Android or iOS? While both systems have their supporters, and sometimes even die-hard fans, with the dying breath of the infamous Windows Mobile and its legendary Tiles, our choices when buying a new phone have been essentially limited to these two options. When it comes to mobile operating systems, Apple and Google (or rather Alphabet) divide and conquer, and there's a difference. As TechJury, mobile devices accounted for 49.78% of all web visits in 2022, and the share of mobile users increased by 5% over the year. Furthermore, according to the report, spending on marketing content targeted at mobile device users is expected to exceed that incurred for traditional desktops in 2023 for the first time. There's no doubt that this market constitutes a significant portion of our online reality, and the most popular mobile apps generate staggering revenues. Five of the ten highest-grossing apps in 2022 were popular mobile games, with four of them—Honor of Kings, Genishin Impact, PUBG Mobile, and Candy Crush Saga—achieving over $1 billion in revenue. Simply put, to be available on Android or iOS phones, and thus reach a mass audience and potentially big bucks, every mobile app must pass through the gateways known as Google Play and the App Store, respectively. The owners of both apps are keen to ensure it stays that way, preferably according to centrally imposed rules.
It is precisely this state of affairs that Epic Games, the creators of "Fortnite," one of the highest-grossing hits in gaming history, has decided to challenge. The game is essentially free to play. The game's business model relies on paid, optional cosmetic upgrades, which can be purchased with in-game currency. In the mobile version, these are called "in-app purchases." It is the rules governing app distribution and billing through Google Play and the App Store that have become the source of the ongoing conflict between the giants.
In its lawsuit against Alphabet, Epic Games accused Android developers of taking actions aimed at eliminating competitors and collecting excessive fees from app developers. The accusation concerning billing is particularly noteworthy. Google allegedly illegally combines its store and billing service, meaning that an app aspiring to be available on Android must use both to be listed in the Google Play store, according to the terms and conditions. Under the current policy, Google collects a 30% fee on all purchases made in connection with apps distributed through Google Play. This is significant because there is virtually no other way for a given developer's app to be found on a phone running the Android operating system (for comparison, in the PC world, Microsoft, the owner of the most popular operating system for personal computers, Windows, also has its own distribution system for desktop apps, the Microsoft Store, but nothing prevents users from fulfilling their needs through other distributors, such as Steam or our native GoG, or directly from the developer, as in the case of Adobe). Moreover, as Gary Bornstein, a lawyer representing Epic in the dispute, points out, Google systematically blocks alternative app stores in the company's Play Store. Seeking alternative solutions, Epic introduced additional payment methods on Android and iOS devices, bypassing official distribution and billing channels, allowing users to make in-app purchases directly from Epic. Consequently, Fortnite disappeared from both Google Play and the App Store. The game developer responded with lawsuits.
In its case against Alphabet, Epic Games accuses the owners of Google Play of abusing their power over app distribution and payments in violation of U.S. federal antitrust law. According to the Fortnite producer, Google's policies, particularly its authoritarian distribution and billing practices within the Android environment, and the accompanying high fees, have harmed innovation among app developers and distributors and resulted in consumers paying significantly higher prices. In response, Google refers to its ongoing battle with Apple. According to the defendants, there can be no monopoly within a single operating system. Alphabet constantly faces the Cupertino company's actions, and thus direct competition from the manufacturer of another operating system and an alternative distribution channel. According to Jonathan Kravis, Google has recently been forced to lower its fees related to Google Play during its battle with Apple, and for this reason alone, it cannot be considered a monopolist. It seems that Epic Games expects the creation of different distribution channels and methods within a single operating system, while Google and Apple expect to maintain the current status quo, where supposed competition is based on the two leading mobile operating systems, which effectively constitute a monolith in terms of distribution and sales settlement, thus dividing the mobile market between them. According to Wells Fargo, revenue from app sales and in-app purchases generates approximately $10 billion in revenue annually for the Mountain View, California-based tech giant.
The Epic Games vs. Google battle continues. On December 11, 2023, the Fortnite developer scored its first significant victory. The jury ruled in favor of Epic on the issue of monopolistic practices, and in January, the court will begin work on determining remedies that should be implemented to counter Google's actions to eliminate competition within Android. The creators of Google Play, of course, intend to appeal the verdict. This ruling is interesting because in the nearly identical Epic vs. Apple case from 2021 (conducted without a jury), the judge found that the prosecutor had not presented sufficient evidence to prove that Apple had unlawful monopoly power, and the issue remains unresolved. Epic has asked the U.S. Supreme Court to reopen the case against the iOS publisher. Will Google ultimately be able to defend its position? Or will the rulings made in the Google case influence the final outcome of the Apple case? Apple undoubtedly dominates the mobile device market in the United States. Regardless of the final outcome, Epic Games has embarked on a battle that could define the shape of mobile services in the coming years.
This alert is for informational purposes only and does not constitute legal advice.
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