Kentucky, other states sue Google over app store

July 7, 2021

Steve Rogers,

FRANKFORT, Ky. (CNN/WTVQ) – Dozens of states have filed an antitrust lawsuit against Google that zeroes in on its app store practices.

The suit alleges that Google abused its dominance in the mobile ecosystem to favor its own Google Play Store, reducing competition in the process. The suit also takes aim at the fees that Google charges developers for in-app purchases.

Bloomberg was first to report the lawsuit.

Court records showed the case against Google has been opened in the US District Court for the Northern District of California. The District of Columbia and 36 states are named as participants, including New York, California, Colorado, Utah, Massachusetts and others.

According to Wednesday’s complaint, Google holds a monopoly on Android app distribution in the United States, and has used restrictive contracts to force Android device makers to promote the Google Play Store at the expense of competition. (Similar allegations in Europe prompted Google to announce in 2018 that it would stop bundling must-have apps such as Google Maps and Gmail with the Play Store.)

Part of Google’s alleged objective was to deter the rise of third-party app stores. According to the complaint, Google made “a direct attempt to pay Samsung to abandon relationships with top developers” so that Google’s app store would remain the most attractive source of Android apps.

The complaint also challenges Google’s developer terms that “make Google Play Billing the only in-app payment processor that an Android developer may use” when an app sells digital content through an Android app.

That’s similar to the allegations leveled at Apple in its case involving Epic Games.

“Google is using its dominant position in the marketplace to stifle competition and extract billions of dollars in commissions on in-app purchases from unsuspecting consumers—and this anticompetitive behavior must stop,” District of Columbia Attorney General Karl Racine said in a statement. “Not only has Google acted unlawfully to block potential rivals from competing with its Google Play Store, it has profited by improperly locking app developers and consumers into its own payment processing system and then charging high fees.”

“Our lawsuit alleges that Google’s anticompetitive business practices violated state and federal antitrust laws, causing direct harm to Kentucky consumers,” added Kentucky Attorney General Daniel Cameron. “Illegal and anticompetitive practices by a dominant company, such as Google, hurt Kentucky consumers and Kentucky businesses operating in the marketplace. Our bipartisan coalition of attorneys general from across the country has joined together to stop these practices from continuing.”

According to the lawsuit, the heart of the case centers on Google’s alleged exclusionary conduct, which substantially shuts out competing app distribution channels, Cameron’s office said in a statement. That conduct, which is aimed at enhancing and protecting Google’s monopoly position over Android app distribution, includes the following:

Google imposes technical barriers that strongly discourage or effectively prevent third-party app developers from distributing apps outside the Google Play Store. Google builds into Android a series of security warnings (regardless of actual security risk) and other barriers that discourage users from downloading apps from any source outside Google’s Play Store, effectively foreclosing app developers and app stores from direct distribution to consumers.
Google forces original equipment manufacturers (OEMs) that wish to sell devices that run Android to enter into agreements whereby OEMs must promise not to create or implement any variants or versions of Android that deviate from the Google-certified version of Android.
Google’s required contracts foreclose competition by forcing Google’s proprietary apps to be “pre-loaded” on essentially all devices designed to run on the Android operating system and requires that Google’s apps be given the most prominent placement on device home screens.
Google “buys off” its potential competition in the market for app distribution. Google has successfully persuaded OEMs and mobile network operators (MNOs) not to compete with Google’s Play Store by entering into arrangements that reward OEMs and MNOs with a share of Google’s monopoly profits.

Google also forces app developers and app users alike to use Google’s payment processing service, Google Play Billing, to process payments for in-app purchases of content consumed within the app.

This arrangement, which unlawfully ties a payment processing system to an app distribution channel, forces app consumers to pay Google’s commission — up to 30% — on in-app purchases of digital content made by consumers through apps that are distributed via the Google Play Store, Cameron said, noting the commission is higher than payment processing fees charged in competitive markets.

The lawsuit is led by Utah, New York, North Carolina, and Tennessee. Attorney General Cameron joined the lawsuit alongside Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Idaho, Indiana, Iowa, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Vermont, Virginia, Washington, and West Virginia.

The allegations mark the latest legal headache for Google, which is already facing multiple antitrust suits by the federal government and the states. They also reflect rising criticism by app developers and regulators who have increasingly scrutinized Google’s and Apple’s app stores in the mobile technology space.

Google could not be reached immediately for comment Wednesday evening.

News of the lawsuit was met with some cheers. For instance, the Coalition for App Fairness — a nonprofit industry organization whose members include Spotify, Tile and Match Group — said it supports the lawsuit.

“App stores have been given a free pass to abuse their dominant market position for far too long,” the group said. “Their anti-competitive policies stifle innovation, inhibit consumer freedom, inflate costs, and limit transparent communication between developers and their customers.”

In the spring, Apple and Epic Games faced off in a non-jury trial over whether Apple holds a monopoly on iOS app sales and has abused its power against app makers. Epic, the maker of the online video game “Fortnite,” had sought to circumvent Apple’s proprietary in-app payment system that allows the iPhone maker to take a 30% cut of digital goods and services sold on iOS.

That led to a contractual dispute that prompted Apple to remove Fortnite from its app store, ultimately leading to Epic’s lawsuit, which could disrupt Apple’s business model.

Apple argued at trial that it competes vigorously to distribute video game apps, including Fortnite. A decision in the case is expected in the coming months.