Recent rulings from the UK’s Competition Appeal Tribunal (CAT) show that regulators and legal counsels can no longer rely exclusively on legal arguments to win a case: the battleground is moving to the balance sheet.
While economic evidence is not new in antitrust cases, the CAT’s ruling on “excessive pricing” in the Pfizer/Flynn case signals a shift: courts are no longer satisfied with standard accounting profits. They are demanding complex financial metrics like Return on Capital Employed (ROCE) and Weighted Average Cost of Capital (WACC) to determine liability.
As the recent ruling on Kent v. Apple and the ongoing Rodger v. Google proceedings illustrate, a lawyer’s ability to understand, demand, and weaponize specific financial data can determine the outcome of a case before trial even begins.
The Profitability Puzzle: Unlocking the Black Box
At the heart of these cases—Dr. Rachael Kent v. Apple and Rodger v. Google—is the allegation of “excessive pricing.” Claimants argue that the standard 30% commission charged to app developers is an abuse of market dominance. To prove this, they must demonstrate that the App Store’s profits are unreasonably high compared to its costs.
This requires calculating specific financial metrics that go beyond standard accounting figures:
- Return on Capital Employed (ROCE): A measure of how efficiently a company uses its capital.
- Weighted Average Cost of Capital (WACC): The rate of return a company is expected to pay to its investors.
The formula for ROCE is EBIT/Capital Employed. Since EBIT is usually known, and most firms know how much profit they make, either as a company or per product, the core dispute lies in calculating the “Capital Employed.” Tech giants argue that significant costs—such as R&D for operating systems, corporate overhead, and shared infrastructure—are “unallocated” at the parent company level (Alphabet or Apple Inc.) and cannot be neatly assigned to the App Store.
One important caveat for the investors in the room: For investment purposes, the ROCE and WACC for a company are not necessarily hard to find or calculate, but for antitrust purposes it is a different story.
“No Data” Defense Doesn’t Work
Both Apple and Google have historically defended their 30% App Store commissions, but they do not disclose publicly much financial information about their profits and costs. They argue that because costs like R&D and corporate overhead are shared across products (devices, OS, search), it is impossible to isolate the profitability of the App Store.
In Dr. Rachael Kent v. Apple Inc. (2025), Apple refused to provide a standalone Profit & Loss statement for its App Store, arguing that allocating indirect costs would be “arbitrary” and “meaningless.” The Tribunal rejected this defense. It held that while allocation is difficult, it is not impossible, noting that Apple performs similar allocations for internal executive reporting.
The consequence of this refusal was negative for the defense, at least on paper. Invoking the “broad axe” principle—which allows courts to estimate damages when a defendant fails to provide precise data—the Tribunal accepted the claimant’s model. Perhaps the most relevant part of this decision is that the court considered the claimant’s model for the specific ROCE a “reasonable approach,” similar to what an investor would do. This model estimated the App Store’s ROCE at over 350%—figures the court deemed “excessive” and “unfair” and led to condemnation for damages.
The coincidence with Google’s arguments in the ongoing Rodger v. Google proceedings is remarkable, offering a clear lesson in procedural strategy. The claimant’s lawyers requested detailed data on “unallocated costs”—expenses held at the Alphabet parent level that Google argued were irrelevant to the Play Store. The argument is the same: claimants need these costs and how they are allocated to calculate the specific ROCE (and profitability) for the Play Store.
The ball is now in Google’s court, and the Tribunal has requested the company to submit some, not all, data requested.
However, the Tribunal highlighted two critical points:
- The “Adverse Inference” Trap: The Chair explicitly warned Google that if it refused to clarify these costs, the company cannot later argue that the profit levels are “too high” because the assumptions made in the calculations are “arbitrary.” The Tribunal would be forced to proceed on a “rough and ready” basis (similar to the Apple case).
- The Timing of Requests: The Tribunal chastised the claimant’s legal team for requesting detailed costs too late in the proceedings. The court noted that had the application been made earlier, it might have been granted in full. This underscores that lawyers must identify the specific financial data required to build their economic models at the outset of litigation.
The Path For Google: Submit Data or Pay?
Google now faces a dilemma. Following Apple’s defeat, the “broad axe” is poised to fall. If Google continues to withhold detailed cost data, it risks a judgment based on the claimant’s estimates.
Paradoxically, Google may choose to follow Apple’s path: disclose the minimum, accept the claimant’s profitability analysis (actually, challenge the model but without providing alternative data), and pay the damages. Why? Because revealing the true, granular economics of the Play Store could be even more damaging. It might expose profit margins that are even higher than estimated, or reveal cost structures that could be weaponized by regulators and litigants in other jurisdictions worldwide. In the calculus of Big Tech antitrust, paying a billion-dollar claim today might be cheaper than handing over the keys to the kingdom.
Using Financial Metrics As Your Leverage
These cases demonstrate that financial literacy is important for antitrust lawyers.
- Defining the Discovery Strategy: You cannot ask for “unallocated costs” or “capitalization of R&D” if you do not understand how they impact the ROCE calculation. The Google case shows that vague or late requests will be denied.
- Controlling the Narrative: Apple’s counsel argued that the App Store’s value was “intangible,” but without a financial model to back it up, the argument failed. Alternatively, the claimant’s expert convinced the judge with a “reasonable approach” to cost allocation (which was deemed reasonable as it followed the logic of an investor).
- Established case-law: After the Pfizer/Flynn case, Kent vs Apple, and now Rodger v. Google proceedings, the Tribunal is setting some rules about profitability in “excessive pricing” cases. Rules that the CMA also applied in recent market studies, and which may also be applied in other jurisdictions given the legal foundation used. Lawyers will need to present, argue and defend financial metrics from early on in their proceedings.