On Monday, a California jury found Google guilty of monopolistic behavior and unfairly using its app store power. This ruling could, potentially, impact the revenue streams of Silicon Valley and alter the relationship between tech companies and software developers.
Epic Games, the developer of Fortnite, claimed that Google had abused its monopoly in the app distribution and in-app billing markets in the Android operating system. Epic Games accused Google of imposing exorbitant fees on app makers via its Google Play app store.
In January, there will be a separate phase of the trial to determine the remedies Epic Games is entitled to. These remedies could potentially disrupt Google’s lucrative distribution model, which is a significant source of revenue for the company.
Epic Games had previously filed an antitrust lawsuit against Apple, but most of its claims were rejected by a federal judge, and the decision was upheld by an appeals court. Apple has asked the Supreme Court to consider the case. Both cases center on the level of control tech giants should have over third-party developers who make games sold in their app stores. These stores are widely used by consumers to download games and other apps to their mobile devices.
TD Cowen’s TMT policy analyst, Paul Gallant, told Yahoo Finance that the outcome of the Google trial was a surprise to many due to the similarities with the Apple case. The decision will likely have the most significant impact on other antitrust challenges Google is currently facing in other courts. The Justice Department is currently challenging Google’s monopoly in the online search market and the market for online advertising technology in two separate cases.
The fight between Epic, Google, and Apple began in 2020 when Epic attempted to bypass the app stores owned by the tech giants. Epic allowed players to make in-game purchases at a 20% discount, thereby avoiding the 30% fee for in-app or in-game purchases.
Google and Apple reacted by removing Fortnite from their app stores, claiming that Epic had violated their terms of service. Epic then sued both companies.
Since the start of the legal dispute, Apple has changed a few things. It changed the way that it assessed fees for the App Store in 2021, lowering the commission for businesses with annual sales under $1 million from 30% to 15%. Developers are still paid 30% for the first year of a subscription and 15% for each additional year, with subscription services remaining untouched. Apple does not charge developers for downloads, so free apps stay free.
While the Google decision is a setback for the company, Google’s Play Store is not as important as its Search business, which generates a significant portion of the company’s revenue through advertising sales.
“It is a setback for Google,” says Gallant, “but it is not game-changing.”
Needham analyst Laura Martin downplayed the potential risks to Google in a research note, stating that an appeal would delay any negative impact to 2025. The analyst also stated that her contacts, furthermore, expect Google to win any appeal against the ruling.
Epic Games called the verdict a win for developers and consumers.
“It proves that Google’s app store practices are illegal and they abuse their monopoly to extract exorbitant fees, stifle competition, and reduce innovation,” the company said in a statement.
Google has said that it will file an appeal against the jury’s verdict.
“Android and Google Play provide more choice and openness than any other major mobile platform,” said Wilson White, a Google vice president of government affairs and public policy.
“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.”
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