A coalition of 37 attorneys general has filed a lawsuit against Google alleging exclusionary conduct relating to the Google Play Store for Android mobile devices and Google Billing.
Virginia Attorney General Mark Herring and his colleagues accuse Google of using its dominance to unfairly restrict competition with the Google Play Store, harming consumers by limiting choice and driving up app prices.
“Google has really become a major player in the tech market, so much so that its products play a role in almost every aspect of Virginians’ daily lives, including their cell phones and the apps that they use on a regular basis,” Herring said. “Because of this market dominance, Google has allegedly been able to tightly control app distribution – and the loss of competition here has cost Virginians hundreds if not thousands of dollars more than necessary when they buy phone apps and make in-app purchases on the apps they use.
“As attorney general, I take my obligation to protect Virginia consumers and maintain competitive markets seriously, and that means making sure that massively influential companies like Google act fairly and comply with the law,” Herring said.
According to the complaint, the heart of the case centers on Google’s exclusionary conduct, which substantially shuts out competing app distribution channels. Google also requires that app developers that offer their apps through the Google Play Store use Google Billing as a middleman. This arrangement, which ties a payment processing system to an app distribution channel, forces app consumers to pay Google’s commission – up to 30 percent – on in-app purchases of digital content made by consumers through apps that are distributed via the Google Play Store.
This commission is much higher than the commission that consumers would pay if they had the ability to choose one of Google’s competitors instead. The lawsuit alleges that Google works to discourage or prevent competition, violating federal and state antitrust laws. Google had earlier promised app developers and device manufacturers that it would keep Android “open source,” allowing developers to create compatible apps and distribute them without unnecessary restrictions.
The lawsuit alleges that Google did not keep that promise.
Background
When Google launched its Android OS, it originally marketed it as an “open source” platform. By promising to keep Android open, Google successfully enticed “OEMs” – mobile device manufacturers, such as Samsung – and “MNOs” – mobile network operators such as Verizon – to adopt Android, and more importantly, to forgo competing with Google’s Play Store at that time.
Once Google had obtained the “critical mass” of Android OS adoption, Google moved to close the Android OS ecosystem, and the relevant Android App Distribution Market, to any effective competition by, among other things, requiring OEMs and MNOs to enter into various contractual and other restraints. These contractual restraints disincentivize and restrict OEMs and MNOs from competing (or fostering competition) in the relevant market.
The lawsuit filed by Herring and his colleagues alleges that Google’s conduct constitutes unlawful monopoly maintenance, among other claims.
In aid of Google’s efforts discussed above, Herring and his colleagues allege that Google also engaged in the following conduct, all aimed at enhancing and protecting Google’s monopoly position over Android app distribution:
- 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 a source outside Google’s Play Store, effectively foreclosing app developers and app stores from direct distribution to consumers
- Google has not allowed Android to be “open source” for many years, effectively cutting off potential competition. Google forces OEMs that wish to sell devices that run Android to enter into agreements called “Android Compatibility Commitments” or ACCs. Under these “take it or leave it” agreements, 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 OS 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 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 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. Thus, Google is unlawfully tying the use of Google’s payment processor, which is a separate service within a separate market for payment processing within apps, to distribution through the Google Play Store. By forcing this tie, Google is able to extract an exorbitant processing fee as high as 30 percent for each transaction and which is more than ten times as high as the fee charged by Google’s competitors
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