Kevan Parekh directly challenged the 75 per cent profit margin claim presented by the prosecution. This figure was based on evidence from a similar US case, but Parekh testified that calculating such a high profit margin was not “inaccurate”
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This case in the UK is part of a broader international debate about the regulation of app stores. The European Union, for instance, has taken steps to address concerns about Apple’s App Store practices by passing the Digital Markets Act. Image Credit: Reuters, Apple
Apple’s Chief Financial Officer, Kevan Parekh, has recently disputed claims that the company’s App Store generates a 75 per cent profit margin during his testimony at a UK trial. The case, heard by the UK’s Competition Appeal Tribunal, is a major part of ongoing efforts to challenge Big Tech companies and their control over app stores. The lawsuit is filed on behalf of 20 million UK Apple users who argue that Apple’s App Store operates as a monopoly, raising prices through its 30 per cent commission on paid apps and in-app purchases.
Apple has defended its business model, arguing that the App Store’s commission structure is fair and comparable to industry standards. The outcome of this case could have significant implications for the tech industry, particularly in how app stores are regulated and how platform fees are structured going forward.
The 75 per cent profit margin dispute
Kevan Parekh directly challenged the 75 per cent profit margin claim presented by the prosecution. This figure was based on evidence from a similar US case, but Parekh testified that calculating such a high profit margin was not only “inaccurate” but also difficult due to the integrated nature of Apple’s services. He explained that separating the profits from the App Store alone from Apple’s wider ecosystem is practically impossible. According to Parekh, indirect costs are involved, making it impossible to provide an exact profit figure for the App Store itself.
He emphasized that any estimation of the App Store’s profitability would be imprecise and subjective, pointing out that the prosecution’s calculation was based on assumptions that did not fully account for the complexities of Apple’s business model. Despite these defenses, the prosecution insists that their figures are based on expert financial analysis, pushing the case forward.
Apple’s fees and the monopoly argument
The UK lawsuit claims that Apple’s control over the App Store creates a monopoly, allowing the company to impose inflated fees on consumers. The prosecution argues that Apple’s 30 per cent commission fee, which applies to paid apps and in-app purchases, is excessive and anti-competitive. Apple, however, counters that 84 per cent of the apps on the platform are free, and thus, developers of these apps don’t pay any comm