Google CEO Sundar Pichai and Epic Games CEO Tim Sweeney.

Reuters

A federal court jury ruled late Monday that Google’s Android app store Google Play engages in anticompetitive practices that harm consumers and software developers.

The ruling is a significant victory for Epic Games and its CEO Tim Sweeney, who have been fighting mobile app stores and their fees since 2020 – including an unsuccessful challenge to Apple’s app store rules, which is currently being appealed to the Supreme Court .

Sweeney attributed the victory to revelations during the trial that Google had allegedly deleted or failed to preserve records such as chats about its secret dealings with app makers. He also pointed out that it was a jury trial, while the Apple case was decided by a judge.

“The audacity of Google executives to break the law and then delete all records of the law violations,” Sweeney said in an interview with CNBC. “That was really amazing. This is anything but a normal court case, you don’t expect a trillion dollar company to act like Google.”

Epic Games originally sued Google in 2020, saying the company was using its dominant position as an Android developer to cut deals with mobile phone makers and collect excess fees from consumers. Google takes between 15% and 30% for all digital purchases made through its storefront. Epic tried to get around these fees by charging users directly for purchases in the popular game Fortnite. Google then booted the game from its store, which triggered the lawsuit.

The decision could give app makers a larger share of revenue in the digital app market, which is currently dominated by Google and Apple and worth about $200 billion a year. The loss for Google could also lead to other antitrust lawsuits against the search giant’s business, including a similar case from the Justice Department.

Monday’s unanimous verdict came after a four-week trial in federal court in California. The jury concluded that Google acquired and maintained monopoly power in the Android app distribution market and in the in-app billing market for digital goods and services transactions.

The result is markedly different from Epic Games’ similar efforts to change Apple’s App Store, which saw the company lose 9 out of 10 votes in 2021. This ruling is currently being appealed to the Supreme Court.

A key difference was that Epic had a harder time finding documentation within Apple. Another reason is that Google’s Android allows software to be installed from the Internet, a process called sideloading, while Apple prohibits it.

“The big difference between Apple and Google is that Apple hasn’t written anything down. And because they are a large vertically integrated monopoly, they don’t make deals with developers and carriers to eliminate competition, they simply block the technical level,” Sweeney said.

During the Google test, Epic Games instead focused on whether Google was blocking the App Store market through deals with mobile phone manufacturers and whether it was discouraging users from using Android’s sideloading functionality through security warnings.

It specifically mentioned secret revenue-sharing deals with Samsung and Chinese phone makers that those partners allegedly signed in exchange for supporting the Google Play Store on new devices. It was also announced that Google has started talks with Epic Games about investing in the Fortnite maker.

What could come next?

U.S. District Judge James Donato will hold hearings in January to determine what changes Google needs to make.

Google may need to change its Google Play Store rules, including opening up an option for off-store billing and distribution. Epic will push for lower fees, alternatives to Google Play and less scary warnings about installing software from the Internet, Sweeney said. He added that Epic Games is not seeking financial damages.

Sweeney isn’t optimistic the change will happen immediately.

“If Google obstructs a vertical remedy through appeals and doesn’t offer a great deal,” Sweeney said, the company will not participate in Google’s services.

Google said it would appeal the decision. Google has previously reached settlements with consumers, state attorneys general and Match Group over Google’s App Store policies.

“We plan to appeal the ruling,” Wilson White, Google vice president of government affairs and public policy, said in a statement. “Android and Google Play offer more choice and openness than any other major mobile platform. The test made it clear that we are in strong competition with Apple and its App Store, as well as the app stores on Android devices and gaming consoles. “We will continue to defend that.” We remain committed to our Android business model and remain committed to our users, partners and the broader Android ecosystem.”

Sweeney hopes that some of Google’s deals announced during the trial could give its partners leverage in negotiations. On Tuesday, Wells Fargo analysts cited the risk that partners could negotiate tougher deals in exchange for operating Google’s App Store or using Google’s billing system.

However, investors don’t appear to have any particular concerns that the outcome of this process will threaten Google’s app business, which could generate annual revenue of around $38.5 billion this year, according to a Wells Fargo estimate. Google shares fell less than 1% during trading on Tuesday.

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Source : www.cnbc.com

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