Graded: the Eddy Cue examination

Q. And the ISA accounts for a significant portion of Apple's profits for fiscal year 2020 and fiscal year 2021; is that right?A. I would disagree with that. I don't -- that is not the way we reported or look at it. The ISA itself that comes in is one piece of it. But, for example, all of the engineering that we do on iOS and Safari and all of those things that make the ISA successful are not incorporated into the dollars that come in from Google. So it's not something we calculate. Thank you. No more Rosetta Stone?

Q. Why did you send this deck to Mr. Cook?A. I think Apple, back then in 2013 and ever since Apple was started, was a company that led on privacy across the board, and we thought we could compete based on the fact that our devices were -- we respected users' privacy and we did a lot to -- and continue to do a lot -- to make our devices as private and secure as possible.

Q. You mentioned earlier some of the different device types that Apple sells, including Mac computers. Under the ISA, could Apple decide to send search queries from a Mac computer to one search engine that is not Google, while sending, you know, all search queries from iPhone to Google?A. Again, just to be very clear, when we were doing the deal with Google, we wanted the capabilities to provide the best -- the best service, the best application, the best thing for customers. Google was the best one. So when we chose and did the deal, we picked it around the world. We don't treat our customers differently around the world. We want them all to have the best experience. And so in the countries where Google was providing the best experience, we did that. In the countries where they were not, we did not do that.

Q. The first time that a user opens up the maps app, Apple presents them with a screen that has three choices on it, right?A. Yes. Again, I -- you started this by the word "choice," and I just want to make clear, yes, we provide the option for the customer to pick what level of privacy they want in maps, that is correct.

Q. Does this refresh your recollection that under the ISA, Google and Apple have agreed that the parties can take certain steps should the ISA be challenged or held unenforceable by a regulatory authority or a court?A. Again, what I recall about this is the same thing I said before. Google had stated some level of investigation of some kind in the EU. I didn't understand what that was. And then this language and these areas that were put in here were done by both counsels related to that. I did not care one way or the other, wasn't my thing, our General Counsel said it was fine, and so I was fine with it from that viewpoint. I assumed that always related to the EU investigation that they talked about.

Q. Mr. Cue, is it your understanding sitting here today that Google and Apple have certain options as set forth in the ISA as to steps they can take if the ISA is challenged or held unenforceable by a government authority or a court?A. As I said earlier -- and you can show me the language, I'm sure -- whatever language is in there related to that, there was something there, I don't recall exactly what it is, I didn't negotiate that language, that was done by our counsel -- our General Counsel and Google's, so I would let them answer what exactly it means.

Q. And, Mr. Cue, I'm not asking for conversations you've had with your lawyers, just your understanding of the ISA. Is it your understanding, as you sit here today, that Apple has a corporate obligation to support and defend the ISA agreement in connection with government actions?A. Again, I don't have the agreement in front of me. If you put the words, I would say whatever the words are are accurate, I don't have a problem with it, but I don't know exactly what that means from a legal point of view.

Q. And, Mr. Cue, as you sit here today, Apple has a corporate obligation to support and defend the ISA agreement in connection with government actions?A. That's a question from a lawyer to answer. I don't know the answer to that. I'm not here because of that, I can say that. I'm here to defend it based on my knowledge of it.

Q. Mr. Cue, as you sit here today, is it your understanding that you have a contractual obligation to support and defend the ISA agreement in connection with government actions?A. There's a statement in the agreement that I know is in there, it was put there by our legal counsel and their legal counsel. I don't know a whole lot about that. I know the requests came from Google at the time. They were under some level of investigation by the EU, and they mentioned that and said that they would like that in there. Our legal counsel said it was fine, so I didn't have a problem with it.

Q. And did you tell Mr. Pichai that if you and he could not agree on a revenue share percentage split, Apple and Google shouldn't move forward with the ISA?A. I don't know the exact words that I told him at the time, but basically my point was if we're trying to re-negotiate the deal, which we were, him and I had to come to an agreement. And if we didn't, yeah, we wouldn't have an agreement.

Q. Did you understand Mr. Pichai's position to be that Google should pay Apple A percentage in the 2016 amendment?A. Yes. At this time, Sundar and myself were just starting to get to know each other, we were just starting to discuss this. Neither of us had been responsible for these agreements in the past. And so I came into this wanting the rev share to increase to C. Not surprisingly, he came back saying he would like to maintain it at A. And so that's -- that was the start of our negotiations and our positions.

Q. Does Apple believe that its approach to privacy with respect to search and advertising is better than Google's?A. Yes, we do. But, again, when we're comparing it here, let's be clear about something. When we did the deal with Google for search from the very beginning, Google is not allowed to require the user to log in, for example, which it says here, "Searchers are tied to Google accounts," for example. That's what they do on other platforms. On our platform, they weren't allowed to do that. In addition to that, over time we've added things to Safari to make it harder to track. You gave some examples earlier. There's also -- ITP is another one. So we're constantly doing things to protect our customers and make sure that the agreements and the things that we have with Google respect our customers' privacy.

Q. Under the ISA, can Apple set Google as the default search engine internationally while using a different default search provider in the United States?A. Again, we -- in the agreements, over time, there were certain countries where we found that either Google wasn't the best one or there was another one that we thought was very competitive, and so we carved those out in the agreement. I believe China was one of those, for example, where we thought the Google search engine was not the best one, and so we carved out the ability of us setting the default there. In the other countries, we felt very comfortable that Google was by far the best one. So there's no carve-out for any other country other than, I think it's the -- I believe it's China, Russia, and South Korea, if I'm correct.

Q. And the ISA does not permit a choice screen for Apple users to set their default search engine out of the box, correct?A. That's correct, it's not something we've ever wanted. We didn't ask for it in 2002, and it's not something we wanted. We think it's a mistake to ask the customer something like that. In both of these cases that you show here, it's very clear to the customer what the choice is. Do you want maps to know your location? Every customer in the world understands that. Being tracked, every customer pretty much in the world understands that. When you're picking a search engine, we have choices in there that customers have never heard of. DuckDuckGo is a very small one. We have another one called Sconcierge, or something like that. They are -- and so you present a user with a choice for something they don't even know. We know what happens. Customers, they don't understand, they're afraid of making the wrong choice. So what we do is we make Google be the default search engine because we've always thought it was the best engine. And then we make it really easy for customers to switch if they'd like to switch. And so that's worked extremely well for our customers and we certainly believe we've done the right thing for our customers.

Q. So when it's important, Apple does offer users choices, not just right out of the box but as they use their iPhone?A. Look, if you're comparing this with picking search engines for browsers, I think these are two very different things, completely different things. I think the appearance one is how to set up a phone, the other one is around privacy, which is a really important component to customers, and we want customers to be aware of what those applications are doing. When we're picking search engines, we pick the best one and we let the customer easily change them. So I have no problem with that. I think we're doing the right thing by customers.

Q. And then if you would look at the middle image on UPXD009, the first time a user opens the maps app, are they given a choice about whether to allow maps to use their location?A. Yes, but I don't think what you're seeing in the second one is a choice screen around it. We provide choices at the beginning. What I see here in the middle, and certainly the next one, are all about privacy decisions that a customer has to make. And so they're appropriate to ask at the time that they're using those applications. They're not appropriate to ask at another time.

Q. You can set that aside, Mr. Cue. What is a choice screen in the context of a smartphone? A I don't -- I mean, there's --A. Yeah. Q Does Apple make -- do Apple users make some choices to set up their phones right out of the box? A Oh, they do. Thank you. Q I think it should also be on your screen, Mr. Cue. A It is now. Q I've handed you what has been marked as UPXD009. This is the United States Demonstrative 9. A It's very bad resolution on the screen. We need a Mac. Yeah, that's correct. When you take a device out of the box, if you think about it, our customers are very excited about getting their phone and getting it up and running and working fast, right. You just spent a significant amount of money, it's a device you use every day. And so we try to get them up and running as quickly as possible. And so the more choices or the more options that you get, it frustrates customers. So we've spent a great deal of time and effort to minimize the number of questions that we ask. And we look at those by what do we think are the most critical things that a customer really needs to know at that point in time. And we thought appearance being whether you want to be in a -- what we call the size of the text in the phone, because obviously some people wear glasses, others don't, it's something that we get a lot of requests for people when they're setting up their phones, they want their fonts to be bigger. And so we provide this capability when you're setting up your phone.

Q. And if you weren't able to reach a deal on the economic terms, you were willing to walk away from the ISA, right?A. I think -- again, you make this all about economics. The deal has a lot more to it than economics. I think ultimately, you have to get a deal across everything, not just economics. Economics was an important part, of course. And so the question of what would have happened if we hadn't gotten a deal; I don't know. Like I said, I didn't spend a lot of time thinking about it. You know, I've been fairly clear that I didn't think at the time, nor today, that there's anybody out there who's anywhere near as good as Google at searching. And so certainly there wasn't a valid alternative that we could have gone to at that time. But what would we have done? Would we have gone off and -- I don't know. I don't know what we would have done in that case. We could have built our own. I don't know what we would have done. It's not something that we ever really truly considered, investigated, or did. My objective at this time was to get a deal done, and I felt confident that I would be able to do that.

Q. And the economics of the deal were important enough that Apple was willing to walk away from the ISA if Google wouldn't commit to certain economic terms?A. You know, look, that never was tested. My view, as I got into this agreement with Sundar, was I always felt like it was in Google's best interest and our best interest to get a deal done. I thought we were a great -- we provided great customers to Google, they did an amazing job on the search engine side, and I always felt we would come to an agreement. So I didn't contemplate or spend a lot of time worrying about not getting a deal done because I felt very confident that I would be able to get a deal done with Sundar.