Jury hands Epic win in antitrust case against Google

Epic Games won big in court today as the jury in its antitrust case ruled that Google has been operating an illegal monopoly with its Google Play app store and billing service.

The case comes three years after Epic Games sued both Google and Apple for the alleged anticompetitive practices in the restrictions it imposes on developers when it comes to its platform for distributing and making payments in its mobile app store.

The case was very different in terms of outcome from the antitrust case against Apple, which Epic Games largely lost. It still has a last-ditch appeal at the U.S. Supreme Court, but a lower court judge and an appeals court affirmed that Epic failed to prove its case that Apple was a monopolist. Epic won on just one point — that app and game devs should be allowed to advertise their alternative stores with lower prices inside their apps that are available on the Apple app store.

But in this case, the jury decided Google had illegally tied its app store and its billing payment service together. And it also ruled that “Project Hug” deals, where Google paid game developers not to compete with its app store, were anticompetitive too.

To me, Project Hug was the biggest difference between the Apple and Google cases. Since Apple makes its own smartphones, it didn’t have to cut deals with other companies to secure its business advantages. But while Google created the Android standard, it has invited many smartphone manufacturers to make phones based on the standard. To secure universal cooperation and to keep its Google Play store strong, Google initiated Project Hug, where it paid alternative stores such as Samsung and game developers substantial amounts of money to use its store rather than compete with it or to foreclose competition.

For instance, with Samsung, Google paid Samsung money to ensure that Google Play was the only app store preinstalled on Samsung smartphones, aside from Samsung’s own store. And Google allegedly paid game developers to use the Google Play store rather than open up their own competing stores. Epic brought witnesses, including former Google employees, who testified to the alleged anticompetitive intent.

Epic argued these practices enabled Google to extract excessive fees — as much as 30% royalties — for every purchase of an app, game, or in-game virtual good. Developers had no choice but to go along and pay the fees, Epic argued, and the jury evidently agreed.

In contrast to the Apple case, Epic was able to surface witnesses during the Google trial who said that Google made payments with anticompetitive intent in mind when it convinced game devs and store owners not to compete. The result, Epic argued, was direct harm to consumers in terms of higher prices.

In a reaction to the jury verdict, Google issued a statement.

“We plan to 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, vice president of government affairs and public policy at Google.

Meanwhile, Tim Sweeney, CEO at Epic Games, tweeted, “This is an example of the greatness of the American justice system. A billion dollar company challenges a trillion dollar company over complex antitrust practices, and a jury of 9 citizens hears the testimony and renders a verdict. And here it is in writing.”

Epic sued Google in federal court in 2020 on the same day it filed a lawsuit against Apple. Federal judge Yvonne Gonzalez Rogers ruled in that case that Apple didn’t have a monopoly on its app store an payment system. But the walls have been closing in around the world. The European Union has passed its Digital Markets Act, which requires gatekeepers to enable competition for their platform markets.

Just as Google did, Apple pointed to Google as proof that it had serious competition. And Google mimicked Apple’s argument that allowing alternative app stores to be advertised to users would expose those users to security risks related to viruses distributed by developers with bad intentions. Epic argued that its own security measures were just as good as those offered by Google.

U.S. District Court judge James Donato in San Francisco will decide what the appropriate remedies will be, and Google is very likely to appeal and keep Epic in court for years to come. Epic CEO Tim Sweeney has not asked for damages but Epic stands to make a lot of money if it doesn’t have to pay the royalties.

Here’s a statement from Epic Games:

Epic v Google Trial Verdict, a Win for All Developers

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

Over the course of the trial we saw evidence that Google was willing to pay billions of dollars to stifle alternative app stores by paying developers to abandon their own store efforts and direct distribution plans, and offering highly lucrative agreements with device manufacturers in exchange for excluding competing app stores. 

These deals were meant to cement Google’s dominance as the only app store in town – and it worked. More than 95% of apps are distributed through the Play Store on Android.

Google imposes a 30% tax on developers simply because they have prevented any viable competitors from emerging to offer better deals. And Google executives acknowledged in Court that their offer of a 26% rate on third party payment options is a fake choice for developers. 

This is, of course, what we know. From the CEO down, Google employees willfully re-directed sensitive conversations to chat, knowing that their contents would be deleted forever.

The evidence presented in this case demonstrates the urgent need for legislation and regulations that address Apple and Google strangleholds over smartphones, including with promising legislation in progress right now with the Digital Markets, Competition and Consumer Bill in the UK and the Digital Markets Act in the EU. 

Thank you to the Court for hearing this important case and for the next steps determining the remedies that will right Google’s decades of anticompetitive conduct. 

And thank you to the jury for their historic decision. The one million game developers who couldn’t be here thank you!