Did Google violate antitrust laws in Epic battle?

This illustration picture shows a person waiting for an update of Epic Games’ Fortnite on their smartphone in Los Angeles on August 14, 2020.
| Photo Credit: AFP

The story so far: On October 7, U.S. District Judge James Donato issued an injunction against Alphabet-owned Google, ordering the tech giant to open up its Play Store to third-party apps. The ruling prohibits Google from cutting exclusive deals with app developers and phone manufacturers, requiring them to pre-install the Play Store on their devices. Furthermore, Google is now required to allow app developers to offer alternative payment options within their apps.

What has been Google’s response?

Google has already appealed the decision, and in a company blog post, it expressed concerns that the ruling could undermine consumer privacy and security, make it more difficult for developers to promote their apps, and reduce competition on mobile devices. But the court’s decision is seen by many as a crucial turning point in the ongoing battle between developers and app store operators over market control.

What’s the background to this injunction?

Legal tensions between app developers and major app store operators like Google and Apple have been escalating for several years. A major flashpoint came in August 2020, when Tencent-backed Epic Games —the maker of Fortnite — introduced a direct payment option in its app, bypassing both Google’s and Apple’s mandatory in-app billing systems. By doing so, Epic circumvented the hefty commissions that both platforms charge developers for in-app purchases and subscriptions. For Epic Games, these commissions typically range from 15-30%.

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Fortnite, which operates under a free-to-play model, generates revenue through in-app purchases and other gameplay-related items. Epic’s CEO Tim Sweeney took issue with Google’s cut from every transaction made through Android devices, believing it was unjust and restrictive. In retaliation, both Google and Apple removed Fortnite from their respective app stores, leading Epic to file two separate antitrust lawsuits — one against Google and the other against Apple. This move was seen as a direct challenge to the tech giants’ dominance in the app store economy and brought the issue of digital monopolies to the forefront.

The legal battle between Epic Games and Google has been drawn out over several years, with various pieces of evidence surfacing during the trial. A key argument from Epic was that Google’s practices — such as making exclusive agreements with developers and enforcing the use of its own billing system — were inherently anti-competitive. Google had made deals with companies like Activision Blizzard and Nintendo, offering incentives such as lower commissions to get their apps and games onto the Play Store while requiring them to use Google’s billing system.

The case was a jury trial, and in December 2023, the jury unanimously found that Google had engaged in anti-competitive practices that harmed Epic’s business and stifled competition for other developers. This ruling ultimately led to Judge Donato’s injunction.

How do Epic’s lawsuits against Google and Apple differ?

While Epic filed similar antitrust lawsuits against both Google and Apple, the outcomes of these two cases have been quite different. Epic’s lawsuit against Apple, which was a bench trial, resulted in a mixed ruling. U.S. District Judge Yvonne Gonzalez Rogers found that while Apple was not a monopoly in the app marketplace, it had still imposed some anti-competitive policies. The court ordered Apple to allow developers to offer payment options for in-app purchases, but Epic was required to pay damages for violating Apple’s developer agreement.

However, the injunction against Google presents a stark contrast. As the Google case was tried before a jury, Epic had a greater opportunity to present evidence of Google’s exclusive agreements with other developers, which helped convince the jury that Google had violated antitrust laws. This difference in how the cases were handled — bench trial versus jury trial— had a significant impact on the outcomes.

How will it impact the app economy?

The implications of these rulings, especially the injunction against Google, could be profound for the app economy, which is valued at over $250 billion and is largely controlled by Google Play Store and Apple’s App Store. First, Google and Apple will need to revise their app store policies to accommodate more developer-friendly terms, such as allowing alternative payment methods and perhaps reducing the commissions they charge on in-app transactions.

Moreover, the injunction against Google could open the door for alternative app stores, which would reduce the near-total control Google and Apple have over app distribution. For consumers, this might mean lower prices for apps, subscriptions, and in-app purchases, as developers will no longer be forced to pay high commissions to app store operators. The knock-on effect could be significant, allowing smaller developers to pass on savings to consumers and potentially lowering the barrier to entry for new app makers.

However, one potential downside is app discoverability. Today, developers only need to create and promote their apps on two major platforms — Google’s Play Store and Apple’s App Store. But in a world with multiple app stores, smaller developers may find it harder to get noticed and attract customers across these fragmented marketplaces. Overall, these legal decisions mark a major shift in how the app economy may operate going forward. They reflect growing scrutiny of big tech companies and their influence over digital marketplaces, which could pave the way for more open competition and fairer terms for developers.