New lawsuit: Google Play Store targeted

36 US states have sued Google for “luxurious” app commissions in the Play Store. Does the user end up paying the bill? And why is Apple’s App Store running under the radar?

Google’s lawyers really can’t complain about a lack of work. On Wednesday, 36 states and the Washington DC administrative region filed a competition lawsuit against the subsidiary of the Alphabet group in the federal court in San Francisco. It is the fourth US state lawsuit against Google since October. But it’s the first to target the lucrative app store.

“Luxurious” fee on app purchases

According to the complaint, Google uses anti-competitive business practices to ensure that app developers have no way around the Play Store if they want to reach their customers. In addition, Google raked in a “luxurious” commission of up to 30 percent on app purchases from the developers. This forces the developers to charge their app customers higher prices.

The plaintiffs are led by the US states of New York, Utah, North Carolina and Tennessee. “Google has been the bouncer of the Internet for many years, but recently it has also become the bouncer of our digital devices – with the result that we all have to pay more for the software we use every day,” said New York Attorney General Letitia James in a statement. The “Google monopoly” is a threat to the market, added her colleague from Utah, Sean Reyes.

Google’s business conduct in court

The new lawsuit casts a grim light on Google business practices. The image of the Internet giant in public had already been cracked by numerous other lawsuits, especially in the eyes of advocates of free competition.

Google is said to have paid the largest Android smartphone manufacturer, Samsung, so that the Korean company would not come up with the idea of ​​developing its own app store. The alleged illegal monopoly of Google in the search engine and online advertising business is also the subject of lawsuits.

When “Fortnite” maker Epic Games began to sell its apps outside of Google’s Play Store, Google is said to have even “bought” developers to dissuade them from doing the same. And that is only a small excerpt from the lawsuits that have been filed against Google’s business practices in recent years.

The Google view of things

With the new lawsuit, the Play Store is now also being targeted by US prosecutors – a completely incomprehensible process from Google’s point of view. The company described the lawsuit as “worthless” in a blog post. The plaintiffs would ignore the fact that Google would compete with Apple for developers and consumers. “We don’t have as many requirements as other mobile operating systems,” emphasized Wilson White, who is responsible for public relations at Google.

He finds it strange that a group of public prosecutors have chosen a system for their attacks, of all things, that has more openness and options than other systems. It can be safely assumed that White was referring to “other systems” as Apple with its iOS operating system and the App Store.

The app duopoly

In fact, it’s not that easy to dismiss the Google view of things. After all, the app business in the western world is by no means a pure Google monopoly, but rather a duopoly: Apple and Google divide the market between themselves. So it is only logical that “Fortnite” maker Epic has filed two competition lawsuits: one against Google, one against Apple.

In contrast to the private sector, the US state attorneys general and the Justice Department appear to be targeting Google rather than Apple with their lawsuits. Apple is still a little under the radar right now. At least in the US. In Germany, the Federal Cartel Office Apple is currently getting involved in the App Store because of its business conduct.

Do users pay the bill?

According to experts, the logic behind the US lawsuit against Google’s Play Store should actually also be applicable to Apple’s App Store. Utah Attorney General Sean Reyes said Google’s business practices have inflated costs for app consumers. The typical consumer might have paid “hundreds, if not thousands, of dollars” more.

Consumer advocates also criticize the fact that the high app fees at Google and Apple have increased the costs for consumers. The analysis company App Annie has calculated that customers spent a total of 143 billion dollars in mobile app stores in 2020 – 20 percent more than in the previous year.

Consumers leave more money in Apple’s App Store

This trend intensified in the first half of 2021: According to the analysts at Sensor Tower, consumers spent a total of 65 billion dollars in the App Store and Play Store in the first six months of the current year, an increase of 25 percent compared to the same period of the previous year.

Of this, Apple’s App Store accounted for $ 41.5 billion and Google Play for $ 23.4 billion. If you take into account that there are significantly more Android devices in circulation than iOS devices, the advantage of the App Store is all the more striking.

An important question remains open

But that is by no means compelling proof that the app developers are really passing the high fees they have to pay to Apple and Google on to the users. It is also quite possible that since Corona at the latest, people have simply spent more time with mobile devices and have also downloaded more paid apps for this.

In order to prove the causal path described by developers, consumer advocates and public prosecutors that behind the sales explosion in the mobile app stores there are really anti-competitive practices, far more detailed investigations are necessary, for example by the competition authorities in the USA, but also in Europe.

Exchange quite calmly

Incidentally, the new lawsuit against Google is quite calmly seen on the stock exchange. Papers of the Google parent company Alphabet fell in after-hours US trading by 0.2 percent to 2523.20 dollars. Since the beginning of the year, they have made price gains of 44 percent, leaving the broad American stock market far behind.

In other words: At this point in time, investors do not seem to see any real threat to Google’s business model in the numerous competition lawsuits – and therefore no reason to get nervous.