Epic Games triumphed in its antitrust case against Google. What happens next?

Google's defeat in its antitrust battle with Epic Games was a sweeping victory for the Fortnite maker and a significant upset to the business model underpinning the mobile app ecosystem
Epic Games triumphed in its antitrust case against Google. What happens next?

Google's defeat in its antitrust battle with Epic Games was a sweeping victory for the Fortnite maker and a significant upset to the business model underpinning the mobile app ecosystem, where platforms host app stores and then take a cut of developer revenues. But what does the ruling actually mean, at least in the near term, for app developers? That remains to be seen: a judge has yet to render a verdict as to what, specifically, Google's penalty should be.

A San Francisco jury on Monday returned a verdict in Epic's favor in mere hours-not days or weeks-finding that Google "willfully acquired or maintained monopoly power by engaging in anticompetitive conduct," as one court filing states. However, liability fell on the jury while it is still on the judge to decide what remedy will be provided for the case. Meaning that both parties will still plead their cases before the court as the case will get the court's rulling later in January in hopes of how Google will be made to change a number of things in its business to make up for what it did.

Most likely, Google will make no changes of moment at the Google Play Store until the judge decides definitively what, in fact, is to be accomplished. Even if it wanted to make such moves now beforehand of that decision, it would create further problems by doing so after the judge ruled that some other actions were necessary.

That is to say, it's business as usual over the next several weeks or months as the case enters its remedial phase; the Play Store is not changing its rules. Developers will still have to pay their commissions, as they had, often passing on the increased cost of doing business to consumers, too, also as always. Google's side deal with Spotify and settlement with Match will also stick.

We don't know yet if U.S. District Judge James Donato will force Google to unwind any of its deals, or if he is going to specify exactly what kinds of competitive agreements Google can pursue in the future regarding app publishers or OEMs. Nor do we know how the judge is going to work out the details around alternative app stores or third-party payment systems-for example, by mandating the discounts Google should give. Epic will likely ask for more specific and more detailed guidance from the court; Google will lobby the court to see that it still has a business to run and that too much restriction will harm competition in the long run.

"The court is going to be trying to strike a balance to restore competition in these markets where the jury has found competition has been restrained," said Paul Swanson, Holland & Hart partner who advises clients on the antitrust implications for their corporate relationships and represents clients in antitrust litigation. Still, he believes that the court will try to do so in the least intrusive way possible because it wouldn't want to make Google itself become a non-competitive entity. Which means that the court would not likely engage in "too much tailing" of the remedy, he says, and instead focus on expanding choice around downloading and purchase of Android apps.

Instead, what is quickly changing as a result of this ruling is the law surrounding the app store business model itself — and perhaps others.

"That we know for now is that this is going to affect walled garden business models Google and Apple and other companies have enjoyed for a little while," Swanson said.

He further suggests that this decision may as well impact other platforms where a company has established its platform and therefore determines how the game will be played, including things like the app stores' commission rate at 30%. Although Apple can be said to have successfully pleaded its case with Epic in the context of antitrust proceedings to the effect that it has a single product that integrates hardware with iOS and with the App Store, this is by no means the conclusion that was reached by the jury in the Google case. They found two are distinct markets: app buying and app distribution. That means other large firms with a platform like Apple's iOS and Google's Android operating systems and the App Store and Play Store might change their business models.

"That's where they go, okay, there's some real uncertainty in our fundamental model for how we do business," Swanson noted. In fact the legal risk from this business model may encourage other businesses to change, even without being dragged to court.

Also, said Swanson, class actions brought forward can now allow other would-be plaintiffs to argue their own cases without having to have the deep pockets that Epic does. "There's a pathway that has been placed for others to follow," he added.

But so far, he said, there has been nothing but silence on the part of other app makers suing in response. Rick VanMeter is the executive director of the Coalition for App Fairness, an Epic-founded lobbying group that also includes other founding members and app developers who are in favor of increased competition in the app economy-most notably Spotify, Match, Tile, Deezer, Basecamp and more. The group, which began with a dozen or so members, has more than 70 today. Mostly the work is pushing forward legislation, such as the Open App Markets Act introduced in the last U.S. Congress, but VanMeter believes the import of this ruling was tied to the fact that this case involved consumers-the members of a jury-looking at the facts and determining that Google's conduct was anticompetitive.

However, consumers do soon learn about these practices and when they get a chance to see what's really going on behind the scenes…I think they do understand it and do want change, remarked VanMeter.

Still, though, he and CAF remain skeptical about how Google will find ways to implement the decision of the judge when that time comes-ways that Apple and Google have managed to skirt around the spirit of the law or a court's ruling. For example, Google opened up a pilot program for alternative payments, but its 4% discount on commissions often means the developer ends up paying more when they have to pay their own payment processing fees. And when Apple was ordered to allow dating apps in the Netherlands to use alternative payment systems, it simply paid the fine for weeks on end for not implementing the change.

"I don't think either company, including Google, can be trusted to comply with the intention of the ruling," said VanMeter to TechCrunch. "I think, for our members, having more specificity and clear rules of the road that will prevent them from circumventing the ruling would be our preference."

He also believes that the ruling could motivate the Supreme Court to take up Epic's other suit against Apple.

"It's our hope that the Supreme Court will look at it and want to review it, and side with Epic," VanMeter said. But he admits he's not sure how the court would interpret a ruling on another case. "To the extent that it encourages them to look at the case and open it up and do a full review and rule on this, I think that would be great," he said.

Swanson added the Google-Epic ruling might not have any direct implications on the case between Apple and Epic, but reflects the general consumer interest that nudged on the speedy verdict by the jury. However, the way the two acquired market power was different. Apple wasn't in the practice of favoring side deals (although it dangled a deal with Netflix) nor did it pay developers to prefer its app store over theirs since, once again, there's only one way to get apps: the App Store. It doesn't have OEM agreements either since it makes its own hardware. While there are certainly parallels with Google, there are also pretty significant differences.

While Epic itself claims the verdict as "a win for all app developers and consumers around the world," in its statement, the truth is that this ruling is one among many dominoes that have to fall before the current business model of an app store is finally broken. Perhaps equally as significant, or even more so, are the regulations in place in other markets on the horizon, such as Europe's Digital Market Act, the U.K.'s Digital Markets, Competition and Consumers Bill, and regulations floated in many markets- Brazil, Japan, Australia, Canada, and the U.S.

In CAF's case at least, the Google-Epic decision could make Apple at least re-examine its business model.

"Just because it is your business model does not mean it is legal or that it's right," he said.

Fortnite creator Epic Games wins battle with Google on antitrust claims
What to know about Fortnite creator Epic Games' antitrust battle with Google, starting today

Blog
|
2024-10-10 19:13:31