Google’s Epic legal battle opens up on another front

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The long-running attempt by Epic Games to break open the mobile app stores that generate billions of dollars in profit for Apple and Google is set for another courtroom showdown on Monday, as its claims against the search giant go to trial in San Francisco.

The case comes at the same time that Google is defending itself in a landmark antitrust case from the Department of Justice in a Washington DC court, bringing another potentially perilous legal test of some of its core business practices.

Epic lost on most of its claims in a similar case against Apple in 2021 before failing on appeal earlier this year, though it has petitioned the Supreme Court to take up the issue. However, the different circumstances of the Google trial have added a degree of unpredictability to the outcome, according to some observers, leaving a chance that the trial could result in serious restrictions if Google loses.

The maker of the popular game Fortnite claims that Google broke US antitrust law by hampering rival app stores that run on its Android operating system, which in effect forces app developers to use its in-house payment system, leaving them paying higher fees.

Google had also been due to face off in court against dating app company Match and a group of US state attorneys-general, which had brought their own complaints about its mobile Play store. But those claims were settled in the weeks leading up to the trial, with Match last week agreeing to pay Google a fee in return for using its own billing system in its apps.

Google claims that its app store policies are far more permissive than Apple’s. Epic has already lost twice in court against the iPhone maker and is now “bringing a case that has even less merit given the flexibility and choices Android offers”, said Wilson White, Google’s vice-president of government affairs.

Unlike Apple, the search company allows handset makers to carry alternative app stores on Android phones, while also letting users download apps directly from the internet. It points out that Epic itself takes advantage of these arrangements, using Samsung’s Galaxy app store to distribute its games, and allows direct download of Fortnite, its most popular game.

Also unlike Apple, Google lets app developers bypass its own payment system and instead use alternatives to handle transactions inside their apps. It described the arrangement, known as user choice billing, as a pilot, but said it was operating in 35 countries.

According to Epic, however, Google’s claims of openness for its mobile app ecosystem do not stand up to scrutiny. It points to a series of contracts Google has forged with device makers and app developers which, it says, are all geared towards making sure that the company’s own Play store remains dominant on Android phones. These include deals under which Epic claims Google paid developers to keep their apps in its store, including making a $360mn payment to gaming company Activision.

Epic also points to financial conditions Google imposes on developers who bypass its payment system. In South Korea, for instance, the search company said two years ago that developers who had previously paid a 15 per cent fee would still have an 11 per cent fee, even if they stopped using the Google payment service. That resulted in a saving that was too small to justify using an alternative payment company, according to Epic.

Google, meanwhile, argues that its charges are justified by the costs of running the Android mobile platform and all the other services it provides to developers, even when they do not use its payment service.

The focus on Google’s contracts carries a strong echo of the DoJ’s antitrust case against the company, which went to trial in September. The agency has accused Google of using those deals, which give prominence to its search engine on smartphones and in browsers, to illegally shut out rival search companies.

As in the DoJ trial, Google’s chief Sundar Pichai is set to testify in the case, which is scheduled to run until mid-December. Other likely witnesses include Epic’s chief executive Tim Sweeney.

Epic’s loss in its Apple case, as well as Google’s greater openness in allowing alternative app stores and payment systems and the fact that other plaintiffs have already settled, are likely to give it “the upper hand” in the trial, according to Paul Gallant, an analyst at TD Cowen in Washington.

However, some aspects of the latest trial could make the outcome more uncertain for Google. While the Apple case was ruled on by a judge, the verdict in the Google trial will be given by a jury, adding a greater degree of unpredictability to the outcome. Google failed in an attempt last week to have Judge James Donato hear the case by himself, after claiming its settlement with the other plaintiffs made a jury unnecessary.

Donato has also said that Epic can tell the jury that Google failed to preserve chat messages among its employees that could have provided important evidence in the trial.

Also, according to Gallant, the judge has shown a propensity for drastic action in antitrust cases, leaving open the potential for stringent sanctions against Google, should it lose. Speaking at an antitrust conference last month, he urged plaintiffs to “swing for the fences when asking for remedies”, with the break-up of infringing companies one potential result.