US states allege Google ‘unlawfully’ retains Play Store monopoly

  • Latest case to force more competition on Android
  • States point to ‘huge profit margins’ for Play Store
  • Case alleges Google intended to pay Samsung not to compete
  • Google says deal seeks to benefit big developers

WASHINGTON/OAKLAND, Calif., July 7 (Reuters) – Thirty-seven U.S. state and district attorneys general on Wednesday sued Alphabet Inc’s Google , alleging it bought out competitors and used restrictive contracts to illegally maintain a monopoly for its app store on Android phones.

The allegations about Google’s Play Store stem from an investigation involving nearly every US state that began in September 2019 and has already resulted in three other lawsuits against the company. The cases threaten to force major changes to how it generates billions of dollars in revenue from its businesses, including advertising, in-app purchases and smart home gadgets.

Google said Wednesday that the litigation is aimed at spurring a handful of large app developers who want preferential treatment rather than helping small businesses or consumers. He argues that unlike Apple Inc (AAPL.O) with its iPhone App Store, Android supports Play Store competitors.

Join now for FREE unlimited access to Reuters.com

Register

“Android and Google Play provide openness and choice that other platforms simply don’t,” the company said in a blog post.

The states, led by Utah, New York, North Carolina and Tennessee, say Google generated ‘huge profit margins’ on the Play Store by engaging in illegal tactics to preserve monopolies in the sale Android apps and in-app products.

In the US, Google Play accounts for 90% of Android apps downloaded, according to the lawsuit.

“Google leverages its monopoly power with Android to unlawfully maintain its monopoly in the Android application distribution market,” the lawsuit states.

The states pointed to agreements already targeted in other lawsuits such as those Google has with mobile carriers and smartphone makers to promote its services.

But they added new claims after recently reviewing internal company documents. The states alleged that Google bought off developers so they wouldn’t support competing app stores, and that through numerous secret projects it intended to pay Samsung Electronics Co (005930. KS), whose rival app store posed the biggest threat, to stop competing.

Samsung declined to comment.

The plaintiffs, which include California and the District of Columbia, also allege that Google unlawfully required certain apps to use the company’s payment tools and give Google up to 30% of sales of digital goods. The “extravagant commission,” compared to the 3% charged in other markets, forced app makers to raise prices and consumers to spend more, the 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 mine 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 a court-imposed monitor to ensure that Google eases the process for consumers, app developers and smartphone makers to use or promote alternatives to the Play Store and Google. official payment system for 20 years. Additionally, states are seeking to stop Google’s payments to Samsung and developers.

States said on Wednesday they were not ruling out taking similar action against Apple on its App Store.

The filing drew praise from Meghan DiMuzio, executive director of the Coalition for App Fairness, which represents companies such as Match Group Inc (MTCH.O) and Spotify Technology SA (SPOT.N) that oppose some of the rules. from the Play Store.

“Anticompetitive policies stifle innovation, stifle consumer freedom, inflate costs, and limit transparent communication between developers and their customers,” DiMuzio said.

FEARING SAMSUNG

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 does not detail the Play Store’s financial performance, 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 exclusively release “Fortnite” for Android devices in 2018, according to the lawsuit.

Epic’s circumvention of the Play Store cost Google millions of dollars in revenue, the states said.

Google “immediately launched multiple coordinated initiatives to block the emergence of a competing market [Samsung] Galaxy Store,” the lawsuit said. “Google viewed these projects as an integrated approach to eliminating the threat of more developers following Epic’s lead.”

Last year, Epic itself sued Google and Apple separately in federal court in California over App Store policies. Proposed developer and consumer classes have joined the cases.

A judge’s decision 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 suffered a blow last week when a judge dismissed a Federal Trade Commission lawsuit against Facebook Inc (FB.O) .

The decision should not affect the Play Store case because it covers different circumstances, the states suing Google said.

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Diane Bartz, Paresh Dave and Karen Freifeld; Additional reporting by Joyce Lee; Editing by Leslie Adler and Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

Comments are closed.