Google CEO Sundar Pichai (L), and Epic Games CEO Tim Sweeney.
Reuters
A federal court jury decided late Monday that Google‘s Android app store, Google Play, uses anti-competitive practices that hurt consumers and software developers.
The verdict is a significant win for Epic Games and its CEO, Tim Sweeney, which have been fighting against mobile app stores and their fees since 2020 — including an unsuccessful challenge to Apple‘s App Store rules which is currently being appealed to the Supreme Court.
Sweeney attributed the win to revelations during the trial that Google had allegedly deleted or failed to keep records such as chats about its secretive deals with app makers. He also noted that it had been a jury trial, while the Apple case was decided by a judge.
“The brazenness of Google executives violating the law, and then deleting all of the records of violating the law,” Sweeney said in an interview with CNBC. “That was really astonishing. This is very much not a normal court case, you don’t expect a trillion-dollar corporation to operate the way Google operated.”
Epic Games originally sued Google in 2020, alleging it uses its dominant position as the developer of Android to strike deals with handset makers and collect excess fees from consumers. Google collects between 15% and 30% for all digital purchases made through its storefront. Epic tried to bypass those fees by charging users directly for purchases in the popular game Fortnite; Google then booted the game out of its store, spurring the lawsuit.
The decision could give app makers a bigger revenue share of the digital app market, which is currently dominated by Google and Apple, and is worth about $200 billion per year. The loss for Google could also empower other antitrust-based challenges to the search giant’s business, including a similar case brought by the Department of Justice.
Monday’s unanimous verdict came after a four-week trial in federal court in California. The jury found that Google acquired and maintained monopoly power in the Android app distribution market, as well as the in-app billing market for digital goods and services transactions.
The result is markedly different than Epic Games’ similar effort to change Apple’s App Store, in which which it lost 9 of 10 counts in 2021. Its only win was a judgment to suspend a rule about being able to email app customers. That ruling is currently being appealed to the Supreme Court.
One major difference was that Epic had a harder time finding documentation from inside Apple. Another is that Google’s Android allows software to be installed from the internet, a process called sideloading, while Apple bars it.
“The big difference between Apple and Google is Apple didn’t write anything down. And because they’re a big vertically integrated monopoly, they don’t do deals with developers and carriers to shut down competition, they just simply block at the technical level,” Sweeney said.
During the Google trial, Epic Games instead focused on whether Google locked up the app store market through deals with handset makers, and whether it scared users away from using Android’s sideloading functionality through security warnings.
It specifically called out secretive revenue-sharing contract deals with Samsung and Chinese handset makers, which these partners allegedly signed in exchange for supporting the Google Play Store on new devices. It also revealed that Google had entered into talks with Epic Games over an investment in the Fortnite maker.
What could come next
U.S. District Judge James Donato will hold hearings in January to determine what changes Google will have to make.
Google might have to alter its Google Play Store rules, including opening up an option for billing and distribution outside of the store. Epic will push for lower fees, alternatives to Google Play and less scary warnings about installing software from the internet, Sweeney said. He added that Epic Games is not seeking monetary damages.
Sweeney is not optimistic that change will be immediate.
“If Google is obstructing a vertical remedy through appeals and isn’t offering an awesome deal,” Sweeney said, the company will not be on Google’s services.
Google said it will appeal the decision. Google previously reached settlements with consumers, state attorneys generals and Match Group over Google’s app store policies.
“We plan to challenge the verdict,” Wilson White, Google vice president for government affairs and public policy, said in a statement. “Android and Google Play provide more choice and openness than any other major mobile platform. The trial made clear that we compete fiercely with Apple and its App Store, as well as app stores on Android devices and gaming consoles. We will continue to defend the Android business model and remain deeply committed to our users, partners, and the broader Android ecosystem.”
Sweeney does hope that some of Google’s deals revealed during the trial could give its partners leverage in negotiations. On Tuesday, Wells Fargo analysts cited the risk of partners striking harder bargains in exchange for carrying Google’s app store or using its billing system.
However, investors don’t seem to be particularly worried that the result of this trial will threaten Google’s app business, which could about total $38.5 billion in annual revenue this year, according to an estimate from Wells Fargo. Google stock fell less than 1% during trading Tuesday.
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