Google lost its antitrust case. Changes are coming faster than you think.
Google was found guilty on Monday of violating antitrust laws with its Android app store, in a first-of-its-kind ruling that could potentially blow up the business model underlying the smartphone economy.
A nine-person jury in San Francisco took less than four hours to decide in favor of Epic Games, the maker of Fortnite that complained that Google’s 30 percent cut of its revenue was excessive.
But despite all the headlines, jury verdicts can be tied up in appeals, delaying resolution of the app store controversy for years. And Google immediately said it would appeal the Epic verdict.
Fortunately for the game maker, other app developers, and perhaps consumers, big changes are coming to Google’s app store much, much sooner. That could help local mobile app developers, and possibly make apps easier or cheaper to use.
All throughout the monthlong trial, US District Judge James Donato had the answer sitting in his office: Google and all 50 states’ attorneys general, who had filed a parallel lawsuit challenging the app store, had hammered out a secret settlement agreement, according to court filings.
Back in September, Google and the AGs told Donato that they had reached an agreement in principle that would include both a monetary relief fund for consumers and restrictions on how the company operated the app store, without divulging any further details.
“This is not just a scribble on the back of a napkin,” Brendan Glackin, Utah assistant attorney general, told the judge during a hearing. “This is a term sheet that has been heavily negotiated between the parties over a matter of months and that has been now approved at the staff level by all 52 of these jurisdictions.”
Donato was worried the deal wouldn’t pass muster with the AGs for all 50 states plus Puerto Rico and the District of Columbia. But by Oct.12, all 52 had signed off. Google asked that the terms of the deal not be released before the trial with Epic, so as not to prejudice the jury, and Donato went along, according to court filings.
The terms were to be made public within seven days of a verdict in the Epic trial, so now the clock is ticking.
The required changes could be similar to rules passed by the European Union to regulate mobile app stores that will take effect next year. Under the EU rules, Apple and Google will be required to allow users to bypass their app stores and install third-party apps directly. Apps will also gain the freedom to use third-party payment services instead of being locked into Apple and Google’s services. However, Apple last month filed a challenge to the EU rules.
Epic wasn’t able to come to terms on its own with Google and so the trial in all its spectacle went forward starting on Nov. 6, including testimony from Sundar Pichai, chief executive of Google parent company Alphabet, and Epic CEO Tim Sweeney.
While the terms of the settlement remain secret, all kinds of other secrets about the smartphone economy came out at the trial. Music service Spotify doesn’t pay Google any cut of its app revenue and Netflix pays just 10 percent, under deals the companies negotiated with Google. And Pichai under oath confirmed that Google pays Apple 36 percent of all of the revenue it makes from searches on Apple devices.
And whatever happens with the app store case and settlement, there will be plenty more courtroom action to occupy Google watchers.
The company just completed a trial before US Judge Amit Mehta in Washington, D.C., over whether the company violated antitrust laws in its search business. At the end of the trial last month, Judge Mehta said he had “no idea” how he would rule in a decision expected some time next year. A ruling against Google would require a second phase examining potential remedies.
And a state AG and Justice Department lawsuit over Google’s digital ad business is still in the discovery phase, with a trial likely next year before US Judge Leonie Brinkema in Virginia.