Google loses appeal in antitrust battle with Epic Games

A federal appeals court has upheld a jury verdict condemning Google’s Android app store as an illegal monopoly, clearing the way for a federal judge to enforce a potentially disruptive shakeup that’s designed to give consumers more choices.

The unanimous ruling issued Thursday by the Ninth Circuit Court of Appeals delivers a double-barreled legal blow for Google, which has been waylaid in three separate antitrust trials that resulted in different pillars of its internet empire being declared as domineering scofflaws monopolies since late 2023.

The unsuccessful appeal represents a major victory for video game maker Epic Games, which launched a legal crusade targeting Google’s Play Store for Android apps and Apple’s iPhone app store nearly five years ago in an attempt to bypass exclusive payment processing systems that charged 15% to 30% commissions on in-app transactions.

The jury’s December 2023 rebuke of Google’s app store for Android-powered smartphones began a cascade of setbacks that includes monopoly judgements against the company’s ubiquitous search engine last year and the technology underlying its digital ad network earlier this year.

Although not as lucrative as Google’s search engine or ad system, the Play Store for Android apps has long been a gold mine that generated billions of dollars in annual revenue by taking a 15% to 30% cut from in-app transactions funneled through the company’s own payment processing system.

Following a month-long trial, a nine-person jury determined that Google had rigged its system to thwart alternative app stores from offering better deals to consumers and software developers. That verdict resulted in U.S. District Judge James Donato ordering Google to tear down digital walls shielding the Play Store from competition, triggering the company’s appeal to overturn the jury’s finding and void the judge’s mandated shakeup.

But a three-judge panel that heard Google’s appeal in February rejected its lawyers’ contention that Donato erred by allowing the case to be determined by a jury that deviated from the market definition outlined by another federal judge who mostly sided with Apple in Epic’s case against the iPhone maker’s app store.

Epic’s lawsuit “was replete with evidence that Google’s anticompetitive conduct entrenched its dominance, causing the Play Store to benefit from network effects,” the judges wrote in the decision.

The ruling “will significantly harm user safety, limit choice, and undermine the innovation that has always been central to the Android ecosystem,” Google’s vice president of regulatory affairs Lee-Anne Mulholland said in a statement.

Unless Google can extend the enforcement delay placed on Donato’s order issued last October, the company will have to begin an overhaul that includes making the Play Store’s entire library of more than 2 million Android apps available to would-be rivals and also help distribute the alternative options. Google has argued that the required revisions will raise privacy and security risks by exposing consumers to scam artists and hackers masquerading as legitimate app stores.

But Epic’s lawyers have ridiculed Google’s warnings about the changes as scare tactics in a desperate attempt to protect the fortunes of its corporate parent Alphabet Inc.

Although Epic fell short in its attempt to have the iPhone’s app store declared a monopoly, that case resulted in a judge issuing an order that required Apple to surrender exclusive control over the payment processing of in-app transactions and allow links to alternative systems without collecting a commission.

Besides being hit with Donato’s order, Google still faces further trouble ahead that could leave an even bigger dent in its finances.

As part of the effort to address Google’s illegal monopoly in search, a federal judge is weighing a proposal by the U.S. Justice Department that would require the sale of its Chrome web browser and ban the multibillion dollar deals that company has been making with Apple and others to lock-in its search engine as the main gateway to the internet.

Google is also facing a proposed breakup of its advertising technology as part of the countermeasures to its monopoly in that business. A trial on that proposal is scheduled to begin in September.

—Michael Liedtke, AP Technology Writer