Google, owned by Alphabet Inc., has agreed to pay $700 million and increase competition in its Play app store after overcharging customers. This is part of a deal with U.S. states and consumers, announced in a San Francisco federal court.
The settlement, awaiting a judge’s approval, involves Google putting $630 million into a fund for consumers and $70 million for a fund managed by states.
The settlement guarantees at least $2 to eligible consumers, with possible extra payments based on their Google Play spending from August 2016 to September 2023. All U.S. states, the District of Columbia, Puerto Rico, and the Virgin Islands are part of this settlement.
Wilson White, Google’s Vice President for Government Affairs and Public Policy, said the agreement will give Android users more choice and better security. It will also let Google keep working on and competing in the Android market for both users and developers.
With the settlement, Google is going to give app and game creators the chance to use different payment methods besides Google’s own. This method, called “choice billing,” has been tested in the U.S. for more than a year. Moreover, the settlement will make it easier for users to download apps directly from developers.
Lawyers representing the states believe this settlement will be greatly beneficial for consumers all over the country. They see it as an important move against the way Google has been doing business.
What Did Google Do Wrong?
The settlement with Google stems from accusations that its U.S. Play Store violated laws by overcharging customers, as mentioned in a court document. The plaintiffs in the case argued that if Google didn’t have such control over the market, customers would have spent less on apps and had a wider range of choices. Ultimately, they think Google’s dominant market position led to higher prices and limited options for those buying apps.
Utah, who was leading the lawsuit alongside other states, announced the settlement with Google in September. However, the details were kept secret until after Google’s court case with Epic Games, who made “Fortnite,” was over.
Epic Games vs. Alphabet: A Landmark Lawsuit
Epic Games, known for “Fortnite,” won an important lawsuit against Google’s parent company, Alphabet. It accused Google’s Play app store of being an unfair monopoly.
A couple of days ago, a jury agreed with Epic on everything. It decided that Google has too much control in the Android app market because its Google Play Store is the only channel through which apps could be safely and legitimately distributed to users.
Furthermore, court documents showed that Google unfairly forced app makers to use its payment system for in-app purchases. This means developers had no choice but to pay Google a hefty commission (up to 30%) to earn revenue.
The court will start planning what steps to take next in January.
Japan’s Fair Trade Commission Investigates Google
In parallel, Japan’s Fair Trade Commission (JFTC) is also investigating Google’s practices with smartphone apps. Japan is concerned that Google might have unfairly forced its search apps to be pre-installed on phones and controlled where the app icons are placed. They also think Google might have made deals with device manufacturers to block other search apps, offering them a share of the ad money from Google searches in return.
In response, Google’s Japan branch said that people using Android phones can change their settings easily, including their internet usage and app downloads. Google is also cooperating with Japanese authorities to demonstrate that it provides a variety of options for its users in Japan.
U.S. Department of Justice’s Antitrust Case Against Google
Beyond these cases, Google faces additional legal scrutiny concerning its search and advertising practices, consistently denying any misconduct.
In January 2020, the US Department of Justice launched an antitrust lawsuit against Google, claiming it broke competition laws. The case focuses on how Google might have unfairly used its power to make sure its search engine is the main choice on phones and browsers, pushing aside its competitors.
Google defends these actions, saying they’re reasonable and don’t affect competition or stop people from choosing other options. Legally, the onus is on the Justice Department to prove that these deals harm competition.