On Wednesday, 37 U.S. state and district attorneys general filed a lawsuit against Alphabet Inc’s Google, alleging that it bought off competitors and used restrictive contracts to illegally maintain a monopoly for its app store on Android phones.
The allegations about Google’s Play Store are the result of an investigation that began in September 2019 and has already resulted in three other lawsuits against the company. The cases threaten to force significant changes in how it generates billions of dollars in revenue across its businesses, which include advertising, in-app purchases, and smart home devices.
Google stated on Wednesday that the lawsuit was filed to benefit a small group of major app developers who want preferential treatment, rather than to assist small businesses or consumers. It maintains that, in contrast to Apple Inc’s App Store on iPhones, Android supports competitors to the Play Store.
The states, led by Utah, New York, North Carolina, and Tennessee, claim that Google has generated “enormous profit margins” from the Play Store by using illegal tactics to maintain monopolies in the sale of Android apps and in-app goods.
According to the lawsuit, Google Play accounts for 90 percent of Android app downloads in the United States. The states cited agreements that have already been the subject of other lawsuits, such as those Google has with mobile carriers and smartphone manufacturers to promote its services.
However, after re-examining internal company documents, they added new claims. According to the states, Google paid developers to not support competing app stores, and that it planned to pay Samsung Electronics Co, whose rival app store posed the greatest threat, to stop competing through a series of secret projects.
The plaintiffs, which include California and the District of Columbia, also claim that Google has illegally required some apps to use the company’s payment tools and give Google up to 30% of digital goods sales. The “extravagant commission,” compared to the 3% charged by other marketplaces, has forced app makers to raise prices and consumers to spend more, according to the states.
“Google Play is not a level playing field,” said Utah Attorney General Sean Reyes in a statement. “It must stop abusing its monopolistic power and dominant market position to illegally extract billions of dollars more from smaller businesses, competitors, and consumers than should be paid.”
Consumers want their money back, according to the states. They also demanded civil penalties and a court-appointed monitor to ensure that Google makes it easier for consumers, app developers, and smartphone manufacturers to use or promote alternatives to the Play Store and the official payment system for the next 20 years. Furthermore, the states want Google to stop paying Samsung and developers.
On Wednesday, the states stated that they have not ruled out taking similar action against Apple over its App Store.
Meghan DiMuzio, executive director of the Coalition for App Fairness, which represents companies such as Match Group Inc and Spotify Technology SA that oppose some of the Play Store rules, praised the filing.
According to the lawsuit, while Google allows consumers to avoid the Play Store, it also displays “generally misleading warnings and hurdles” to discourage such behavior.
Google does not break out the financial performance of the Play Store, but it has stated that the unit, along with several others, generated $21.7 billion in revenue last year, or about 12% of total sales. According to the lawsuit, Google’s concerns about Samsung grew after the South Korean company collaborated with video game maker Epic Games Inc to exclusively launch “Fortnite” for Android devices in 2018.
According to the states, Epic’s refusal to use the Play Store cost Google millions of dollars in revenue.
Epic sued Google and Apple separately in federal court in California last year over app store policies. The cases have been joined by proposed classes of developers and consumers.
A decision in the Apple case is expected in the coming weeks, and a hearing on Google’s request to dismiss the case against it is set for July 22. The lawsuits come amid increased antitrust scrutiny of major technology companies, but regulators were dealt a setback last week when a judge dismissed a Federal Trade Commission lawsuit against Facebook Inc.
The ruling should not have an impact on the Play Store case because it addresses different circumstances, according to the states suing Google.