36 states, D.C. sue Google for alleged antitrust violations in its Android app store

A group of 36 states and Washington, D.C., sued Google on Wednesday in an antitrust case challenging the company’s control over its Android app store — opening a new front in regulators’ attempts to rein in the search giant.

The suit, filed in California federal court and led by Utah, North Carolina, Tennessee, New York, Arizona, Colorado, Iowa and Nebraska, is the latest in a series of major antitrust cases filed against the tech industry's biggest forces, after years of brewing unhappiness with the growing wealth and power of Silicon Valley.

It comes just nine days after the antitrust crusade suffered its first major setback, when a federal judge in Washington dismissed the Federal Trade Commission's antitrust suit against Facebook on the grounds that the agency hadn't offered enough evidence that the world's largest social network is a monopoly.

In addition to Wednesday's suit, Google also faces a suit that the Justice Department and 14 states filed in October, focused on Google's efforts to dominate the mobile search market; one from 38 states and territories filed in December, also focused on search; and a third suit by 15 states and territories related to Google's power over the advertising technology.

In a blog post, Google dismissed the suit as "meritless," saying the changes the plaintiffs demand for its Google Play store risk "raising costs for small developers, impeding their ability to innovate and compete, and making apps across the Android ecosystem less secure for consumers."

"This lawsuit isn’t about helping the little guy or protecting consumers," the company said. "It’s about boosting a handful of major app developers who want the benefits of Google Play without paying for it."

The new case: Wednesday's suit is the latest challenge to the search giant's plan to force all app developers who use its Google Play Store to pay a 30 percent commission on sales of digital goods or services. The change is set to go into effect in September.

The case mirrors one filed against Google by Fortnite-make Epic Games last August, and a barrage of antitrust class actions filed on behalf of app developers and consumers who allege Google’s policies have led to higher prices.

The bipartisan group of state attorneys general filed Wednesday's case in the same court as those other app store lawsuits. It will be heard by the same judge, James Donato, an Obama appointee, who has scheduled a trial in Epic’s suit against Google for April 2022.

The suit is the first to challenge Google's control in the mobile app store market, though antitrust authorities in the U.K. and Australia have also opened probes into the search giant's dominance in the industry.

Background: Google’s Play Store is the default app store on Android phones, although users of those devices can also download apps from stores operated by companies like Amazon or Samsung — or even install them directly from other random sources. ("In fact, most Android devices ship with two or more app stores preloaded," Google said in its blog post.) That differs from the setup on iPhones, where Apple's App Store is the only source where users are allowed to obtain apps.

While Google has long had a policy that app developers must use its payment system for purchases made through the Play Store, the company has only loosely enforced the rule. Last year, the company said it would start enforcing its payment rules this coming September.

That led to uproar from companies including Netflix, Spotify and Match Group, which have bypassed Google’s commissions.

Google has sought to quell some of the unhappiness by lowering commissions to 15 percent on the first $1 million in sales, mirroring a small business program that Apple introduced in 2020. The Android-maker also announced a program last month to let developers of video, audio and e-book services also pay a 15 percent commission on sales.

New details: In their complaint, the states alleged that Google controls 90 percent of the market for Android apps, and no other Android app store has more than a 5 percent market share.

While Google allows other app stores, the search giant has taken steps to ensure that none of them gain traction, the complaint says. For example, it refuses to allow other app stores to be downloaded from its Google Play Store, which comes preinstalled on all Android smartphones. It also refuses to let other app stores buy advertising on its search engine or popular video streaming platform YouTube.

Google also took steps to keep Samsung, whose devices account for about 60 percent of U.S. Android smartphones, from gaining ground with its Samsung Galaxy Store, the states said. Google offered Samsung an undisclosed sum of money upfront and a portion of the revenue earned from its Play Store if the Korean smartphone manufacturer stopped pursuing exclusive deals to distribute popular apps such as Epic Games’ Fortnite. The negotiations eventually fell apart, they alleged.

The search giant also paid app developers to prevent them from removing their app from its Play Store and encouraging customers to directly download updates, the complaint alleges. And to prevent consumers from seeking out apps directly, the states said, the company has made false and misleading statements about the security of apps downloaded outside the Play Store, imposing various technical hurdles to make it more difficult for users to do so.

The Coalition for App Fairness — a group that includes Epic, Spotify and Match — praised the suit as an effort "to enforce fairness in the app marketplace."

"App stores have been given a free pass to abuse their dominant market position for far too long," said Meghan DiMuzio, the group's executive director.

Google’s defense: At a Senate hearing in April, Google said its commissions are in line with what others in the industry charge and help fund developer tools and updates to the Android ecosystem. Android also allows users to use multiple app stores or download apps directly from a developer’s website, a technique known as sideloading.

“If a developer feels that the value proposition of Google Play is not adequate, they can distribute their apps in a number of other ways,” said Wilson White, Google’s public policy lead for Android and Google Play.