People using the Google app store are needlessly paying higher prices, lawsuit says
If you have an Android or Google phone, or any other device that uses the Google Play app store, you’re likely the victim of a monopoly that’s creating artificially high prices for apps, says a new lawsuit filed by 37 states.
State attorneys general from around the country sued Google for antitrust violations on Wednesday, in a case that could potentially bring millions of dollars back to North Carolina, both to the state and individual consumers.
The lawsuit alleges Google is a monopoly and has used that status to unfairly restrict competition and options within the Google Play app store. That, in turn, has created limited options and higher prices for all its customers, said North Carolina Attorney General Josh Stein, who is among the officials leading the lawsuit.
“We believe they’re charging monopoly rents, which means they’re charging a gross overcharge on consumers,” Stein said in an interview. “Because they can. Because they are a monopoly. And they’re using that monopoly power to the detriment of users.”
In a lengthy response posted Wednesday night, Google disputed the claims and called the lawsuit meritless.
The company is hardly a monopoly, it said, since it has to compete with Apple. Plus, phones and tablets that run Android allow apps to be downloaded outside the Google Play store. Many devices also come pre-loaded with competing app stores like the Amazon app store, Google said, giving customers further options.
Stein acknowledged that Google does allow people to get around the Play store, but he said people who try to do so are shown scary-sounding warnings about malware that, he said, are largely bogus. The real intent is to convince people to use the Google Play store, he said, adding that in the end 90% of app downloads on Android devices do come through the Play store.
Follow the money
Google takes a large cut out of app purchases, Stein said Wednesday, which forces companies to not only make their apps more expensive but also raise the cost of things that can be purchased within apps — like microtransactions in video games, which are a lucrative and ubiquitous part of the mobile gaming industry.
Stein said Google charges as much as 30% for its cut.
“When people buy things from payment processors the typical rate is 3%, and Google is charging 30%,” said Stein, a Democrat. “And so I’m bringing this lawsuit along with 36 other attorneys general, Republicans and Democrats alike, to stop Google from using its dominant market position in Android to harm consumers.”
Google has argued in Senate hearings on antitrust that the fees help support Play Store upgrades, tools for developers and security updates.
Google has not yet responded to a request for comment Wednesday.
The four main leaders of the lawsuit are Utah, North Carolina, Tennessee and New York.
Stein and North Carolina were also among the leaders in a different multi-state lawsuit against Google last December.
That previous lawsuit argued that Google used its dominance over internet searches to corner the lucrative online advertising market. The company would lower the search rankings for competitors like home repair search sites, the lawsuit said, and its search results favor companies that advertise with Google and not other search engines like Bing.
Similarity to Fortnite lawsuits
The lawsuit could resonate locally, where Cary-based Epic Games has sparred with tech giants over similar complaints.
Epic sued Google — as well as Apple — last year with similar claims, arguing the company’s app store practices were a violation of antitrust laws. Both Google and Apple kicked Epic’s popular Fortnite video game off their app stores, after Epic tried to add its own payment processing system to the app, a move that violated app store rules.
But unlike the Fortnite lawsuits, the new one from the state could wind up with individual North Carolinians getting paid — if a judge accepts the 37 states’ request for damages and fees.
The new lawsuit claims that nationwide people have paid about $32 billion at the Google Play store. Stein said that by a rough estimate, North Carolinians might be responsible for around $1 billion of that. In addition to seeking damages for individual customers, the lawsuit is also seeking civil fees that would go to the states involved in the lawsuit.
Epic declined to comment on the lawsuit from the attorneys generals. But Meghan DiMuzio, executive director of The Coalition for App Fairness, a group co-founded by Epic, said it supported the lawsuits.
“App stores have been given a free pass to abuse their dominant market position for far too long,” DiMuzio said in a statement. “Their anti-competitive policies stifle innovation, inhibit consumer freedom, inflate costs, and limit transparent communication between developers and their customers.”
Google disagrees.
The lawsuit filed Wednesday by the 37 states, it said, “mimics a similarly meritless lawsuit filed by the large app developer Epic Games, which has benefited from Android’s openness by distributing its Fortnite app outside of Google Play.”
But while Epic has sued both Google and Apple, so far North Carolina has not filed a suit against Apple’s App Store. But Stein said that’s not out of the question in the future.
“We are clearly monitoring the Epic versus Apple case closely, and may choose to pursue a similar case against Apple if we believe that the facts warrant it and that the relief granted is inadequate,” Stein said.
Apple also charges a 30% fee on in-app purchases, which Epic argues causes prices to be artificially high.
“We believe this form of tying of a mandatory payment service with a 30% fee is illegal in the case of a distribution platform with over 50% market share,” Tim Sweeney, Epic’s founder and CEO, said last year.
Rebecca Haw Allensworth, a professor of antitrust at Vanderbilt Law School, said Epic could benefit from a broad antitrust push against Google.
“I think this is what Epic wants,” she said in a phone interview. “I think one of Epic’s goals in bringing the suit was to get the attention of other regulators and to try to get them to jump on the bandwagon.”
The addition of 37 attorneys general, she said, will make it seem less like Epic is on its own with this issue.
“It’s not clear that it would be the kind of thing that would be cited by the courts in deciding in favor of Epic,” she added, noting she hasn’t read the complaint yet. “But the optics, and position of the rest of the regulators will influence judges.”
Of course, Epic also stands to benefit if the attorneys general win any remedies against Google, she added.
Epic’s lawsuit with Google could go to trial next year.
However, its case against Apple could be decided soon, with a judge expected to reach a decision in the coming weeks. Epic is hoping to convince the court that app developers should be allowed to have more than one way to get their apps onto iPhones (currently the only option is through the App Store), and that they should be allowed to use any payment system they desire.
Apple argues that it should be allowed to have both higher fees and restrictions on its App Store because of the security and user experience it provides customers.
Unlike Apple, Google does allow apps to be downloaded outside of its app store, in a process called side loading. Google has said its side loading feature is proof that there are multiple distribution channels on Android.
But Epic has argued in its lawsuit that Google makes the process intentionally cumbersome, so that apps downloaded outside of the Play Store are put at a disadvantage.
Stein said that feature doesn’t negate the antitrust complaints against the Play Store.
“They make it exceptionally difficult for people to be able to download any app other than through their Play Store,” he said, adding they make users “go through multiple steps, and many scary warnings about the risks that they are creating for themselves that we believe are not real.
“And so we just believe it’s not an actual meaningful opportunity, and it’s shown by the fact that Google Play Store is where more than 90% of downloads occur.”
This is a developing story. Check back for updates.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
This story was originally published July 7, 2021 at 6:14 PM with the headline "People using the Google app store are needlessly paying higher prices, lawsuit says."
