The future of tech giant Google’s mobile app store fees is on trial in California.
Fortnite publisher Epic Games sued Google in 2020 over in-app purchase fees, claiming that the tech behemoth’s Android operating system’s app store was an unlawful monopoly. The case proceeded to trial in the U.S. District Court for the Northern District of California on Nov. 7, and is ongoing.
Cary, North Carolina-based Epic wants the tech giant to make using non-Google payment methods easier. Google has said doing so would hurt its ability to compete with Apple’s iOS mobile operating system and provide a secure user experience, according to technology news site The Verge.
Epic Games “seeks to end Google’s unfair, monopolistic and anticompetitive actions,” according to the legal complaint. The Fortnite maker claims Google’s current restrictions harm app developers, payment processors and consumers.
Google fired back in a blog post earlier this month. “The truth is that Epic simply wants all the benefits that Android and Google Play provide without having to pay for them. And it wants to strip away critical security and privacy protections that keep billions of users safe.”
The legal question for the court is whether tying the app store with the payment system is fundamentally anti-competitive, Harvard Business School Assistant Professor Andy Wu said in an interview this month. Wu’s work includes research in the technology sector, and he has been closely following Epic’s lawsuit against Google.
In addition to suing Mountain View, California-based Google, Epic Games also sued tech giant Apple in 2020. Both lawsuits challenged Apple and Google’s practice of allowing in-app purchases to be run only through their billing system and taking a cut of up to 30% of the payment fees.
The Apple trial in May 2021 resulted in a split decision in which the judge sided with the Cupertino, California-based company on nine out of 10 counts. The case wound its way through the appeals courts and Apple has appealed to the U.S. Supreme Court.
Given what happened with the Apple case, Wu finds it unlikely that the court will take Epic’s side against Google. There is a strong case that the tech giant can make that the fees it charges for mobile gaming payments are worth it for users. “There’s a gazillion random mobile games. And there is high potential for fraud in that category,” Wu said.
What Wu does see as possible is that the tech giant will reduce its payment fees.“It would be hard to imagine the court ruling that Google has to change its payment terms on the Android app store,” Wu said. “But, given the broader set of antitrust actions against Google, Google’s in a tough position where it might consider, as a matter of prudence, to actually lower [fees] independent of what the court rules.”
Drake Star Partner Michael Metzger agrees with Wu that both Google and Apple will likely drop their fees for gaming apps. Drake Star Partners is a technology-focused investment bank. “For game developers, the value provided by the app stores has declined over the years,” Metzger said in an email. “I can certainly see that the Apple and Google Play app store fees will be significantly lower in the medium future.”
Epic’s lawsuit against Apple has already cut into the tech giant’s app-based revenue, according to Wu. While the Epic case has been unfolding, Apple has pulled back on certain fees, including commissions it typically charges for some app categories, Wu said.
He pointed to Korea as a recent example of governments around the world also pushing back against Apple’s fees for certain kinds of apps.
A spokesperson for Epic Games declined to comment on the lawsuit against Google, but referred to the legal complaint in an email. Likewise, a Google spokesperson declined to comment via email, pointing to its blog post from earlier this month.
Apple did not respond to requests for comment on the lawsuit over digital payments through mobile app stores.
