Thirty-seven state and district attorneys general on Wednesday sued Alphabet Inc’s Google, alleging it had bought out competitors and used restrictive contracts to illegally maintain a monopoly for its app store on Android phones.
The Google Play Store allegations stem from an investigation involving nearly every state in the United States that began in September 2019 and has already resulted in three more lawsuits against the company.
The cases threaten to force major changes in the way it generates billions of dollars in revenue from its businesses, including advertising, in-app purchases and smart home gadgets.
Google said on Wednesday that the litigation was aimed at stimulating a handful of large app developers who want preferential treatment rather than helping small businesses or consumers. He argues that unlike Apple Inc with its iPhone App Store, Android supports Play Store competitors.
“Android and Google Play provide openness and choice that other platforms just don’t,” the company said in a blog post.
States, led by Utah, New York, North Carolina and Tennessee, say Google has generated “huge profit margins” on the Play Store by adopting illegal tactics to preserve monopolies in selling apps Android and integrated products.
In the United States, Google Play accounts for 90% of downloaded Android apps, according to the lawsuit.
“Google is leveraging its monopoly power with Android to illegally maintain its monopoly in the Android application distribution market,” the lawsuit said.
The states highlighted deals already covered in other lawsuits such as those Google has entered into with mobile carriers and smartphone makers to promote its services.
But they added new allegations after recently reviewing internal company documents. States alleged that Google had bought out the developers so that they would not support competing app stores, and that through numerous secret projects, it intended to pay Samsung Electronics Co, including the store. Rival applications posed the greatest threat, so that it stops competing.
Samsung declined to comment.
The plaintiffs, which include California and the District of Columbia, also claim that Google illegally required certain apps to use the company’s payment tools and give Google up to 30% of digital product sales.
The “extravagant commission,” compared to 3% in other markets, forced app makers to raise prices and consumers to spend more, states said.
“Google Play is not fair play,” Utah Attorney General Sean Reyes said in a statement. “It must stop using its monopoly power and hyper-dominant market position to illegally exploit billions of additional dollars from small businesses, competitors and consumers beyond what should be paid.”
States want consumers to get their money back. They also called for civil penalties and court-imposed scrutiny to ensure Google facilitates the process for consumers, app developers and smartphone makers to use or promote alternatives to the Play Store. and to the official payment system for 20 years. Additionally, states are seeking to stop Google payments to Samsung and developers.
States said Wednesday they were not ruling out taking similar action against Apple on its App Store.
The case has garnered praise from Meghan DiMuzio, executive director of the Coalition for App Fairness, which represents companies such as Match Group Inc and Spotify Technology SA that oppose some of the Play Store rules.
“Anti-competitive policies stifle innovation, hamper consumer freedom, inflate costs and limit transparent communication between developers and their customers,” said DiMuzio.
The lawsuit said that although Google allows consumers to avoid the Play Store, it displays “generally misleading warnings and barriers” to discourage such activity.
Google doesn’t detail the financial performance of the Play Store, but said the unit, along with several others, generated $ 21.7 billion in revenue last year, or about 12% of overall sales.
Google’s concerns about Samsung grew after the South Korean company worked with video game maker Epic Games Inc to launch “Fortnite” exclusively for Android devices in 2018, according to the lawsuit.
Epic’s Play Store bypass cost Google a few million dollars in revenue, the States said.
Google “immediately launched multiple coordinated initiatives designed to block the emergence of competitive [Samsung] Galaxy Store, ”the lawsuit said. “Google saw these projects as an integrated approach to removing the threat from more developers following Epic’s lead.”
Last year, Epic itself sued Google and Apple separately in federal court in California over App Store policies. The proposed classes of developers and consumers have joined the cases.
A judge’s ruling in the fight against Apple is expected in the coming weeks, and a hearing on Google’s efforts to dismiss the case against it is scheduled for July 22.
The lawsuits come amid growing antitrust scrutiny of big tech companies, but regulators took a heavy blow last week when a judge dismissed a Federal Trade Commission lawsuit against Facebook Inc.
The ruling is not expected to affect the Play Store case as it covers different circumstances, states suing Google have said.
(Reporting by Diane Bartz, Paresh Dave and Karen Freifeld; Additional reporting by Joyce Lee; Editing by Leslie Adler and Richard Pullin)