Google strikes tentative settlement in play store lawsuit

September 8, 2023 Rob Abruzzese

Attorney General Letitia James. Photo: Seth Wenig/AP.

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Alphabet Inc.’s Google has reached a tentative settlement concerning accusations of its Play Store violating federal antitrust rules. The details of this settlement, which pertains to allegations of overcharging customers, remain undisclosed.

More than 30 U.S. states brought the action, suggesting that Google’s perceived monopoly might have led consumers to spend more on applications. The attorney general of Utah led this group, and their proposed settlement has put a hold on the trial previously scheduled for Nov. 6. While Google has refrained from commenting on the allegations and proposed settlement, their silence is notable.

Many New Yorkers find themselves among the 21 million represented consumers, awaiting clarity on the potential repercussions of this settlement on their digital lives and expenses.

“No company is too big to play by the rules, including Google,” said New York Attorney General Letitia James. “We brought this lawsuit because it is illegal to use monopoly power to drive up prices. We appreciate this bipartisan group of attorneys general who fought for a fair marketplace that encourages competition, innovation and lower prices for consumers. We look forward to finalizing this agreement and sharing more details in the next 30 days.”

The lawsuit initially alleged that Google’s monopoly in the Android app market had artificially inflated prices for paid apps and in-app purchases. A finalized agreement is anticipated in the next month, revealing the terms and specifics of the settlement.

The ramifications of this lawsuit are further complicated by similar legal battles Google faces. Notably, the company is preparing for several antitrust lawsuits in the next year, including a trial against the Justice Department and a coalition of state attorneys general, focusing on Google’s dominant role in online searches.

The Play Store lawsuit, originally filed in July 2021, challenged Google’s policy of forcing app developers on its Play Store to pay a 30% commission on digital sales. Other giants in the tech space, including Epic Games and Match Group, have filed similar claims. Epic Games, in particular, has been vocal about their dissatisfaction with what they term the “Google Tax.”

The Sherman Antitrust Act and potentially the Clayton Act are the two primary federal statutes regulating competition among businesses. They aim to prevent anticompetitive practices in the marketplace.

The Sherman Antitrust Act, which was passed in 1890, particularly Section 1 of the Sherman Act, prohibits contracts, combinations or conspiracies that restrain trade unreasonably. This provision would target collusive activities like price-fixing or market allocation agreements among competitors.

Section 2 of the Sherman Act addresses individual monopolistic behaviors. It makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations.” This provision could be invoked when a company uses improper means to establish or maintain a monopoly.

The legal standard for a Section 2 violation usually hinges on possession of monopoly power in the relevant market. This means the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen or historical accident.

The Clayton Act, passed in 1914 addresses specific practices that the Sherman Act does not clearly prohibit, such as mergers and interlocking directorates (when the same people sit on the boards of competing companies). Section 7 of the Clayton Act prohibits mergers and acquisitions that may “substantially… lessen competition, or … tend to create a monopoly.”

The legal standard would require demonstrating both that Google possesses significant market power and that it engaged in anticompetitive practices to acquire, maintain, or extend that power.