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Google Play Store Cases

Neal Mehrotra and Henry James Brockway

Google Play Store Cases
Peter Dazeley via Getty Images

On December 11, 2023, a federal jury handed Epic Games (Epic) a win in its fight against Google when the jury decided that Google illegally monopolized both the Android app distribution and Android in-app billing markets, imposed unreasonable restraints of trade, and illegally tied its Play Store and Play Billing services, in violation of Sections 1 and 2 of the Sherman Act. Separately, on December 18, 2023, the terms of the settlement between Google and a coalition of state attorneys general (State AGs) in a similar lawsuit were made public, with Google agreeing to pay $700 million in compensation and penalties and committing to several changes to its policies and practices with respect to the Play Store and Play Billing. Epic’s trial victory against Google stands in contrast to the result in a substantially similar case Epic largely lost against Apple. The divergent outcomes may in part be a result of the differences between jury and bench trials as well as Google’s bad internal documents and missing or deleted evidence.

1. Background

Google owns the Android mobile operating system, which it licenses to device manufacturers (such as Samsung and LG). Google has agreements with these manufacturers to make its Play Store the default app store that is preloaded onto all new Android devices. The Play Store is the primary way that Android users can download apps. Google requires that all purchases on the Play Store process payment through its Play Billing services (including app purchases and purchases of digital content or subscriptions). For apps that are downloaded from the Play Store, Google also requires that payment for all subsequent in-app purchases be processed through Play Billing. Google charges a fee for processing transactions through Play Billing (typically ranging between 15-30% of the purchase amount). Google does not allow app developers to use alternative, third-party payment processing options.

Epic is a game developer that makes Fortnite, a popular online game that is accessible through various methods and was formerly available as an app for download on Android and Apple devices. Epic earns revenues from Fortnite based on players making in-app purchases of digital currency (V-Bucks) for use in the Fortnite game. Epic distributed Fortnite through the Play Store (as well as through the Apple app store in a similar arrangement) and so was required to use Play Billing to process all payments made on the Play Store, with 30% of its revenues being paid to Google.

In 2020, Epic deployed hidden code in an update to Fortnite without Google or Apple’s knowledge, which allowed consumers to purchase V-Bucks directly through Epic’s payment processing platform. Epic recommended that Fortnite players make in-game purchases through Epic’s website instead of through Android or iPhone apps. Epic acknowledged that this violated Google’s developer distribution agreement and Apple’s developer product licensing agreement, which respectively required Epic to use Google’s billing system for Play Store purchases and Apple’s IAP for App Store purchases and labeled its rebellion “Project Liberty.” Google and Apple reacted by removing Fortnite from their respective app stores on the very same day.

Epic sued Apple and Google in federal court in August 2020, filing substantially similar lawsuits against each of them, alleging that they violated the Sherman Act and state antitrust laws by (1) monopolizing their respective app stores and corresponding in-app payment systems, (2) imposing unreasonable restraints of trade on players in those markets, and (3) illegally tying each app store and its in-app payment system.

In addition to the Epic lawsuit, a coalition of attorneys general from 37 states (initially, ultimately all 50 states plus DC, Puerto Rico, and the Virgin Islands joined) sued Google in July 2021, accusing Google of forming an unlawful monopoly in the app distribution and in-app-payment services markets for Android, as well as unreasonable restraints of trade, and tying, harming both Android phone users and app developers. There was no similar action against Apple from any state attorneys general.

2. Settlements with States and Class Members

The coalition of State AGs reached a settlement with Google in September 2023, ahead of trial, which was set to begin November 6, 2023. The terms of the settlement were, however, kept confidential ahead of the Epic v. Google trial, with the details being publicly revealed on December 18, 2023, following the jury verdict in Epic v. Google. Under the terms of the settlement, Google agreed to pay a total of $700 million ($630 million of the settlement goes to consumers and $70 million directly to the States) and agreed to several commitments to its Play Store and Play Billing policies and practices, including:

  • Google must continue to technically enable installation of third-party apps on Android phones from outside the Google Play Store for at least seven years and reduce the sideloading warning that pops up when users attempt to download a third-party app from outside the Google Play Store to a single screen with specified language for at least five years;
  • Google will not enter contracts that require Play Store to be the exclusive, pre-loaded app store on a device or home screen or require Google’s consent to preload a third-party app store for at least five years;
  • Google will maintain Android system support for third-party app stores, including allowing automatic updates, and not require developers to launch their app catalogs on the Play Store at the same time as they launch on other app stores for at least four years;
  • Google must give all developers the ability to allow users to pay through in-app billing systems other than Google Play Billing for at least five years;
  • Google will not require developers to offer the best prices for their apps on Google Play for at least five years;
  • Google must permit developers to steer consumers toward alternative, non-Google billing systems by advertising cheaper prices within their apps themselves for at least five years; and
  • Google must submit compliance reports to an independent monitor who will ensure that Google is not continuing its anticompetitive conduct for at least 5 years.

3. Epic v. Google Trial

Epic’s case against Google went to a jury trial in the Northern District of California, with the jury returning a verdict on December 11, 2023. The jury unanimously rendered a verdict for Epic on all counts after just four hours of deliberation, finding that: (1) Google has monopoly power in the markets for Android app distribution and in-app billing solutions, (2) Google’s conduct in those markets was anticompetitive, and (3) Epic was injured by Google’s conduct. The jury also found an illegal tie between Google’s Play Store and Play Billing services.

a. Market Definition

The jury adopted Epic’s suggested market definitions of an Android app distribution market and a market for Android in-app billing services for digital goods and services. These product market definitions excluded Apple devices as well as other platforms “facilitating digital transactions,” which Google had argued should be included in the relevant market (and the former of which would have swept in Xbox and Nintendo as platforms helping Epic get digital transaction dollars through app purchases). The relevant geographic market the jury adopted was worldwide, excluding China.

b. Monopolization

The jury decided that Google willfully acquired or maintained monopoly power in both relevant markets by engaging in anticompetitive conduct, which injured Epic.

Epic argued consumers have no real Android alternative to the Play Store if they want to get Fortnite. Further, Epic’s expert testified that when Google kicked Fortnite off its Play Store, Fortnite’s Android usage declined substantially, which its lawyer argued was proof of Google’s market power because Android users lacked alternative means to get the game.

Google unsuccessfully argued that Apple’s App Store was a competitive constraint on Play Store (and that Apple had 64% of app store revenues) in a broader app store market. Google’s argument was undermined by consumer surveys showing app store choice was not a top factor in decisions to switch, evidence that the rate of switching was low, and business documents from Google showing that it regarded its “existential question” as how it continues “to keep Play as the preeminent distribution platform for Android” without mentioning the Apple app store.

Despite evidence introduced by Google about the existence of other app stores and the ability for sideloading (i.e., downloading outside of the Play Store), Epic successfully showed that Google’s Play Store accounted for over 90% of app downloads on Android devices, with no other app distribution service accounting for more than 5% of app downloads.

c. Unreasonable Restraint of Trade

The jury also found that Google unlawfully restrained trade (under Section 1 of the Sherman Act and California state law) by entering into agreements that unreasonably restrained trade in the markets for Android app distribution and Android in-app billing services for digital goods and services. The jury found that each of the (1) developer distribution agreements, (2) agreements with Google’s alleged competitors or potential competitors under Project Hug, and (3) agreements with original equipment manufacturers that sell mobile devices (including mobile application distribution and revenue sharing agreements) were unreasonable restraints of trade.

Google’s agreements with app developers offered millions of dollars in support, credits, gift card programs, promotions, and dedicated access to Google staff in exchange for developers listing their apps on Play Store and/or not creating their own app stores. Epic characterized these agreements as “bribes” to ensure Play Store dominance and stifle competition from other app stores. Epic further presented internal documents showing that Google viewed Epic Games as a “contagion” that would infect Android’s most significant game and app developers, turning them into “agitators” that would demand lower fees and ultimately defect from the Play Store. Google also made agreements with device manufacturers, including Samsung and Motorola. Google offered Motorola an incentive payment when a certain percentage of its devices did not preinstall app stores other than Google Play Store.

d. Tying

The jury also found that Google unlawfully tied the use of the Play Store to the use of Play Billing.

Epic claimed that Google’s requirement that its Play Billing system be used to process all purchases on the Play Store or in apps downloaded from Play Store resulted in a higher fee than would otherwise prevail if other payment processing systems could be used. Epic alleged that it and other app developers were directly harmed by having to pay the 30% processing fee charged by Google, which also resulted in end consumers paying a higher price.

Google unsuccessfully argued that its Play Store and Google Play Billing are not separate products (a precondition for tying) because they are part of a two-sided platform that serves developers and users, where the user’s valuation of the platform depends on the number of apps (and indirectly, developers). Google also unsuccessfully argued that the two were not tied because the sale of one product is not conditioned upon the purchase of another since the in-app purchases for V-Bucks are not required once you download Fortnite in the Google Play Store.

e. Antitrust Injury

The jury found that Epic suffered a cognizable antitrust injury. Epic argued that it experiences the same harms as end consumers in the form of higher costs for in-app purchases, less choice of app stores, and less innovation than would otherwise exist absent Google’s anticompetitive conduct.

f. Google’s Post-trial Motion

On February 1, 2024, Google filed a motion for renewed judgment as a matter of law or for a new trial. Google’s primary arguments were: (1) the jury verdict depended on legally flawed market definitions, (2) legal errors compromised the jury instructions, (3) the jury verdict was unsupported by legally sufficient evidence, and (4) erroneous evidentiary rulings.

g. Remedies

If Judge Donato does not grant Google’s motion, it remains to be seen exactly what Epic will ultimately win despite prevailing at trial. Epic’s complaint only sought injunctive relief. Despite not seeking monetary damages, Epic’s CEO, Tim Sweeney, has suggested that Epic stood to make hundreds of millions or even billions of dollars simply by not having to pay Google’s fees.

Epic has told the court it wants every app developer to have total freedom to introduce its own app stores and its own billing systems on Android. Judge Donato is expected to rule on the remedy in March 2024, after ruling on the renewed motion for judgment as a matter of law or for a new trial from Google (assuming the parties do not reach a post-trial settlement on remedies).

Determining the scope of the remedy will be a complicated task for the court. Judge Donato has himself acknowledged in court that determining the terms of any injunction would be “challenging” and indicated he would hold a “hot tub” hearing with experts from both sides to debate what the court's injunction should look like. Judge Donato has also said that he would not “micromanage Google” and expressed doubt that district court judges are in the best position to make determinations such as whether Google can have four click-through screens before sideloading an app but not eight or to reset the fee developers can be required to pay to Google. Moreover, it is not entirely clear what injunctive relief Epic would get that would go meaningfully beyond the settlement with the State AGs discussed earlier.

4. Comparison to Epic v. Apple

The result in the Epic v. Google trial surprised many commentators given that Epic largely lost its parallel case against Apple two years ago (although the court did order Apple to let Epic and other app developers steer customers to outside platforms for purchases). Epic was largely unsuccessful in its lawsuit against Apple despite facts suggesting Apple has more restrictive policies towards app developers than Google (Apple’s app store is the only app store on Apple devices and sideloading is not permitted.) There are several differences that may help explain the divergent results in the Apple and Google cases.

First, the Apple case was presided over by a judge in a bench trial, whereas the Google case was decided by a jury. (Google had requested a bench trial, a request that Judge Donato denied.) The jury may have been receptive to Epic’s asserted underdog story and swayed by inflammatory documents and Google’s perceived malfeasance (both in this trial and in other recent cases against it).

Second, Google had several “bad” internal documents, including those related to Project Hug. Epic was also repeatedly referred to in Google documents as a worrisome contagion that could cause other developers to defect from the platform.

Finally, Google also had issues with missing and deleted evidence, including rampant use of “history-off chats” that auto deleted within 24 hours. Alphabet’s CEO, Sundar Pichai, even testified that employees intentionally used this feature to make certain conversations disappear and that they did not change the auto-delete setting even after they were made aware of their legal obligation to preserve evidence. Judge Donato also summoned Kent Walker, Alphabet’s chief legal officer to testify about Google’s policies, and accused him of “tap dancing” around questions about how Google’s employees were instructed to retain communications. Judge Donato chastised Google for its handling of evidence, stating that it is “deeply troubling to me as a judicial officer of the United States” that Google acted this way, calling it “the most serious and disturbing evidence I have ever seen in my decade on the bench with respect to a party intentionally suppressing relevant evidence.” As a result, Judge Donato elected to give a “permissive jury instruction” that the jury “may” infer that missing evidence from Google might have helped Epic and hurt Google. At least one juror confirmed in a post-trial interview that the deleted chats, as well as Epic’s CEO Tim Sweeney appearing more credible than Sundar Pichai, factored into the jury’s decision.