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Apple App Store profits look ‘disproportionate,’ U.S. judge say

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A federal judge on Friday grilled Apple Inc Chief Executive Tim Cook over whether the iPhone maker’s App Store profits from developers such as “Fortnite” maker Epic Games are justified and whether Apple faces any real competitive pressure to change its ways.

Cook testified for more than two hours in Oakland, California, as the closing witness in Apple’s defense against Epic’s charges that the iPhone maker’s App Store controls and commissions have created a monopoly that Apple illegally abuses.

App makers including music service Spotify Technology, European regulators and U.S. politicians who question whether the company that once urged the world to ‘think different’ has now become too big and too powerful.

At the end of testimony, Judge Yvonne Gonzalez Rogers questioned Cook, pressing him to concede that game developers generate most App Store revenue and help subsidize other apps on the store that pay no commission.

Gonzalez said the profits Apple reaps from game developers “appear to be disproportionate.”

“I understand this notion that somehow Apple is bringing the customer to the dance,” she said. “But after that first time, after that first interaction, the developers are keeping customers with the game. Apple is just profiting from that, it seems me.”

Cook disagreed. “The free apps bring a lot to the table. Only the people who are really profiting in a major way are paying 30” percent commissions, he said.

Epic has tried to show that Apple’s iPhone is a lucrative platform that locks in users, pointing to an internal Apple document that Epic alleges showed the App Store had 78% operating margins. Cook said the document did not reflect the full costs of running the App Store.

The testimony constitutes Cook’s most extensive public remarks on the App Store, which anchors Apple’s $53.8 billion services business.

Gonzalez Rogers also cited a survey that found 39% of software developers were unhappy with Apple’s app distribution services.

“It doesn’t seem to me that you feel pressure or competition to actually change the manner in which you act with developers,” Gonzalez Rogers said.

Cook replied that “we turn the place upside down” to respond to developer complaints, but later conceded that he does not receive regular reports on how developers feel about working with Apple.

At the start of the three-week trial, Gonzalez Rogers also pressed Epic Chief Executive Tim Sweeney with tough questions https://www.reuters.com/technology/judge-presses-epic-ceo-during-second-day-apple-antitrust-trial-2021-05-04 on how forcing Apple to change would ripple through the software world. Sweeney said he had not thought the issue through.

The maker of “Fortnite,” an online game which pits players against in each other in an animated “Battle Royale” fight to the last survivor, has waged a public relations and legal campaign against Apple.

Epic parodied Apple’s iconic “1984” commercial and argued in court that it acts anticompetitively by only allowing approved apps on the world’s 1 billion iPhones and forcing developers to use Apple’s in-app payment system which charges sales commissions of up to 30%.

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Apple has sought to persuade Gonzalez Rogers that its rules for developers are aimed at keeping its customers’ information private and safe from malware.

“We have a maniacal focus on the user and doing the right thing by the customer,” Cook said. “Safety and security are the foundation that privacy is built on. Technology has the ability to vacuum up all kinds of data from people, and we like to provide people with tools to circumvent that.”

(Reporting by Stephen Nellis in San Francisco; editing by Peter Henderson, Richard Pullin and Richard Chang)

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Britain in talks with 6 firms about building gigafactories for EV batteries

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Britain is in talks with six companies about building gigafactories to produce batteries for electric vehicles (EV), the Financial Times reported on Wednesday, citing people briefed on the discussions.

Car makers Ford Motor Co and Nissan Motor Co Ltd, conglomerates LG Corp and Samsung, and start-ups Britishvolt and InoBat Auto are in talks with the British government or local authorities about locations for potential factories and financial support, the report added .

 

(Reporting by Kanishka Singh in Bengaluru; Editing by Himani Sarkar)

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EBay to sell South Korean unit for about $3.6 billion to Shinsegae, Naver

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EBay will sell its South Korean business to retailer Shinsegae Group and e-commerce firm Naver for about 4 trillion won ($3.6 billion), local newspapers reported on Wednesday.

EBay Korea is the country’s third-largest e-commerce firm with market share of about 12.8% in 2020, according to Euromonitor. It operates the platforms Gmarket, Auction and G9.

Shinsegae, Naver and eBay Korea declined to comment.

Lotte Shopping had also been in the running, the Korea Economic Daily and other newspapers said, citing unnamed investment banking sources.

South Korea represents the world’s fourth largest e-commerce market. Driven by the coronavirus pandemic, e-commerce has soared to account for 35.8% of the retail market in 2020 compared with 28.6% in 2019, according to Euromonitor data.

Shinsegae and Naver formed a retail and e-commerce partnership in March by taking stakes worth 250 billion won in each other’s affiliates.

($1 = 1,117.7000 won)

 

(Reporting by Joyce Lee; Editing by Edwina Gibbs)

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Canada launches long-awaited auction of 5G spectrum

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Canada is set to begin a hotly anticipated auction of the mobile telecommunications bandwidth necessary for 5G rollout, one that was delayed more than a year by the pandemic.

The 3,500 MHz is a spectrum companies need to provide 5G, which requires more bandwidth to expand internet capabilities.The auction, initially scheduled for June 2020, is expected to take several weeks with Canadian government selling off 1,504 licenses in 172 service areas.

Smaller operators are going into the auction complaining that recent regulatory rulings have further tilted the scales in the favour of the country’s three biggest telecoms companies – BCE, Telus and Rogers Communications Inc – which together control around 90% of the market as a share of revenue.

Canadian mobile and internet consumers, meanwhile, have complained for years that their bills are among the world’s steepest. Prime Minister Justin Trudeau’s Liberal government has threatened to take action if the providers did not cut bills by 25%.

The last auction of the 600 MHz spectrum raised C$3.5 billion ($2.87 billion) for the government.

The companies have defended themselves, saying the prices they charge are falling.

Some 23 bidders including regional players such as Cogeco and Quebec’s Videotron are participating in the process. Shaw Communications did not apply to participate due to a $16 billion takeover bid from Rogers. Lawmakers and analysts have warned that market concentration will intensify if that acquisition proceeds.

In May, after Canada‘s telecoms regulator issued a ruling largely in favour of the big three on pricing for smaller companies’ access to broadband networks, internet service provider TekSavvy Inc withdrew from the auction, citing the decision.

Some experts say the government has been trying to level the playing field with its decision to set aside a proportion of spectrum in certain areas for smaller companies.

Gregory Taylor, a spectrum expert and associate professor at the University of Calgary, said he was pleased the government was auctioning off smaller geographic areas of coverage.

In previous auctions where the license covered whole provinces, “small providers could not participate because they could not hope to cover the range that was required in the license,” Taylor said.

Smaller geographic areas mean they have a better chance of fulfilling the requirements for the license, such as providing service to 90% of the population within five years of the issuance date.

The auction has no scheduled end date, although the federal ministry in charge of the spectrum auction has said winners would be announced within five days of bidding completion.

($1 = 1.2181 Canadian dollars)

 

(Reporting by Moira Warburton in Vancouver; Editing by David Gregorio)

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