Google’s problems remain unchanged since a US jury found that the company is monopolizing the Play Store. Video game developer Epic Games, best known for the game Fortnite, has won an antitrust trial against Google. The win could have a big impact on the app store economy. The decision was on the grounds that the tech giant was establishing an unlawful monopoly through its Play store and billing service. Three hours of deliberation followed a four-week trial that focused on a lucrative payment system within the Google Play Store before a unanimous decision was reached. The store serves as the primary location for hundreds of millions of users worldwide to download and install apps compatible with smartphones powered by Google’s Android software.
Epic Games win the antitrust trial
Three years ago, Epic Games sued Google, claiming that the internet search giant had been abusing its position to keep its Play Store free from rivals. In this way, it was safeguarding a billion-dollar profit margin. The gaming industry has traditionally seen game developers submit to the power of app stores. With this victory, the industry marks a turning point. The fact that Epic Games’ lawsuit against Apple was dismissed two years ago makes it even more noteworthy. Tim Sweeney, the CEO of Epic Games, stated in court that his company could save up to billions of dollars if they didn’t have to pay Google. Though the fines for the Google case have not yet been determined, Epic Games did not submit any financial claims.
What was the Google v Epic Games antitrust trial?
Video game developer Epic Games claimed Google Play Store Antitrust Litigation was charging app developers 30% more for in-app purchases. With this, Google’s Play Store was essentially eliminating all competition. Despite making up a small portion of Google’s overall revenue, these kinds of transactions are nevertheless a high-margin business. To maintain more of the money it makes from in-app purchases and provide an app store that could rival Google’s Play Store for Android users, Epic filed a lawsuit against Google three years prior in 2020.
Epic said that Google illegally tied up its Play Store with its billing services. Doing so, developers were forced to use both in order to have their apps included. Epic accused the tech giant of using anti-competitive practices that hurt both consumers and developers. Google pulled Epic’s video game Fortnite from its store because the developer attempted to avoid paying Google’s fees by charging users directly for in-app purchases. The lawsuit was sparked by this.
What did the jury rule in this antitrust trial?
After a month-long trial, the nine-person jury unanimously found in favor of Epic Games. They agreed on all eleven questions after three hours of deliberation. In essence, the jury concluded that Google had obtained and was still enjoying monopoly power in the markets for Android app distribution and in-app purchases of digital goods and services.
Google’s attorneys contended during the trial that the company could not function as a monopoly. It stated this was because it was in competition with Apple’s App Store. App Store is more widely used in the United States. Additionally, Google announced that it would appeal to the 9th U.S. Circuit Court of Appeals, which is located in San Francisco.
This is an example of the greatness of the American justice system. A billion dollar company challenges a trillion dollar company over complex antitrust practices, and a jury of 9 citizens hears the testimony and renders a verdict. And here it is in writing! https://t.co/6btDlhRqEF
— Tim Sweeney (@TimSweeneyEpic) December 12, 2023
What are the implications of the ruling?
After this ruling, Epic Games will have the opportunity to file a court document. It can outline its recommendations for fixing Google’s Play Store. However, it could jeopardize Google’s $10 billion in yearly revenue from in-app purchases and app sales. On Google’s Android mobile platform, the ruling may open the door for competing app stores. However, long appeals procedures will probably stall any changes for years.
In addition, Google might be asked to permit developers to employ payment processors other than Google’s, which could have a big effect on Google’s whole business strategy. The verdict of the trial won’t have a direct impact on the company’s primary revenue stream, which is digital advertising primarily connected to its search engine, Gmail, and other services. The jury’s unanimous decision may also put more pressure on Google at a moment when the tech giant is facing legal action from the US Justice Department, which has charged it with violating antitrust laws.
Google’s claims of an open app store market
As proof of a free market, Google cited competing Android app stores. These included the one Samsung installs on its well-known smartphones. More than 60% of Android phones offer alternate stores for Android apps. This is in addition to the competing app stores that come pre-installed on devices manufactured by other companies.
However, Epic provided proof to support the claim that Google views competition as a figment of the imagination. It pointed to the hundreds of billions of dollars it has given to firms like Activision Blizzard, a developer of video games. This was to deter them from launching competing app stores. In addition to providing these payments, Epic Games asked the jury to take into account the Google “scare screens” that appear and alert users to possible security vulnerabilities when they attempt to download Android apps from some of the alternatives to the Play Store.
Similar case: Epic Games vs Apple
In an identical lawsuit Epic filed against the iPhone app store, Apple won. However, a federal judge’s decision from that 2021 trial is being appealed to the US Supreme Court. The case’s outcome differed significantly from that of Epic Games’ antitrust lawsuit against Apple, which was mostly unsuccessful. Even though Epic is still trying to prove Apple was a monopolist, a lower court judge and an appeals court upheld the decision. It means the case will not go to the U.S. Supreme Court. Epic prevailed on a single issue: developers of apps and games ought to be permitted to promote cheaper alternative stores within the apps they offer for sale on the Apple App Store.
Major difference in both trials
The primary distinction between Google and Apple’s case was Project Hug. Apple didn’t need to sign agreements with other businesses to maintain its competitive advantages because it produced its own smartphones. However, Google developed the Android platform. To maintain global collaboration and the viability of its Google Play store, Google launched Project Hug. In this, it compensated rival retailers like Samsung and game developers handsomely for using its store instead of competing with it or eliminating competition.
For example, Google paid Samsung money to guarantee that, in addition to Samsung’s own store, Google Play was the only app store that came preinstalled on Samsung smartphones. Additionally, Google allegedly advised game developers to use the Google Play store instead of starting their own rival businesses. According to Epic, Google was able to charge up to 30% in royalties for each app, game, or in-game virtual good that was purchased because of these practices. Developers were forced to comply and pay the costs.
Video Game industry expansion
In 2023, the video game industry experienced both successes and setbacks, including studio closures, significant layoffs, and numerous lawsuits. There are significant ramifications for the video game industry from lawsuits. For instance, Epic Games’ against Apple and Google, as more developers aim to enter the mobile market. Given Epic’s victory over Google, it’s possible that Google will be forced to modify its invoicing procedures and possibly reduce its royalties. For independent developers and smaller studios, this would be encouraging. It would increase the financial viability of mobile app stores, giving them additional platform options for their games. Any potential fines, though, are probably going to be challenged by Google. It would mean that Epic might have to continue battling the law for years to come.