems, the Xbox Series X and Series S — which have sold out within hours of nearly every restock since last year.

Microsoft didn’t immediately respond to a request for comment.

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Apple CEO Tim Cook and President Donald Trump in March 2019

Apple CEO Tim Cook speaks with President Donald Trump during a meeting at the White House in March 2019.


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Trump administration officials subpoenaed Apple for data from at least a dozen people connected to the House Intelligence Committee in an attempt to root out the source of leaks of classified information, The New York Times reported this week. The targets included at least two Democrats on the House Intelligence Committee, aides and family members — one of whom was a minor.

Prosecutors, who seized the records in 2017 and early 2018, were searching for the source of media leaks about contacts between Trump associates and Russia, the Times reported. Rep. Adam B. Schiff of California, then the panel’s top Democrat, was one of the members of Congress targeted, sources told the newspaper.

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Apple provided metadata and account information, but not photos, emails or other content, a person familiar with the inquiry told the Times. Ultimately, the data subpoenaed didn’t tie the committee to the leaks, the newspaper reported.

The report follows recent revelations that former President Donald Trump’s administration had secretly obtained phone and email records from a number of journalists, including reporters for CNN and the Washington Post. President Joe Biden said last month he had directed the Justice Department to end the practice of seizing phone or email records of reporters.

As it did with the news organizations, the Justice Department obtained a gag order that prevented Apple from disclosing the subpoenas, a source told the Times. Lawmakers only learned of the probe last month from Apple, after the gag order had expired, the newspaper reported.

Schiff called the investigation “baseless” and said it highlighted how Trump used the system to target political enemies.

“This baseless investigation, while now closed, is yet another example of Trump’s corrupt weaponization of justice,” Schiff said in a tweet Thursday evening.

Trump repeatedly demanded the DOJ go after his political enemies.

It’s clear his demands didn’t fall on deaf ears.

 

This baseless investigation, while now closed, is yet another example of Trump’s corrupt weaponization of justice.

And how much he imperiled our democracy.

— Adam Schiff (@RepAdamSchiff) June 11, 2021

Rep. Eric Swalwell of California, another prominent Democrat on the Intelligence Committee, told CNN on Thursday evening he had been notified that his data was seized as part of the probe. Representatives for Swalwell, a longtime critic of Trump, didn’t immediately respond to a request for comment.

Apple typically receives thousands of requests each year for individual data from governments and private parties in litigation around the world. In April, the company reported that requests it received in 2020 had targeted 171,368 devices, a drop of 12% from the same time in 2019. Apple provided the information requested 80% of the time.

Representatives for Apple and the Justice Department didn’t respond to a request for comment. On Friday, however, Apple said it didn’t know that the DOJ’s subpoena targeted Democrats‘ data. The subpoena sought data belonging to a seemingly random collection of email addresses and phone numbers and “provided no information on the nature of the investigation,” a company spokesman told CNBC in a statement. “It would have been virtually impossible for Apple to understand the intent of the desired information without digging through users’ accounts.”

CNBC also reported Friday that Microsoft received a similar DOJ subpoena. “In this case, we were prevented from notifying the customer for more than two years because of a gag order,” the company told the news outlet in a statement. “As soon as the gag order expired, we notified the customer who told us they were a congressional staffer. We then provided a briefing to the representative’s staff following that notice. We will continue to aggressively seek reform that imposes reasonable limits on government secrecy in cases like this.” 

Also on Friday, the Justice Department’s independent inspector general opened an investigation into the subpoena for the data, The New York Times reported.

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