Google operated its app store and payments system as an “illegal monopoly”, a US court has ruled, in a major win for games developer Epic that paves the way for legal action in Australia.
A jury in California this week unanimously found that the Google Play app store has been operating as an illegal monopoly by stamping out competing app stores and charging unjust fees on app developers.
Epic, the developer of Fortnite, launched the case against Google three years ago, arguing that the tech giant had used its market power through Android devices to make its own app store far more dominant than its rivals.
Epic told the court that Google “suppresses innovation and choice” due to a “web of secretive, anti-competitive agreements”.
After just a few hours of deliberation, the jury in California agreed with Epic on all counts. The jury answered yes to all questions put to it: that Google has a monopoly power through its Android app distribution markets and in-app billing services markets; that it did anti-competitive things in those markets; and that Epic was injured by this behaviour.
It’s a significant ruling and a major win for Epic following its loss against Apple over the same issues, and could have global ramifications, including in Australia, where a similar legal challenge is brewing.
The judge in the case will now decide what remedies to apply, with Epic arguing that Google should be forced to give app developers total freedom to introduce their own app stores and billing systems.
Google has already flagged it will appeal the decision, meaning any potential remedies and changes are likely still a while away.
Totally epic win
Epic hailed the court win in a post on the company’s website.
“Today’s verdict is a win for all app developers and consumers around the world,” Epic Games said in the post.
“It proves that Google’s app store practices are illegal and they abuse their monopoly to extract exorbitant fees, stifle competition and reduce innovation.”
Google vice-president of government affairs and public policy Wilson White said the company would be appealing the decision.
“Android and Google Play provide more choice and openness than any other major mobile platform,” White said in a statement.
“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.”
Google’s Play is one of the largest app stores in the world and is in direct opposition to Apple’s App Store.
Google’s Android system powers about 70 per cent of smartphones globally, Epic claimed in the court case, and the vast majority of Android apps are distributed through the Play store.
Google takes a cut from all app purchases and in-app purchases on the Play store on Android devices.
The case heard details of secret revenue sharing deals Google held with major game developers, with arguments that these were designed to squash rival app stores.
Epic was also challenging the transaction fee of 30 per cent that Google put on all app developers and its linking of the Play store with its billing services, meaning developers must use both of these to have their app in the store.
Unhappy campers
The case kicked off in mid-2020 when Epic launched a campaign for its Fortnite in-game currency offering discounts through a new way of paying for the items dubbed “Epic direct payments”, outside of the Apple and Google payment services.
This led to the game being quickly removed from both app stores and Epic launching lawsuits against the two tech giants in the US, European Union, United Kingdom and Australia.
In September 2021 a judge ruled mostly against Epic in its case against Apple, deciding that Apple is not a monopolist “despite considerable market share of over 55 per cent and extraordinarily high profit margins”.
The judge ruled in favour of Apple in nine out of 10 of Epic’s allegations, but did find that Apple must allow app developers to sell in-app purchases outside of its own systems.
Epic’s win against Google in the US paves the way for a similar lawsuit to begin early next year in Australia.
Epic has launched legal proceedings against Google and Apple in Federal Court, alleging that the companies have contravened provisions in the Australian Competition and Consumer Act.
Apple attempted to have this case thrown out, arguing that it can only be heard in the US, but this was eventually rejected, with the case to go ahead.
Epic’s case against Apple and Google will be heard together, along with a class action on behalf of app developers and consumers, and is scheduled to begin in Federal Court next March.
It comes after the Senate Economics References Committee called on the federal government to legislate to “prevent anti-competitive practices through the bundling of payment services and products by large digital platforms”.
