Google sued by US states over Play store

US antitrust enforcers have mounted their first challenge to a mobile app store, accusing Google of overcharging developers who sell through the Play store that is built into its Android operating system.

The complaint, filed in federal court in San Francisco on Wednesday, is the fourth against the search giant in the US in less than a year and the first to take on the smartphone platforms at the centre of today’s consumer technology.

Until now, Google has faced less public criticism than Apple over the charges it levies from mobile app developers, along with restrictions that prevent developers from sidestepping the charges. Apple’s App Store has been the subject of a high-profile private antitrust case from Epic Games.

The case, led by Utah and including 35 other US states and the District of Columbia, accused Google of “unlawfully restraining trade and maintaining monopolies” in the market for distributing Android applications, as well as the market for paying for Android apps.

Google denied the claims, calling it “not correct” that developers and Android users are forced to use the Play store. It also indirectly attacked Apple over its own, more restrictive app store policies.

In a blog post late on Wednesday Wilson White, Google’s senior director of public policy, called it “strange that a group of state attorneys-general chose to file a lawsuit attacking a system that provides more openness and choice than others”.

The states could face an uphill battle in convincing a court that the search giant has a dominant position in how mobile apps are sold. Android accounts for only 46 per cent of the US smartphone market, compared to the 53 per cent of Apple’s iOS, according to StatCounter. The difficulty of proving market dominance is seen as one of the biggest hurdles to Epic’s case against Apple.

In a sign of the challenge US regulators face in tackling tech giants under existing antitrust laws, a case against Facebook by the Federal Trade Commission was thrown out by a US judge last week in part because the regulators had failed to adequately define the market the company was alleged to dominate. The EU has decided that it needs an ambitious new law, the Digital Markets Act, to break the power of dominant digital platforms including the smartphone app stores.

To make their case, the states maintain that the Android smartphone platform is part of a market of freely-licensed mobile operating systems, which excludes Apple’s iOS from the picture. Android accounts for 99 per cent of this market, and Google has employed “anti-competitive tactics to diminish and disincentivise competition in Android app distribution”, enabling it to charge an “extravagant” commission of up to 30 per cent, the complaint alleges.

Google has always maintained that the sale of apps in Android is more open to competition than Apple’s rival iPhone platform because it allows rival app stores alongside its own Play store.

White also challenged the states’ attempt to draw a narrow definition of the app market to make their case, saying it “completely ignores the competition we face from other platforms such as Apple’s incredibly successful app store”.

Justifying their attempt to define the Google operating system as virtually a market in its own right, and not in direct competition with the iPhone, the states said in their complaint: “Android is the only viable operating system available to license by mobile device manufacturers that market and sell their devices to US consumers.”

Google had taken advantage of that to profit illegally from its own Play store, they added, shutting down other channels of Android app distribution and forcing developers to use the Play store’s payment system, triggering automatic commissions.

The decision by the states to take on Google and not Apple probably reflects the fact that the investigation was more advanced, and complaints against both companies’ app stores from US states and federal regulators are likely eventually, said Paul Gallant, an analyst at Cowen. If anything, Google is more “developer friendly” than Apple because it allows rival app stores and also lets Android users side-load apps, or download them directly rather than through an app store, he added.

Utah’s attorney-general Sean Reyes said Google had used its “monopolistic power and hyper-dominant market position to unlawfully leverage billions of added dollars from smaller companies, competitors and consumers beyond what should be paid”.

In December almost 40 attorneys-general sued the company over a range of claims that it had illegally abused its search monopoly. That followed a complaint brought by a smaller group of Republican states over the company’s advertising technology. Google also faces a search-related complaint from the Department of Justice.