Google faces potential business model changes to app store after Epic wins US antitrust fight

Google faces the threat of significant changes to its app store business in the wake of a jury deciding this week, for the first time this century, that a large tech company violated US antitrust laws.

With specialist journalists in court for the trial’s duration, MLex® has provided blow-by-blow reporting, digging into the potential ramifications of the litigation in real time.

Keep scrolling for key insights on the verdict, or start your 14-day free trial now for full access to our forensic archive on a memorable month for antitrust.

12 December 2023
By Xu Yuan, Jenn Brice, Amy Miller and Mike Swift

Google faces the threat of significant changes to its app store business in the wake of a jury today deciding, for the first time this century, that a large tech company violated US antitrust laws.

The nine-member jury’s lightning-quick decision in favor of Epic Games just three hours after the conclusion of closing arguments means it’s now up to US District Judge James Donato to order a remedy sometime early next year.

Epic sought no damages but wants to force changes in the Play store, such as allowing the use of non-Google in-app payment processing tools and allowing Epic to launch its own app store on Play.

The jury disagreed with one of Google’s main defenses — that the Google Play app store engages in fierce competition with Apple’s app business — in answering all 11 questions on the verdict form in favor of Epic. As a remedy, Donato could order changes in how Google allows apps to be installed from other app stores, or in how it shares billions of dollars of in-app revenues with developers.

“Today’s verdict is a win for all app developers and consumers around the world,” Epic said in a statement from a spokeswoman. “It proves that Google’s app store practices are illegal and they abuse their monopoly to extract exorbitant fees, stifle competition and reduce innovation.”

It wasn’t a close call for the jurors, some of whom were posing for selfies and group pictures with Epic CEO Tim Sweeney in the courtroom hallways after the verdict was read out in court. They also asked for selfies with Lauren Moskowitz, the Epic attorney who one juror said “kept us awake” throughout the proceedings — likely referring to her cutting cross-examinations.

Google said it will challenge the verdict. “Android and Google Play provide more choice and openness than any other major mobile platform. 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,” said Wilson White, Google’s vice president for government affairs and policy.

Jurors defined the relevant markets in this case as those for Android app distribution and for Android in-app billing for digital goods and services worldwide, excluding China. They found Google was an illegal monopolist, engaged in unlawful restraint of trade, and illegally tied Google Play store to the use of Google Play billing.

Donato will determine the appropriate remedies. Epic has said it seeks Android openness for all app developers, specifically the ability to choose their own billing system, pay competitive rates for Google Play billing, and distribute their own app stores.

Donato has warned Epic that “no federal judge is going to micromanage Google.” The judge said he won’t dictate what Google’s service fee should be or grant Epic’s request for an “anti-circumvention order,” which would preempt any creative solutions by Google to curb court remedies.

Donato told counsel there would be “no reason to fast-track post-trial filings” before the December holidays.  The judge will hear Epic’s motion for remedies in January.

Sweeney celebrated with a “Victory over Google!” post on X.

“After 4 weeks of detailed court testimony, the California jury found against the Google Play monopoly on all counts,” Sweeney wrote. “Thanks for everyone’s support and faith! Free Fortnite!”

The jury’s verdict was praised by Google critics, such as the American Economic Liberties Project, which urged Donato to craft a “strong remedy to ensure that app markets are open, accessible and competitive for honest businesses across the tech industry.”

“Epic’s decision to forego monetary damages and instead pursue injunctive relief all but ensure that this decision will fundamentally reshape Google’s monopoly, which it has leveraged to exploit app developers and stifle innovation,” Senior Legal Counsel Katherine Van Dyck said in a statement.

It’s a historic victory for Epic, which largely lost a similar legal battle against Apple two years ago when Judge Yvonne Gonzalez Rogers in Oakland, California, found that Apple isn’t an illegal monopolist, after a bench trial.

Gonzalez Rogers issued an injunction requiring Apple to remove rules that prevent developers from steering their customers outside its App Store, which Apple has asked the US Supreme Court to review. Apple argues that the nationwide injunction is overbroad and defies established limits on the scope of injunctions that can be imposed by courts.

Epic is also asking the Supreme Court to review Gonzalez Rogers’ findings.

Before the trial started, Google made a last-minute attempt to get a bench trial but failed. Donato was insistent that antitrust cases should be decided by juries and praised this particular jury for their focus throughout the trial.

Today’s verdict was the first of what could be three dominos to fall that could force significant changes across Google’s business.

The Google Play trial was one of three direct challenges within a six-month period to three legs of the Internet giant’s business: search, Android and its targeted advertising business. A 42-day antitrust trial over Google’s search business ended last month in Washington DC, with US District Judge Amit P. Mehta expected to rule sometime next year. Google faces a third trial, over its collection of personal data through the private modes of Chrome and other browsers, next month in Oakland, California, in what will also be a jury trial.

Leave a Reply

Your email address will not be published. Required fields are marked *