A competitive update

US court verdicts will benefit app developers

Android users may see changes in the way Google Play Store works after two key legal outcomes in US courts. In September, a settlement was reached in a suit brought by 30 US states alleging anti-competitive behaviour. Google will pay $700 million in fines in that settlement. Of this, $630 million will go into a fund for compensating users who may have been forced to pay more due to Google’s alleged monopolistic practices with Play Store. This sum is about a fortnight or three weeks’ worth of earnings from Play Store. Further, on December 11, a jury decided, in response to a lawsuit brought by game developer Epic Games, Google Play was indeed an illegal monopoly. Epic complained about being compelled to pay 30 per cent commission on Play Store purchases of its games and also about other restrictive clauses imposed by Google. However, Epic isn’t satisfied because Google may still continue to charge a large fee while offering users a choice of alternative locations for downloads.

Google will have to support external app installs on Android for at least seven years. It will have to allow phone manufacturers to offer alternative app stores. Besides, it cannot demand the Play Store icon to be placed on the home screen for at least five years. App developers may also offer alternative billing options and discounts outside Google Play for at least five years. Third-party app stores may keep exclusive rights to apps downloaded from these places. Third parties will be allowed to automatically update apps, and Android will support a consent mechanism to control app-updating options. Google also cannot enter agreements with developers to offer app versions with more features for downloads on Play Store. It can only collect minimal data if a consumer chooses alternative billing options and it may not use such data to compete with the app. Epic Games and other developers do stand to gain. But Google currently charges up to 26 per cent commission on alternative “user-choice” billing, which means this is only a 4 per cent discount. For many developers, it may not be a sufficient saving to make it worth creating and maintaining alternatives. However, the judge in the Epic case will have to ratify the penalties suggested by the jury and could choose to review user-choice fees, though analysts say this is unlikely.

Google may also appeal the verdict. The trial did reveal Google had opaque revenue-sharing deals with smartphone makers and some game developers. Internal documents cited at the trial showed that Google forecast that it could lose $2 billion in revenue or more from offering alternative billing choices. If Epic’s popular Fortnite is downloaded from outside Play Store, for example, Google may lose $250 million in annual revenues from Fortnite, and it could lose about $240 million if Activision Blizzard King pulls Candy Crush. While Google’s argument — that it charges commissions to ensure that apps in Play Store are vetted for malicious code and transactions are secure — must be taken seriously, a more competitive environment for downloads is bound to be beneficial for consumers and developers in the long run. The jury verdict and the earlier settlement together do seem to promise this. If “User Choice” fees of 26 per cent are also deemed to be high, app developers could gain more substantially.