Court Orders Google (a Monopolist) To Knock It Off With the Monopoly Stuff

A federal court recently ordered Google to make it easier for Android users to switch to rival app stores, banned Google from using its vast cash reserves to block competitors, and hit Google with a bundle of thou-shalt-nots and assorted prohibitions.

Each of these measures is well crafted, narrowly tailored, and purpose-built to accomplish something vital: improving competition in mobile app stores.

You love to see it.

Some background: the mobile OS market is a duopoly run by two dominant firms, Google (Android) and Apple (iOS). Both companies distribute software through their app stores (Google’s is called “Google Play,” Apple’s is the “App Store”), and both companies use a combination of market power and legal intimidation to ensure that their users get all their apps from the company’s store.

This creates a chokepoint: if you make an app and I want to run it, you have to convince Google (or Apple) to put it in their store first. That means that Google and Apple can demand all kinds of concessions from you, in order to reach me. The most important concession is money, and lots of it. Both Google and Apple demand 30 percent of every dime generated with an app – not just the purchase price of the app, but every transaction that takes place within the app after that. The companies have all kinds of onerous rules blocking app makers from asking their users to buy stuff on their website, instead of in the app, or from offering discounts to users who do so.

For avoidance of doubt: 30 percent is a lot. The “normal” rate for payment processing is more like 2-5 percent, a commission that’s gone up 40 percent since covid hit, a price-hike that is itself attributable to monopoly power in the sector.That’s bad, but Google and Apple demand ten times that (unless you qualify for their small business discount, in which case, they only charge five times more than the Visa/Mastercard cartel).

Epic Games – the company behind the wildly successful multiplayer game Fortnite – has been chasing Google and Apple through the courts over this for years, and last December, they prevailed in their case against Google.

This week’s court ruling is the next step in that victory. Having concluded that Google illegally acquired and maintained a monopoly over apps for Android, the court had to decide what to do about it.

It’s a great judgment: read it for yourself, or peruse the highlights in this excellent summary from The Verge. 

For the next three years, Google must meet the following criteria:

• Allow third-party app stores for Android, and let those app stores distribute all the same apps as are available in Google Play (app developers can opt out of this);
• Distribute third-party app stores as apps, so users can switch app stores by downloading a new one from Google Play, in just the same way as they’d install any app;
• Allow apps to use any payment processor, not just Google’s 30 percent money-printing machine;
• Permit app vendors to tell users about other ways to pay for the things they buy in-app;
• Permit app vendors to set their own prices.

Google is also prohibited from using its cash to fence out rivals, for example, by:

• Offering incentives to app vendors to launch first on Google Play, or to be exclusive to Google Play;
• Offering incentives to app vendors to avoid rival app stores;
• Offering incentives to hardware makers to pre-install Google Play;
• Offering incentives to hardware makers not to install rival app stores.

These provisions tie in with Google’s other recent  loss; in Google v. DoJ, where the company was found to have operated a monopoly over search. That case turned on the fact that Google paid unimaginably vast sums – more than $25 billion per year – to phone makers, browser makers, carriers, and, of course, Apple, to make Google Search the default. That meant that every search box you were likely to encounter would connect to Google, meaning that anyone who came up with a better search engine would have no hope of finding users.

What’s so great about these remedies is that they strike at the root of the Google app monopoly. Google locks billions of users into its platform, and that means that software authors are at its mercy. By making it easy for users to switch from one app store to another, and by preventing Google from interfering with that free choice, the court is saying to Google, “You can only remain dominant if you’re the best – not because you’re holding 3.3 billion Android users hostage.”

Interoperability – plugging new features, services and products into existing systems – is digital technology’s secret superpower, and it’s great to see the courts recognizing how a well-crafted interoperability order can cut through thorny tech problems. 

Google has vowed to appeal. They say they’re being singled out, because Apple won a similar case earlier this year. It’s true, a different  court got it wrong with Apple.

But Apple’s not off the hook, either: the EU’s Digital Markets Act took effect this year, and its provisions broadly mirror the injunction that just landed on Google. Apple responded to the EU by refusing to substantively comply with the law, teeing up another big, hairy battle.

In the meantime, we hope that other courts, lawmakers and regulators continue to explore the possible uses of interoperability to make technology work for its users. This order will have far-reaching implications, and not just for games like Fortnite: the 30 percent app tax is a millstone around the neck of all kinds of institutions, from independent game devs who are dolphins caught in Google’s tuna net to the free press itself..