Google losing the antitrust lawsuit brought by Epic Games concerning the Play Store will have far-reaching implications for the mobile app economy.
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In the jury’s view, Epic showed a “preponderance of evidence [that] Google willfully acquired or maintained monopoly power by engaging in anticompetitive conduct” regarding both the Android app distribution market and Android in-app billing services for digital goods and services transactions in worldwide markets, exclusive of China.
The verdict comes after Epic lost a similar suit with Apple, which it is appealing. Google also intends to contest its verdict.
Why did Google lose when Apple won? And what does the ruling mean for the app economy? Let’s explore.
A difference in openness
Turning the clock back, the differences between Epic’s case against Apple and Google were clear to some. In a reasonable victory lap, technology and markets analyst Ben Thompson reminded folks that he pointed out the critical difference between the two cases years ago. In his view, Apple offered a fully closed ecosystem, while Google proffered its own with a veneer of openness, belied by the company’s deals with OEMs (original equipment manufacturers) who built the hardware that its mobile operating system ran on, making the twin suits far from identical.
What happened with Google? The jury found that Epic reasonably proved that Google made “agreements that unreasonably restrained trade in a relevant antitrust market,” including deals with “potential competitors under Project Hug or Games Velocity Program,” and “agreements with OEMs that sell mobile devices (including MADA and RSA agreements).”
For context, Project Hug was a campaign with which Google compensated certain gaming developers for not creating their own app stores. Google had argued that the compensation it made to developers was not a bribe. When Epic declined a nine-figure deal with Google to put its massively popular game, Fortnite, on Google’s Play Store, the search giant became worried that others might follow suit. Project Hub was later rebranded to Apps and Games Velocity Program.
MADA is Google’s Mobile App Distribution Agreement that, in Google’s own language, is a “core commercial agreement” on Android that, among other things, “secures baseline distribution of [its] apps on Android.” RSA, meanwhile, is Google’s Search Revenue Share Agreement, which “reinforces MADA’s distribution with additional protections for [Google’s] revenue generating services.”
What we learned during the trial is that Google may use money paid to OEMs from RSAs to encourage MADA adoption. That means that Google Play would be included on the OEM’s smartphones, along with other applications (again, per Google’s internal decks). Thus, for a company to make an app store to compete with Google on Android, they would have to replicate the cut of search and Play Store revenue that Google might offer. That would be a tall order for anyone but Google, given its dominance of the search market (also a target of anti-trust suits).
This is a thicket, but Google worked hard to ensure that its app store and apps grew to become big business on Android so it could collect a material cut of mobile app revenue. Google likes the setup because it is lucrative, but developers are not enthused by having to pay a marketplace a cut. Hence the Epic tension.
Apple, on the other hand, makes both hardware and software, and offers no options or even lip service to openness. So, it’s hard to say that Apple is doing anything nefarious in its walled kingdom. Sure, you could argue that Apple is being greedy, but at least the company is up front about it.
Google did other stuff, too, including what the judge in the case called “willful and intentional suppression of relevant evidence in this case” that they found “deeply troubling to [them] as an officer of the court.” That was pretty bad. Also, offering sweetheart deals to certain companies that proffered apps on the Play Store wasn’t a great look.
So what?
First, this was not a case in which the U.S. Federal Trade Commission took on a tech giant. Those cases are also happening, but here we saw one private company fighting another. Thus, this case is not the same sort of political football that another Lina Khan effort might engender.
The regulation is coming from inside the house. It’s likely some members of the jury were using Android phones during the trial.
Google and its Big Tech peers don’t like cases like these because it forces them to detail their business practices. The things we learn! I bet a lot of developers out there are irked that they have no option but to pay a cut of their Android-derived revenue to Google when Spotify does not. The bigger you are, the better deal you might get from Google, in other words. And that sucks if you are small and not powerful. The decision therefore feels like it could empower smaller devs and companies.
Second, the verdict could have knock-on effects. Matt Stoller, the director of research at the American Economic Liberties Project and a writer on monopolies, predicts that the case will have a big impact on future cases:
Google is likely to be in trouble now, because it is facing multiple antitrust cases, and these kinds of decisions have a bandwagon effect. The precedent is set, in every case going forward the firm will now be seen as presumed guilty, since a jury found Google has violated antitrust laws. Judges are cautious, and are generally afraid of being the first to make a precedent-setting decision. Now they won’t have to. In fact, judges and juries will now have to find a reason to rule for Google. If, say, Judge Amit Mehta in D.C., facing a very similar fact-pattern, chooses to let Google off the hook, well, he’ll look pretty bad.
It’s too soon to say sea change, but the lawsuit and its result really do feel very impactful.
Anti-punk rock
One of the more irksome views I’ve seen on Twitter and other technology watercoolers lately is that we should not be too harsh toward large tech companies. We’re lucky to have them, the thinking goes. We don’t want to become the EU, do we, all regulation and no innovation?
Remember Apple’s famous 1984-style ad that criticized the existing market status quo, likening a computing rival to Big Brother and implying that power in the market had become too centralized? Today, some of the companies that were young when the ad came out are now in court defending one of the more aggressive examples of rent-seeking that I can recall.
Ask yourself what it would have been like if Microsoft had forced everyone who wrote apps for Windows to only use its app store, and took a 30% cut. How different would the world look today? How much richer would Microsoft be? How much poorer would other companies be? It really would be a different world.
Yet when it comes to mobile, some folks in tech reflexively defend any tech company against criticism. It’s all very dull.
Now that this verdict is in, I am somewhat curious what pro-Google position you might take if you aren’t on its payroll.