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Apple’s newly appointed chief financial officer disputed claims the iPhone maker enjoys profit margins of about 75 per cent on its App Store as he became the first senior Big Tech executive to testify in a UK class action antitrust trial.
Kevan Parekh told a London court on Thursday it was impossible to accurately determine the standalone profitability of its App Store after it was accused in a lawsuit of abusing a dominant position to extract “exorbitant” returns from the software centre.
The seven-week trial is the first stemming from a wave of UK class action antitrust lawsuits brought against Big Tech. Antitrust lawyers are scrutinising the £1.5bn case in the Competition Appeal Tribunal as they try to gauge the prospects of success for several other antitrust lawsuits against groups including Alphabet, Microsoft and Meta.
Barrister Michael Armitage, representing the claimants, said evidence cited in separate US litigation had pointed to operating margins for the App Store of more than 75 per cent, while an expert accountant acting on behalf of the claimants in the UK case had arrived at a similar figure.
Armitage said: “That rather suggests these figures are accurate, aren’t they Mr Parekh?” Parekh replied: “I wouldn’t say they’re accurate.”
Armitage put it to Parekh that it was indeed possible to calculate the profit margins of the App Store, even if it was not disclosed line-by-line in Apple’s accounts.
“I think it’s possible to do a directional estimate,” said Parekh, who was previously Apple’s vice-president of financial planning and analysis before taking over from Luca Maestri as Apple’s CFO earlier this month.
But “it can’t be meaningfully estimated in an accurate way”, he added.
In his witness statement, Parekh said Apple “cannot allocate all indirect costs to specific products or services”. He added: “Any attempt to allocate these types of costs would involve imprecise and subjective judgments.”
Armitage said the implication of Apple’s position was that the App Store’s profitability “can’t be scrutinised”.
The claimants, led by “class representative” Rachael Kent, a lecturer at King’s College London, on behalf of millions of UK consumers, argue Apple has created a monopoly by forcing developers who make software for devices such as iPhones and iPads to distribute their apps using the company’s own App Store.
They are demanding £1.5bn from Apple, claiming that “excessive and unfair” commissions charged to developers are passed on to consumers who download the software and buy content or digital services inside the apps.
But Apple countered that the claimants’ case ignores “the enormous benefits conferred through Apple’s innovation by the iOS ecosystem as a whole”.
The company’s lawyers, led by Marie Demetriou KC, said in court filings that Apple’s “unique fully integrated system” was “designed to protect user security, privacy and safety, and provide a simple and intuitive user experience”.
They also argued the claimants had defined the market too narrowly and that Apple “faces intense competition in the markets in which it designs, manufactures, and sells iOS devices”.
The trial is the latest legal scrutiny of Apple around the world. The US Department of Justice has brought a case against Apple arguing its App Store rules have stifled competition.
However, the iPhone maker largely emerged unscathed from a legal fight over the App Store with Fortnite creator Epic Games that concluded early last year.
