The legal battle between 36 states and Google’s app store monopoly, explained

The legal battle between 36 states and Google’s app store monopoly, explained
FILE PHOTO: A sign is seen at the entrance to the Google retail store in the Chelsea neighborhood of New York City, U.S., June 17, 2021. REUTERS/Shannon Stapleton
“This lawsuit isn’t about helping the little guy or protecting consumers,” wrote White in his blog post. “It’s about boosting a handful of major app developers who want the benefits of Google Play without paying for it.”

Why is Google being sued?

  • On July 7, 36 states filed a lawsuit against Google LLC for its “extravagant commission,” and “anticompetitive tactics,” used on the company’s app store.
  • The Play store is Google’s version of the iPhone app store, and it accounts for how 90% of apps are downloaded on Android devices.
  • This lawsuit also claims that Google allegedly offered Samsung Electronics Co., Ltd. an undisclosed amount of money as well as a portion of Google’s Play store revenue, so that Samsung wouldn’t pursue big deals for the Galaxy store – the app store competing with Google’s Play Store.
  • Those deals apparently included excluding apps such as Epic Games’ Fortnite on the Galaxy store so that Android users would only be able to find those apps on Google’s Play store.
  • The suit also says that Google paid app developers to keep their apps on the Play store rather than moving them to a different app store. as well as making it impossible to download other app stores through the Play store.
  • Instead, if an Android user wants to download another app store, let’s say, the Galaxy store, they would have to download it from a browser, a process that the state lawyers called “unnecessarily cumbersome and impractical."

But, what’s the problem?

  • So, the thing is, one of the biggest differences between an Android and an iPhone is that Androids can download apps both through the Google Play store, as well as through a web browser. This process is called “sideloading.”
  • The commission that developers have a problem with is the 30% fee Google takes from every purchase run through the Play store.
  • That includes when people buy apps, but also, in-app purchases, which is where app developers make most of their money.
  • Think about Candy Crush, which tempts you to buy extra lives within the app. Google will take 30% of the money you spend buying those lives and the remainder 70% goes to the developers.
  • To put this in perspective, last year, consumers spent around US$143 billion across all apps and Google Play alone, generated revenues of nearly US$40 billion.
  • The problem is, app developers have grown frustrated with the fact that a chunk of their revenue goes to Google and so have found workarounds.

What workarounds?

  • Think about services like Netflix or Spotify, where while you buy the app from the store but you purchase the subscription through their website instead.
  • This then makes it hard for the app stores to get their 30% cut because now we, the users, are buying the subscriptions from Netflix and Spotify’s seperate system.
  • But, Google recently said it would start cracking down on those workarounds, annoying a lot of companies, which is one of the things that brought on this lawsuit.

How is that hard for developers?

  • The commission alone isn’t the only problem; a lot of it is the fact that there really isn’t anywhere else to go other than the Play store.
  • The lawsuit claims that no other app store has more than even a 5% market share. Google has 90%.
  • So, because Google dominates this market, it makes it nearly impossible for any developer to leave the Play store and make money, forcing them to rely on the Play store.
  • Google has also supposedly made it difficult for any other Android app stores to grow by preventing them from advertising through Google ads, as well as through ads on YouTube, which is also owned by Google.
  • What this all means is that if you want to develop apps for Android devices, you have to sell your app through the Google Play store.

How did Google respond?

  • One of the things that Google has done recently is reduce the commission down to 15% on the first US$1 million in sales.
  • It isn’t entirely clear if the intention behind this was to avoid lawsuits like this one or to simply make companies a little happier, but regardless it doesn’t appear to be enough.
  • But, aside from the commission decrease, Google has largely defended its business practices.
  • In a blog post, Wilson White, Google’s senior director of public policy, pointed out that Samsung phones still come with the Galaxy store in addition to the Play store, and that some Android devices, like the Kindle Fire, don’t have the Play store at all, opting for a different app store.
  • White also argued that the business model for the Play store wasn’t restrictive like the lawsuit claimed, citing that the Play store had led to the creation of nearly two million jobs in the US.
  • “This lawsuit isn’t about helping the little guy or protecting consumers,” wrote White in his blog post. “It’s about boosting a handful of major app developers who want the benefits of Google Play without paying for it.”

What’s next?

  • Epic Games is also suing Apple in several countries because of the high commission charged on app purchases.
  • According to Epic Games, Apple and other manufacturers “make vast, vast profits from the sale of their devices and do not in any way justify the 30 percent cut.”
  • Those verdicts will likely come out before this one and might give some clues as to how the court will look at these upcoming problems.
  • The other big thing to watch for is how Google tries to solve the issue on its own. So far it seems like they’ve taken a hard-line approach to the situation, holding their ground and fighting the claims, but they’ve also shown a willingness to reduce the commission so it’s a possibility that they might try to do something similar to dismiss the case.
  • Ultimately, a win for the lawsuit would likely mean that Google would have to make it easier for other app stores to grow, and a loss would signal that tech behemoths like Google and Apple might be able to get away with more than they thought.

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