On 11 December 2023, Epic Games (“Epic”) emerged victorious in a three-year long antitrust case against Google in the United States District Court of the Northern District of California. Epic accused Google of maintaining an unlawful monopoly of the Google Play Store and Google Play Billing service by taking action to suppress competition and imposing artificially high fees of up to 30% on all transactions. After deliberating for over three hours, the jury unanimously sided with Epic Games on all 11 questions and deemed the dominance of Google Play and the mandatory use of its billing system as anti-competitive.
Background
By way of background, Epic Games is the developer behind Fortnite, the hit online battle royale video game. Fortnite is free to download and sells in-game items in exchange for its virtual currency known as ‘V‑Bucks’. But nothing in life comes free so V-Bucks are primarily acquired by spending real money on purchasing them in-game. Players using Android or iOS devices to install Fortnite through the App Store or Google Play Store triggered a payment fee to Google or Apple of 30% on all in-game purchases.
On 13 August 2020, Epic circumvented Google and Apple’s stores by deploying an update that allowed players to purchase V-Bucks directly through its own payment system at a discount of 20%. In response, both Apple and Google promptly banned Fortnite from their respective platforms that same day for violating their terms and conditions.
This had already been pre-empted by Epic Games who immediately filed claims against both Apple and Google, alleging that the companies maintained an unlawful monopoly and unreasonably restrained trade. Not only this, but Epic had also pre-prepared an advert titled “Nineteen Eighty-Fortnite” featuring a unicorn-shaped hammer being tossed at a monitor to launch their campaign as underdog.
Epic’s case against Apple was decided by a non-jury trial in 2021. Epic were unsuccessful on most parts except the issue of an injunction under which Apple were prohibited from banning in-app links and buttons to third-party payment options. The decision was reaffirmed in part by the United States Court of Appeals for the Ninth Circuit on 24 April 2023, though the injunction was consequently stayed in July 2023 so that Apple could appeal the decision to the U.S. Supreme Court.
Unfortunately for both parties, in January 2024 the US Supreme Court decided not to hear appeals from Apple and Epic Games and gave no reason for the decision. This reinstated the injunction on in-app links and prompted Apple to change its App Store rules. The updated policy allows the signposting of alternative payment options within iOS applications with the caveat that any resulting purchases are subject to a 12% to 27% commission fee.
Jury verdict in Epic v Google
Epic’s case against Google was heard by a jury under presiding U.S. District Judge James Donato. Epic Games alleged that Google violated federal and state antitrust laws by:
- monopolising and imposing unlawful restraints on app distribution by restricting the downloading of apps from sources other than the Google Play Store;
- monopolising in-app payment solutions by restricting payment systems other than the Google Play Billing service; and
- engaging in unlawful tying by conditioning developers’ access to the Play Store on the exclusive use of Google’s own in-app payment tools.
Following over three hours of deliberation, the jury sided with Epic Games on all counts. Two key aspects of this decision are highlighted below.
Third-party contracting
At the heart of the dispute were Google’s contracts with third parties which were found to be unreasonable restraints of trade.
Google feared a “contagion” of games developers launching app distribution channels outside the Google Play Store and devised multiple risk mitigation strategies including “Project Hug” and “Project Banyan”. These deals offered support, credits, gift card programs, promotions and access to Google staff to developers launching on the Google Play store. Epic cited examples of over twenty developers signed in multi-million dollar deals under the ‘Google Games Velocity Program’ (the formal name for Project Hug), including Activision Blizzard, which allegedly prevented them from launching a rival to Play Store in exchange for this preferential treatment. Evidence was shown at trial of a copy of an internal communication confirming that Google prompted Riot Games to halt development on its own app store by promising the company $10 million in marketing.
Google’s deals with phone makers and non-games development companies were also examined. For example, Epic cited proposed deals with Samsung and LG under which they agreed to pre-install a bundle of Google apps, including the Play Store, on their Android phones in return for a share of Google’s profits. Google’s revenue-sharing agreement with OnePlus directly prevented it from pre-installing an Epic Games app store without getting a special exemption from Google. Witness evidence given at trial also revealed a deal struck with Spotify under which it paid 0% on commission fees when using its own payment processor or 4% to pay with Google Billing.
Although Google tried to argue the pro-competitive benefits of these agreements, such as enhanced security for users, the US jury ultimately deemed them anti-competitive and unlawful restrictions on downloading apps from other sources.
Discovery omissions
Another apparently significant factor contributing to Epic’s victory was the lack of preservation of relevant documentation on the part of Google. Google employees and executive intentionally used “history-off chats” for corporate communications on its internal “Chat” system which automatically deleted messages within 24 hours. This was Google’s standard retention policy for its Chat messages, unless the employee activated a “history on” setting which extended retention for 30 days.
Google did not suspend this auto-deletion policy after the claim was issued and litigation began. Unless “history on” had already been activated, Google employees were left alone to determine what communications might be relevant to the legal and factual issues in dispute and should be preserved.
This policy was deemed in breach of Google’s obligation to preserve electronically stored information under the Rule 37(e) of the U.S. Federal Rules of Civil Procedure 2015 and the US court sanctioned Google for intentionally subverting the discovery process. It considered Google to be a frequent and sophisticated litigation party that trains employees on how to handle privileged communications and, the court ruled, the evidence was lost with the intent “to prevent and deprive another party of its use in litigation.” As a result of this sanction, the jury was instructed that it “may infer that the deleted messages were unfavourable to Google.”
Next steps
Judge Donato will discuss remedies with both parties later this month in January 2024. Epic has only sought declaratory and injunctive relief rather than monetary damages, aspiring to grant developers the freedom to introduce their own app stores and billing systems on Android. It is likely that this will be granted given the existence of similar agreements with Spotify.
Google plans to appeal the verdict based on its “fierce” competition with Apple and other app stores on Android devices and games consoles. Additionally, Google has since confirmed its expansion of the Play Store to provide consumers with alternative billing options for in-app purchases.
Differences to Epic v Apple
Readers may be wondering why this case yielded such a strikingly different outcome to Epic’s claim against Apple two years ago, despite nearly identical allegations against each party. To explain the judicial reasoning (whether or not you may agree with it), the key distinctions leading to the contrasting results include the two separate development ecosystems from which Google’s Play Store and Apple’s App Store derive and the fact that they underwent two different trials.
First, Apple’s “walled garden” ecosystem with iOS differs to the open way in which Google operates and markets Android as an open-source platform. Android is intended to be licensed to other companies and integrated with their hardware and software. This gives it a much wider contractual environment as outlined above. On the other hand, iOS is only compatible with iPhone hardware and developers anticipate only being able to sell their applications in the App Store without any additional mediation by Apple.
Secondly, Epic v Google was tried before a jury rather than a judge. Google faced challenges from the offset, given the instruction that the jury may infer certain Chats were not saved due to their unfavourable nature to Google’s case. This jury could also have been persuaded by Epic’s framing of Google as something of a bully that deploys a “bribe and block” strategy to discourage competition. While it is technically possible to download apps from elsewhere, Epic argued that it is too cumbersome and for those who try, Google allegedly sends “dire warnings that scare most consumers into abandoning the lengthy process.”
Other proceedings
UK
Epic Games also filed separate complaints in December 2020 in the UK’s Competition Appeal Tribunal (“CAT”) on the basis that the removal of Fortnite from the Google Play store and Apple’s App Store was unlawful and that various contractual terms relating to in-app payment processing and the app stores restrict competition.
The UK claims faced an initial hurdle in the form of a requirement for Epic to obtain permission to serve out of jurisdiction as the key defendants were incorporated in the U.S. The claim against Apple was rejected based on a lack of connection to the jurisdiction, though Epic vowed to reconsider pursuing this following the resolution of the US claim. Permission was given for Epic Games to serve proceedings on Alphabet Inc. and Google LLC in the UK on the basis of its corporate structure. A nine-week hearing has been listed to commence on 5 May 2025.
Australia
Epic also launched action against Apple and Google in Australia in November 2020 and March 2021, respectively, for similarly anti-competitive practices. These proceedings are listed for an 18-week trial commencing on 4 March 2024.
Analysis
This case will be disappointing for Google, which (along with Apple) has faced allegations of anti-competitive practices for years. Epic has long championed this cause and no doubt will feel vindicated with this result – not only on its own behalf, but also on behalf of the wider games industry and mobile developer community.
Pending the remedies ruling in January 2024, Google could be forced to change its Play Store rules to allow other companies to offer competing stores and billing systems. This would be a significant alteration to the digital environment for developers and consumers which risks opening the floodgates to rival stores and payment processing systems that offer much lower fees to distribute applications. By increasing market competition in the Play Store, the wider video games community may also see a shift in which 30% is no longer being used as the standard platform commission fee – not only on mobile, but also on other platforms like PC and console.
Whether the decision in Epic v Google will withstand appeal remains an area to watch. In the meantime, the contrasting verdict to Epic v Apple may prompt technology companies to reconsider their approach to legal compliance. Some may consider Google as having effectively unfairly ‘penalised’ for having a more open approach, while Apple’s closed wall approach was permitted in the other case. Nevertheless, the most crucial takeaways from this case should be why the cases received such different legal consideration. Parties engaging in litigation must take significant care in preserving all relevant documentation (not leaving it up to employees!) and should carefully consider strategy if opting for a jury trial in the United States.
unknownx500
