Google’s Epic legal defeat threatens $200 billion app store industry

Google’s legal defeat at the hands of Fortnite maker Epic Games Inc. threatens to roil an app store duopoly with Apple Inc. that generates close to $200 billion a year and dictates how billions of consumers use mobile devices. The loss — handed down by a San Francisco jury on Monday — is a blow to the two companies’ business model in apps, where they charge commissions of as much as 30% to software developers who typically have few other options.

Epic has spent years railing against the practice and got a federal jury to agree that Alphabet Inc.’s Google unit had acted unfairly as a monopoly. The case is likely to accelerate the weakening of app store rules, which have already come under fire from regulators and lawmakers around the world. “The dominoes are going to start falling here,” Tim Sweeney, chief executive officer of Epic, said in an interview after the verdict. “The end of 30% is in sight.”

Though Apple won a similar case against Epic in 2021, that ruling was made by a single judge. The nature of the Google suit — where a jury sided unanimously with Epic — let actual consumers weigh in on the world of smartphone apps. In under four hours of deliberations, they found that Google had engaged in anticompetitive conduct, harmed Epic and illegally forced its own billing system on developers. The battle began in 2020, when Fortnite was kicked off the Apple and Google Play app stores because the game developer had secretly installed its own payment system. The idea was to bypass the up-to-30% revenue share that the two tech giants take from in-app purchases and subscriptions on their platforms. In response, Epic sued both companies.

Google also has drawn criticism for making side deals with big developers like Spotify Technology SA where it offers lower commissions. In Monday’s decision, the jury found that Google shouldn’t require Android app developers to use its billing system for software sold through its store — and that it shouldn’t offer custom agreements to certain developers. “The immediate aftereffect is we will see a shift in the marketplace where big tech companies will have to make accommodations — whether it is more access, better terms, more options for developers — to stave off legal exposure,” said Paul Swanson, a partner at Holland &Hart who specializes in technology and antitrust law.

The case also underscores a sentiment among many consumers that major technology companies have gained too much power. Google also faced scrutiny from a Justice Department judge this fall over its power in search, though the outcome of that trial won’t be clear for months.