Play the field

Google reportedly paid Activision Blizzard $360m in 2020 to launch its games on the Play Store at the same time as on rival platforms. Riot Games got $18m. Epic Games, the maker of Fortnite, was offered $147m over three years to stay put and declined.^{2TechCrunch5 things we learned from the Epic-Google antitrust case this week10 Nov 2023} Google calls this competing. A federal jury in San Francisco, which on 11 December 2023 unanimously sided with Epic, called it something else.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023}

The verdict ends a three-year fight that Epic began in 2020, alleging that Google’s app-store practices broke federal and Californian antitrust law.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023} The claims centred on two markets: distributing apps to Android users and processing payments for content bought inside those apps.^{3TechCrunchWhat to know about Fortnite maker Epic Games' antitrust battle with Google, starting today6 Nov 2023} Epic argued that Google tied developers to its billing system, struck deals with phone-makers to keep rival stores at bay and bought off the big developers who might have defected. Google says it will appeal: “We plan to challenge the verdict.”^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023}

We think the jury got the substance right, and that the lesson is more interesting than the headline. Google’s defence was always that Android is the open one. Apple’s iPhone forbids third-party app installs; Android allows “sideloading”, and Google argued that the Play Store competes with Apple’s App Store, Samsung’s Galaxy Store and Amazon’s Appstore.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023,3TechCrunchWhat to know about Fortnite maker Epic Games' antitrust battle with Google, starting today6 Nov 2023} That sort of argument helped Apple win most of its own case against Epic.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023} It failed here because openness on paper is not openness in practice. About 90% of Android apps in America are downloaded from the Play Store.^{2TechCrunch5 things we learned from the Epic-Google antitrust case this week10 Nov 2023} A door that is technically unlocked, with a fee-charging bouncer standing in it, is still a gate.

The money explains the interest in keeping it. Epic’s lawyers said the Play Store earns more than $12bn a year in operating profit, at a margin of 70%, up from 24% in 2014.^{2TechCrunch5 things we learned from the Epic-Google antitrust case this week10 Nov 2023} Google replies that its commission is 15% to 30% rather than a flat 30%, and that 99% of its developers qualify for 15% or less.^{3TechCrunchWhat to know about Fortnite maker Epic Games' antitrust battle with Google, starting today6 Nov 2023} Both can be true, which is rather the point: the big developers with leverage to haggle got special terms, and the rest paid the list price. Epic’s own store, at a 12% cut, was still not profitable, according to testimony.^{2TechCrunch5 things we learned from the Epic-Google antitrust case this week10 Nov 2023} Cheaper rivals do not thrive when the incumbent can pay the few firms that might have made them viable.

The strongest objection is Google’s own. Platforms charge for security, curation and payment handling, and both Google and Apple point to safety when they restrict alternatives.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023} Users who want a vetted storefront should get one, and a fee that funds it is hardly theft. Nor should a judge be sketching the architecture of a phone.

But the verdict does not require that. The jury was not asked whether Google may run a store, or whether it may charge. It was asked whether Google used contracts and cash to make sure no one else could. A remedy follows from that narrow finding: end the payments to developers and the deals with manufacturers that exist to foreclose rivals, and let alternative stores and billing systems compete with Google’s on safety and price. If Google’s curation is worth 30%, it will keep its customers. If it is not, the customers are owed the discovery.

Regulators elsewhere are heading the same way, as Epic noted, pointing to the European Union’s Digital Markets Act and Britain’s digital markets bill.^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023} America has chosen to get there through juries. It is slower, though the evidence at least comes with witnesses.

Google has said Android offers “more choice and openness than any other major mobile platform.”^{1TechCrunchFortnite maker Epic Games wins its antitrust fight against Google11 Dec 2023} It now has the chance to prove it, which is a novelty.