Google Loses On Every Count In Play Store Antitrust Case With Epic Games

Authored by Matt Stoller via The BigNewsletter.com,

Google just lost its first antitrust trial, as a San Francisco jury returned a decision that Google harmed rival Epic Games, maker of the popular video game Fortnite, in the $48 billion dollar app store Android market. Google is facing multiple antitrust cases in different parts of its business, this is the first trial to reach a decision. So what happened? And what does it mean going forward?

Three years ago, Epic’s CEO Tim Sweeney launched a dramatic legal assault against Apple and Google for monopolizing the on-ramp to the phone. This case didn’t come from the left or right, but from the commercial world. It was part of what I called a civil war in American business, as smaller companies across the economy began marshaling against dominant big tech goliaths.

Epic sued both Apple and Google to break their ironclad control over app stores. Here’s the Wall Street Journal summarizing the case:

Epic’s case centered on Google’s dominant position in the market for apps on mobile devices running the company’s Android software, and the fees it charges for developers on its Play Store.

The game developer in 2020 began encouraging Fortnite players to pay Epic directly for purchases of in-game items, rather than using systems developed by Google and Apple. Both tech giants kicked Fortnite out of their app stores…

It became clear during the trial that Google’s goal was to maintain its dominance by preventing the emergence of other app stores.

Google worried about a “contagion effect” with other gaming companies if Epic were to move its flagship title Fortnite away from the Play Store, according to company documents the developer presented at trial. 

The tech giant paid $360 million to Activision Blizzard and millions of dollars to 19 other game developers as part of an initiative called Project Hug, an initiative Epic argued was aimed at discouraging them from developing rival app stores. The search company argued the payments encouraged gaming companies to make their titles available in the Play Store.

The judge also ruled that Google had destroyed relevant trial evidence, and told the jury to weigh that behavior in its decision. Here’s Sean Hollister in the Verge on what happened after the jury heard the testimony and judicial instructions:

After just a few hours of deliberation, the jury unanimously answered yes to every question put before them — that Google has monopoly power in the Android app distribution markets and in-app billing services markets, that Google did anticompetitive things in those markets, and that Epic was injured by that behavior. They decided Google has an illegal tie between its Google Play app store and its Google Play Billing payment services, too, and that its distribution agreement, Project Hug deals with game developers and deals with OEMs were all anticompetitive.

It’s a long and winding road for Epic. The firm lost the Apple case, which is on appeal, but got the Google case to a jury, along with several other plaintiffs. Nearly every other firm challenging Google gradually dropped out of the case, getting special deals from the search giant in return for abandoning their claims. But Sweeney was righteous, and believed that Google helped ruined the internet. He didn’t ask for money or a special deal, instead seeking to have Judge James Donato force Google to make good on its “broken promise,” which he characterized as “an open, competitive Android ecosystem for all users and industry participants.”

Specifically, Sweeney asked for the right for firms to have their own app stores, and the ability to use their own billing systems. Basically, he wants to crush Google’s control over the Android phone system. And I suspect he just did. You can read the verdict here. Here’s part of the jury form.

So what happens now?

In this case, the judge will come up with remedies next year. The order could be broad, and will likely loosen Google’s control over the mobile app ecosystem. Google has already announced that it will appeal, so the case isn’t over.

That said, Google is likely to be in trouble now, because it is facing multiple antitrust cases, and these kinds of decisions have a bandwagon effect. The precedent is set, in every case going forward the firm will now be seen as presumed guilty, since a jury found Google has violated antitrust laws. Judges are cautious, and are generally afraid of being the first to make a precedent-setting decision. Now they won’t have to. In fact, judges and juries will now have to find a reason to rule for Google. If, say, Judge Amit Mehta in D.C., facing a very similar fact-pattern, chooses to let Google off the hook, well, he’ll look pretty bad.

There are a few important take-aways.

First, this one didn’t come from the government, it was a private case by a video game maker that sued Google over its terms for getting access to the Google Play app store for Android, decided not by a fancy judge with an Ivy League degree but by a jury of ordinary people in San Francisco. In other words, private litigation, the ‘ambulance-chasing’ lawyers, are vital parts of our justice system.

Second, juries matter, even if they are riskier for everyone involved. It’s kind of like a mini poll, and the culture is ahead of the cautious legal profession. This quick decision is a sharp contrast with the 6-month delay to an opinion in the search case that Judge Mehta sought in the D.C. trial.

Third, tying claims, which is a specific antitrust violation, are good law. Tying means forcing someone to buy an unrelated product in order to access the actual product they want to buy. The specific legal claim here was about how Google forced firms relying on its Google Play app store to also use its Google Play billing service, which charges an inflated price of 30% of the price of an app. Tying is pervasive throughout the economy, so you can expect more suits along these lines.

And finally, big tech is not above the law. This loss isn’t just the first antitrust failure for Google, it’s the first antitrust loss for any big tech firm. I hear a lot from skeptics that the fix is in, that the powerful will always win, that justice in our system is a mirage. But that just isn’t true. A jury of our peers just made that clear.

*  *  *

Thanks for reading! Your tips make this newsletter what it is, so please send me tips on weird monopolies, stories I’ve missed, or other thoughts. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.