Google faces US lawsuit over play store monopoly

Washington — Thirty-seven US state and district attorneys-general have sued Google, alleging that it bought off competitors and used restrictive contracts to unlawfully maintain a monopoly for its app store on Android phones.

The allegations about Google Play stem from an investigation involving almost every US state that began in Sept. 2019 and have already resulted in three other lawsuits against the company. The cases threaten to force major changes to how the company generates billions of dollars in revenue across its businesses, including advertising, in-app purchases and smart home gadgets.

Google said on Wednesday the litigation was about boosting a handful of major app developers that want preferential treatment rather than about helping small businesses or consumers. It maintains that, unlike Apple with its App Store on iPhones, Android supports competitors to Google Play.

“Android and Google Play provide openness and choice that other platforms simply don’t,” the company said in a blog post.

The states, led by Utah, New York, North Carolina and Tennessee, argue that Google has generated “enormous profit margins” from Google Play by engaging in illegal tactics to preserve monopolies in selling Android apps and in-app goods.

In the US, Google Play accounts for 90% of Android apps downloaded, according to the lawsuit.

“Google leverages its monopoly power with Android to unlawfully maintain its monopoly in the Android app distribution market,” the lawsuit says.

The states pointed to agreements already targeted in other lawsuits such as those Google has with mobile carriers and smartphone makers to promote its services.

But they added fresh claims after reviewing internal company documents. The states allege that Google bought off developers so they would not support competing app stores, and that through numerous secret projects it intended to pay Samsung Electronics, whose rival app store posed the biggest threat, to stop competing.

Samsung declined to comment.

The plaintiffs, which include California and the District of Columbia, also say Google has unlawfully mandated that some apps use the company’s payment tools and give Google as much as 30% of digital goods sales. The “extravagant commission”, compared with the 3% other marketplaces charge, has forced app makers to raise prices and consumers to spend more, the states said.

“Google Play is not fair play,” Utah attorney-general Sean Reyes said in a statement. “It must stop using its monopolistic power and hyper-dominant market position to unlawfully leverage billions of added dollars from smaller companies, competitors and consumers beyond what should be paid.”

The states want the consumers to get their money back. They also called for civil penalties and a court-imposed monitor to ensure Google eases the process for consumers, app developers and smartphone makers to use or promote alternatives to Google Play and the official payment system for 20 years. In addition, the states seek to stop Google’s payments to Samsung and developers.

The states said on Wednesday they have not ruled out taking similar action against Apple over its App Store.

The filing drew praise from Meghan DiMuzio, the executive director for the Coalition for App Fairness, which represents companies including Match Group and Spotify Technology that oppose some of the Google Play rules.

“Anti-competitive policies stifle innovation, inhibit consumer freedom, inflate costs, and limit transparent communication between developers and their customers,” DiMuzio said.

Fearing Samsung

The lawsuit said that while Google does enable consumers to avoid its play store, it displays “generally misleading warnings and hurdles” to discourage such activity.

Google does not break out its play store’s financial performance but has said the unit along with several others together generated $21.7bn in revenue in 2020, or about 12% of overall sales.

Google’s worries about Samsung grew after the South Korean company worked with video game maker Epic Games to launch “Fortnite” exclusively for Android devices in 2018, according to the lawsuit.

Epic’s bypassing of Google Play cost Google millions of dollars in revenue, and it “immediately launched multiple co-ordinated initiatives designed to block the emergence of a competing Galaxy Store”, the lawsuit said. “Google viewed these projects as an integrated approach to eliminating the threat of more developers following Epic’s lead.”

Last year, Epic itself sued Google and Apple separately in federal court in California over app store policies. Proposed classes of developers and consumers have joined the cases.

A judge’s decision in the Apple contest is expected in weeks, and a hearing on Google’s effort to dismiss the case against it is scheduled for July 22.

The lawsuits come as antitrust regulators step up scrutiny  of big tech companies, but they suffered an early blow last week when a judge dismissed a Federal Trade Commission lawsuit against Facebook.

The ruling should not affect the Google Play case because it covers different circumstances, the states suing the company said. 

Reuters