Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) Google agreed to pay $700 million to U.S. consumers as well as to revamp the way it runs its app store.
Last week, it also lost an antitrust lawsuit to Epic Games. But Google continues to defend its Android business model despite losing the monopoly case. Google has faced numerous anti-trust cases, settling similar claims from dating app Match even before this trial started. But Epic also filed a similar antitrust case against Apple Inc (NASDAQ: AAPL) in 2020 but lost as the U.S. judge ruled largely in favor of Apple.
Google's apology to U.S. consumers.
To settle with 50 states, Google will have to do more than pay $700 million which include $630 million into a fund for consumers and $70 million into a fund that will be used by states. It will have to allow developers offer direct payment options to its Play App store consumers. Also, Google will make it easier to download apps on Android devices from sources other than its Play Store.
Epic Games won against Google.
Epic Games has won the court battle as the jury agreed that the search giant had operated an illegal monopoly. Epic Games sued Google back in 2020, accusing it of unlawfully making its app store dominant over rivals. In the lawsuit, Epic Games accused Google of suppressing innovation and choice with a web of secretive and anti-competitive agreements. With a win against Google, Epic Games emphasized the urgent need for legislation and regulation to challenge the power Google and Apple have over smartphone users.
Technically, developers won when Google lost, but not necessarily customers.
Until now, Google has been charging app creators a 15% for customer payments for app subscriptions. It also charged up to 30% for purchases made within popular apps that are downloaded from the store. With the settlement, it will be forced to reduce those fees when app creators handle their own transactions. However, customers might not necessarily enjoy lowered fees because the discount could end up app developers' pockets.
The fight with Epic Games brought many secrets to light.
Spotify Technology S.A. (NYSE: SPOT) pays Google nothing to get almost all the benefits of the Google Play store. When it uses its own in-app-payment system, Spotify pays 0 percent, while a competing subscription service might pay 11 percent of its revenue if it's even allowed to use its own payments system at all. Basically, anyone who is smaller than Spotify is automatically worse off.
In 2017, Google offered Netflix Inc (NASDAQ: NFLX) a special treatment. At a time when the norm was 15%, Google offered Netflix to pay only 10%. Netflix refused Google's offer to become its "platform development partner". Netflix no longer pays Google anything for distribution via Google Play. But back in the days, Netflix did make a deal with Apple in a unique arrangement under which Netflix enjoyed half of the standard rate Apple was taking, more precisely only 15 percent of its revenue on iOS.
Google lost, but Apple is in the clear.
It's no secret that Apple is running its App Store with an iron fist, while Google lets anyone install any app on Android phones. But, Apple sells the iPhone and therefore, it is its way or the highway, while Google does not sell the Samsung Galaxy and other Android lineups. Google builds its ecosystem differently in accordance with phone makers. Yet, Apple was cleared and Google was found guilty of ruling an illegal monopoly. Interestingly, even the judge did not allow either side to bring up Apple, with nothing from the Apple case being considered directly relevant to the Google case. Therefore, the fact Apple won was considered irrelevant. There's also the fact that Apple fought a bench trial while Google needed to face the jury.
But besides the outcome, both of these trials destroyed any notion that Google and Apple are giving developers a fair or equal treatment. Internal emails and strategic plans that were revealed during the trial clearly showed Google's clear intention to block rival app stores. But this is not the end of Google's regulatory troubles as besides losing this particular legal battle, Google is facing other lawsuits that are questioning its search and digital ad practices.
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