Judge Poised to Penalize Google After Antitrust Ruling

Google Faces Industry Shakeup After Monopoly Verdict

by Faruk Imamovic
Judge Poised to Penalize Google After Antitrust Ruling
© Getty Images/Michael M. Santiago

A jury's recent verdict found Google guilty of breaking US antitrust laws with deals and billing rules that unfairly bolstered its Google Play app store. On Thursday, the focus shifted to determining how Google might be forced to alter its business practices as a result. The potential remedies could dramatically reshape Google's dominance in the Android ecosystem.

Epic Games Pushes for Competitive Fairness

Epic Games, the developer of Fortnite, won a significant victory when a jury ruled that Google's Play Store constituted an illegal monopoly. Now, Epic is advocating for federal judge James Donato to bar Google from entering contracts that inhibit competition. Epic also seeks measures that would help rival app stores list more apps, thereby boosting their competitiveness. These changes could enable Epic to process in-game purchases independently of Google’s payment system and market games through its own app store.

Google, however, claims that Epic's demands could jeopardize user security and harm its partners, including Android device manufacturers and app developers. The tech giant is appealing the jury's verdict, a move that could delay or negate the penalties. Nonetheless, Google has already been compelled to make expensive adjustments in Europe and Asia due to similar legal challenges and new regulations affecting the Play Store. Additionally, another trial involving Epic is currently underway in Australia.

"I want to be clear: Google as an illegal monopolist will have to pay some penalties," Donato stated during a hearing in San Francisco. He emphasized that Google's loss necessitates breaking its hold on the Android ecosystem to end its unlawful monopoly and address the gains it has reaped from years of unfair dominance.

Industry Implications and Consumer Impact

The potential penalties could bring significant changes to the industry surrounding Google's Android operating system, potentially offering consumers more choices. Donato mentioned that Google might need to invest in new projects to address the situation.

Donato expressed frustration with Google's claims that any changes would harm consumers and other businesses. "To jump up and down and say the new way is going to be a world no one wants to live in, it’s unfounded," he remarked. Despite his criticism, he spent considerable time questioning economists from both sides to ensure the penalties would be fair.

Epic's proposal includes preventing Google from making deals that dissuade companies from using alternative app stores. Historically, Google has required hardware companies wanting to offer Google Play to avoid promoting other app stores, limiting consumer exposure to alternatives. Rival app stores, such as those from Amazon and Samsung, have struggled to attract developers due to the extra effort needed to maintain apps in multiple stores.

To level the playing field, Epic suggests that Google be mandated for six years to allow rival stores to list apps hosted on Google Play. This would let users browse alternative stores without missing out on popular apps, improving these stores' chances of success.

"Rival app stores [would] have incentives to sign up developers so that they can get revenue streams and so that they're not dead in the water when this provision expires," explained Douglas Bernheim, a Stanford University economist testifying for Epic. "Google [would have] incentives to continue to sign up developers so that they're not at a disadvantage."

Matthew Gentzkow, a Stanford economist representing Google, countered that developers might suffer if their apps appeared in stores with laxer content policies, potentially harming their brand and reputation.

Judge Donato also questioned how to ease Google's requirement that apps in the Play Store use Google’s billing system, one of the rules that triggered Epic’s lawsuit. He expressed a desire to reduce the "friction" users face when downloading apps from non-Google Play stores on Android devices. Google’s operating system currently interrupts this process with warnings about potential security issues, discouraging users from proceeding.

Final arguments from Google and Epic are expected in August, with Donato aiming to issue penalties by the Labor Day holiday in September, though he noted they would come "promptly."