Apple Judge Calls Out Nobel Winner’s Math in $10 Billion Suit

(Bloomberg) -- The judge handling a lawsuit over alleged price-gouging at Apple Inc.’s App Store criticized a Nobel prize-winning economist’s analysis backing a claim by consumers for billions of dollars in damages, saying the expert witness “gave us no math and pulls numbers out of the air.”

Based on the methodology prepared by Daniel McFadden, a professor at University of California at Berkeley who was a co-winner of the 2000 Nobel Memorial Prize in Economic Sciences, Apple owes iPhone customers $7 billion to $10 billion for charging “supra-competitive” prices for apps and in-app purchases at the online store, a lawyer for the customers said.

But that’s only if U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California, allows the case to move forward as a class action on behalf of more than 400 million App Store users. It wasn’t clear at a hearing Tuesday that she will do that. In September, Gonzalez Rogers ruled largely in favor of Apple after a trial over similar claims in a case brought against the tech giant by Epic Games Inc.

Read More: Apple Must Face IPhone App Antitrust Suit, Supreme Court Rules

In questioning lawyers for the consumers, Gonzalez Rogers repeatedly knocked McFadden’s work. At one point, she complained that he’d provided “just six paragraphs” to explain his methodology, adding “he’s not an expert in any of it.”

McFadden, who didn’t participate in the hearing, didn’t respond to voicemail and email messages outside regular business hours seeking comment.

Lawyers for the customers defended McFadden’s methodology, arguing that the model clearly shows most App Store customers were injured by Apple’s non-competitive pricing.

“Prof. McFadden’s two-step analysis and the econometric methodology he applied are widely accepted by economists to determine and measure the effects of anticompetitive conduct on market prices, making his report and testimony relevant, reliable, and admissible,” the attorneys said in a court filing.

Gonzalez Rogers expressed doubts about how McFadden had used the online store operated by Epic Games, among others, to come up with a benchmark that he claims shows how much Apple has overcharged customers.

“What about the fact that it’s operating at a loss for the foreseeable future?” she asked the lawyers. “If you cherry pick your numbers, how is that methodology? And if I don’t agree with that, doesn’t the entire model fall?”

The lawsuit was filed 10 years ago by four plaintiffs who allege that Apple’s policy of requiring customers to buy all their apps through the App Store has created a monopoly and allowed Apple to charge exorbitant prices. Apple has denied wrongdoing and is urging the judge not to grant class-action status.

Mark Rifkin, a lawyer for the customers, told the judge that if the consumers win the case at trial, the methodology developed by McFadden “will be used to compute individual damages Apple ID by Apple ID.”

The case is In re Apple iPhone Antitrust Litigation, 11-cv-06714, U.S. District Court, Northern District of California (Oakland).

©2021 Bloomberg L.P.