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Business News/ Technology / Google’s App Store Power Goes on Trial
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Google’s App Store Power Goes on Trial

wsj

The legal fight with Epic Games is the latest challenge over agreements the search company struck with mobile phone makers.

Fortnite-maker Epic Games claims that Google used its dominant position to squeeze excess profits from app developers. Premium
Fortnite-maker Epic Games claims that Google used its dominant position to squeeze excess profits from app developers.

Google’s power in the digital economy will face another major legal test starting Monday in a case targeting its role as a gatekeeper on billions of mobile devices.

A group of San Francisco jurors will begin hearing arguments from Fortnite-maker Epic Games that Google used its dominant position to squeeze excess profits from app developers. The case forms the second part of Epic’s attack on the two largest mobile software providers after the game developer went up against Apple in a 2021 courtroom battle.

The trial adds to Google’s busy legal docket as it also fights a landmark antitrust case challenging its dominant search engine. Both lawsuits take aim at agreements Google struck with manufacturers of mobile phones running on Android, the most widely used mobile software system in the world.

Google also faces a Justice Department lawsuit targeting its advertising technology business that is expected to go to trial next year, allegations that Google also denies.

Google’s parent company Alphabet brings in a relatively small amount of revenue from the Play Store, the app marketplace targeted by Epic. But the app store is also an important component in a package of services licensed to the manufacturers of Android-powered phones, a major entry point for Google’s search engine.

Epic convinced a judge in a previous trial that Apple should loosen restrictions on how app developers accept payments, but fell short on most claims. The lawsuit against Google covers similar territory while advancing new allegations that the tech giant spent $1 billion on deals to stifle competition from videogame companies such as Activision Blizzard.

Christine Varney, a lawyer for Epic at Cravath, Swaine & Moore, said Google’s monopoly power in the Android ecosystem harmed both device makers and developers, likening the company’s behavior to Microsoft’s in the 1990s. Varney headed antitrust enforcement at the Federal Trade Commission under the Obama administration.

In a blog post before the trial, Google said Epic’s case had “even less merit" than the one it brought against Apple, arguing that Android provides developers with greater choice. The company said the deals with game companies provided incentives to develop for the Play Store.

“The truth is that Epic simply wants all the benefits that Android and Google Play provide without having to pay for them," Wilson White, Google vice president of government affairs and public policy, wrote in the blog post.

Tinder owner Match Group and a group of states each settled their claims against Google in recent months, leaving Epic as the only party in this case battling the tech company in court.

Epic is expected to call Google Chief Executive Sundar Pichai to testify. The defense will likely call Hiroshi Lockheimer, a senior vice president in charge of Android. Pichai also testified last week in the company’s search trial, defending its search partnerships with companies like Apple.

The Play Store trial has the potential to “open Google up to more forces of competition," said Rebecca Haw Allensworth, an antitrust professor at Vanderbilt University Law School who has been critical of the power of big tech companies. “That’s a good thing, but I don’t know that they need to view that as an existential threat."

Epic sued Google as part of a broadside, code-named Project Liberty, aimed at the tolls app stores charge for facilitating billions of dollars in payments for virtual clothing, weapons and other digital goods.

The game developer in 2020 began encouraging Fortnite players to pay the company directly for purchases of in-game items, rather than using systems developed by the tech giants. Apple and Google kicked Fortnite out of their app stores, and Epic filed its lawsuits soon after.

Epic’s lawsuits have triggered additional scrutiny from global regulators, including in South Korea, the home of Google’s largest mobile partner Samsung Electronics.

Google has tried to address the concerns of large app developers by allowing alternative payment systems in the Play Store. Spotify, a notable critic of Apple’s app store policies, began testing the feature last year and has since introduced it to more than 140 markets.

Alphabet said revenue from the Play Store fell last year, mostly because of fee changes announced in 2021 and an overall decrease in spending. The company doesn’t report precise financial details for the Play Store.

Unlike Apple, whose app store comes pre-installed on iPhones, Google mostly distributes its app store through contracts with manufacturers of Android mobile phones such as Samsung.

Epic has argued those agreements, which require manufacturers to prominently display the Play Store along with a licensed set of popular Google apps, stifle competition from companies trying to develop rival marketplaces.

Google has said Android is the only major mobile software system that allows developers to distribute apps through several marketplaces, and most devices running on the software come with at least two app stores pre-installed.

Epic has also accused Google of using a series of deals to persuade game companies such as Activision not to develop their own app stores. Epic said the plan was known as Project Hug inside Google.

Google paid Activision about $360 million in 2020 after the game developer told the tech giant it was considering developing a competing marketplace, Epic alleged.

“The number of secret deals Google signs with competitors to pay them not to compete is horrifying," Epic CEO Tim Sweeney posted on X, the website formerly known as Twitter, last week.

An Activision spokeswoman said Google never asked or pressured the company to avoid competing with the Play Store.

Write to Miles Kruppa at miles.kruppa@wsj.com

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