Epic Games v. Google
Court	United States District Court for the Northern District of California
Full case name	Epic Games, Inc. v. Google Inc.
Argued	November 6–December 1, 2023
Decided	December 11, 2023
Court membership
Judge(s) sitting	James Donato

Epic Games v. Google is a lawsuit brought by Epic Games against Google in August 2020 in the Northern District of California.^[1] Filed concurrently with Epic Games v. Apple, Epic had challenged Google's monopolistic practices on its Google Play Store on Android devices. A jury trial was held in November and December 2023, after which the jury found for Epic on all counts, ruling that Google violated anti-trust laws in maintaining the Play Store as the dominant storefront with Android, including making deals to ensure apps would be solely published through the Play Store and requiring the Play Store be installed on third-party devices.

Background

Google operates the Google Play Store for Android devices. Similar to Apple and its App Store for iOS devices, Google takes a 30% share of the revenue for all sales made through the Play Store, including in-app purchases. This 30% revenue share was comparable to what other digital storefronts, like Steam, require as of 2019.^[2]

Tim Sweeney, the CEO of Epic Games, had been outspoken about this 30% fee, believing that storefronts could significantly reduce this while still being profitable.^[3][4] Part of the reasoning behind the Epic Games Store was to show that Epic could operate this storefront at a 12% revenue share.^[5] Epic released Fortnite Battle Royale for computers and consoles in 2018 as a free to play title supported by microtransactions, allowing players to buy in-game "V-bucks" currency for cosmetic items. When Fortnite was brought to mobile devices, Epic initially released the game through sideloading as to avoid giving Google any revenue from in-game sales. However, this led to a number of clones, some with malicious behavior, to appear in the Google Play Store to masquerade as the real Fortnite game, and Epic eventually discontinued the sideloaded version in favor of a legitimate Google Play version in 2020.^[6]

On August 13, 2020, Epic initiated "Project Liberty", a plan developed by Sweeney to challenge the 30% revenue fees on Google's and Apple's stores.^[7] Both the Android and iOS versions of Fortnite were updated with code to allow players to buy V-bucks directly from Epic alongside the respective storefront, providing a better deal for those buying directly from Epic. This practice violated the allowable terms for apps for both the Google Play Store and App Store, and Fortnite was removed from these storefronts that same day.^[8][9] Epic used this action to file federal lawsuits it had prepared against both Google and Apple in the United States District Court for the Northern District of California, asserting their storefronts engaged in anti-competitive behavior.^[10]

In Apple's case, Epic's case was overseen by Judge Yvonne Gonzalez Rogers. Apple filed a countersuit against Epic within weeks of Epic's action, citing a breach of contract.^[11] The trial was held in May 2021,^[12] and Rogers made her decision in both suits in September 2021, ruling against Epic on nine of their ten claims, but upholding a claim related to Apple's anti-steering provisions, which prevented apps from advertising other means to purchase in-game content.^[13] Rogers ordered that Apple must allow for apps to include such steering. Both Epic and Apple appealed the ruling to the Ninth Circuit, while upheld Rogers' ruling in Apple 2023.^[14] The Supreme Court of the United States declined to hear the subsequent appeals, leaving Rogers' order to Apple in place.^[15]

Legal action

In initiating the lawsuits against Google and Apple, Epic did not seek monetary damages but instead was "seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers."^[16] In comments on social media the next day, Sweeney said that they undertook the actions as "we're fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly. The primary opposing argument is: 'Smartphone markers can do whatever they want.' This as an awful notion. We all have rights, and we need to fight to defend our rights against whoever would deny them."^[17] While Epic had focused on whether Apple held a monopoly on iOS devices in that trial, Epic instead argued that Google used aggressive deal-making with partners as to maintain the strength of the Google Play Store within the Android operating system.^[18]

Google, in response to the lawsuit, stated to The Verge that "For game developers who choose to use the Play Store, we have consistent policies that are fair to developers and keep the store safe for users. While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play."^[19] Google also distanced itself from the Apple case, asserting that the Android operating system does not have the same single storefront restriction as Apple's iOS, and thus allows different Android phone manufacturers to bundle different storefronts and apps as they desire. Google said they are negotiating with Epic Games far differently from Apple in their case.^[20]

About a month after Epic's lawsuits, Epic joined with smaller tech firms like Match.com and Spotify to create the Coalition for App Fairness, an advocacy group to challenge Apple and Google's practices on their respective app stores.^[21]

Google countersued Epic in October 2021, asserting that by introducing a version of Fortnite that did not use Google Play's payment systems, Epic had violated their contract with Google, and because this version still exists and can be obtained in other formats outside of Google Play, Epic "has alternatively been unjustly enriched at Google's expense", and seek to recover monetary damages from this version.^[22]

While the jury trial was pending, Google was sued in July 2021 by a coalition of 36 states and the District of Columbia over its app store practices, mirroring several of the complaints Epic had filed under.^[23] This lawsuit was settled in September 2023, with Google agreeing to pay $700 million as part of the settlement. In addition, Google stated they would allow selected apps to use a new User Choice Billing option, which lets apps under the group to charge users directly without having to go through the Play Store payment system, though developers would still need to pay a 26% revenue sharing fee back to Google. The settlement also loosened requirements for third-party storefronts in sharing space with the Play Store.^[24][25]

The Match Group, which runs several app companies including Tinder and Match.com, launched its own lawsuit against Google over its app store policies in May 2022, also with similar complaints raised in Epic's suit.^[26] Google and Match Group settled in November 2023, ahead of Epic's trial, with Google paying Match Group $40 million and allowing Match Group to use its User Choice Payment system.^[27]

Trial

The jury trial was held from November 6 through December 11, 2023.^[18] During the trial, Epic was able to show the numerous deals that Google had made with various partners as to maintain the strength of the Google Play store and discourage other storefronts. Among these included what was known as "Project Hug", an effort to work with twenty mobile publishers, including Activision, Aniplex, Bandai Namco, Bethesda, Blizzard, Com2uS, EA, King, Mixi, Niantic, NCSoft, Netmarble, NetEase, Nexon, Nintendo, Pearl Abyss, The Pokémon Company, Riot, Square Enix, Supercell, Tencent, and Ubisoft, as to keep their games and apps within the Play Store, with hundreds of millions of dollars used to maintain this agreement.^[28] Similarly, a "Project Banyan" referred to a deal made with Samsung Electronics as to weaken the impact of their Galaxy Store on Android devices.^[28] Epic showed that Google had become concerned about Epic's actions and saw them as a disruptor, in that through a "contagion effect", other developers would follow Epic's approach of sideloading their games to avoid the Play Store and potentially cost them $2 billion a year in revenue. Google appeared to have looked into acquiring a controlling portion of Epic as to discourage Epic from avoiding the Play Store.^[28] Epic also discovered that Google had made a number of sweetheart deals with specific apps to avoid or reduce Play Store or the User Choice Billing fees, such as with Spotify and Netflix.^[28] Google was also found to have deleted certain chat messages that were relevant to the case, which was said to undercut Google's credibility to the jury.^[29]

The jury deliberated and returned with its verdict on December 11, ruling on all eleven counts in favor of Epic. The jury affirmed that Google had engaged in anti-competitive practices both with the Play Store and its related billing system, and maintained its monopoly through how it made deals with partners using its dominant position in the overall technology market. The jury also found that Google further its position by requiring the Play Store to be installed on third-party Android hardware such as Samsung phones.^[29]

Determination of relief given the jury's findings was scheduled to take place starting in January 2024. Google has stated its intent to appeal the decision.^[29]

Epic submitted its recommended injunctions to place on Google stemming from the jury's decision, which include preventing Google from contracts like "Project Hug" to discourage developers from releasing on third-party app stores, no tying of Google Play with phone OEMs, and preventing any anti-steering steps.^[30]

References