by The big news last week was that a jury in San Francisco had found Google guilty of all counts of antitrust violations stemming from its dispute with Epic Games, the maker of the bestseller. Fortnitewho made several complaints related to how Google runs its Play store, an Android app market with revenues of around $48bn (£38bn) a year.
Why is this interesting? Isn’t it another case of two tech companies battling it out in a US court? Well, first of all, something very rare happened – a technology giant in fact lost a major case in a US court. Secondly, the case was decided by a jury, not (as is often the case in such cases) by a judge. Third, it showed that anti-trust (ie anti-monopoly) laws like the Sherman Act still work.
This all stems from the launch of the smartphone in 2007. Since these devices were proper computers, they could run small programs – apps (for “applications”) created by software developers. Accordingly, Apple established the App Store, from which iPhone users could purchase apps made by third-party developers. Only Apple-approved apps were allowed into the store, and the company charged a 30% fee for each sale — and also for any in-app purchases enabled by the developers. So if you wanted to buy an iPhone app, it had to come from the Apple store. And you were prohibited from “sideloading” – installing an app from outside the store. It was, by any standards, a cozy – and more profitable – monopoly.
Was the verdict because ordinary citizens are much less enamored of a technology giant than they once were?
Not to be outdone in the monopoly stakes, Google, after launching the Android operating system for non-Apple smartphones, opened its own app store in 2008. Called the Android Market, it was renamed Google Play in 2012 , and, like the Apple store, took a 30% cut of app sales, but allowed it to load on Android phones – albeit through a fiddly process.
In 2020, Tim Sweeney, the founder of Epic Games, started encouraging players of the Fortnite Paying Epic directly for the purchase of in-game items, rather than using systems developed by Google and Apple. The two tech giants promptly kicked Fortnite from their app stores.
Sweeney then sued the pair for, as one expert put it, “monopolizing the ramp on the phone”. He lost the Apple case, appealed, and is now with the supreme court. But last week, he won in San Francisco. Why?
The catchy answer is that Apple’s case was decided first by a judge, but Google’s case involved a 10-person jury. Was this because ordinary citizens are much less enamored of the tech giants than they once were?
Well, they may be; after all, they are normal people. But a more plausible explanation is that the evidence was lying to them. The jury agreed that Google had monopoly power in the Android app distribution market and in-app billing, that it behaved anti-competitively in those markets in a way that hurt Epic. They also found that Google had an illegal connection between the Google Play app store and Google Play billing payment services, and that the company’s distribution agreement was anti-competitive, as were its deals with game developers under something called Project Hug.
Project Hug was one of the tasty items that emerged from the case through the legal discovery process. It seems that Google was worried in 2019 that Epic and other companies could establish themselves Android app stores, and maybe even convince phone manufacturers like Samsung to install those stores on their phones. Google Play’s financial team estimated that if that were to happen, the company could face revenue losses of somewhere between $350m and £1.4bn by 2022.
So they came up with Project Hug – a “close-and-show-love-developers-hug plan”, or “a booming plan to shower extra love/promotion on top developers and games”. In practical terms, Epic’s legal complaint argued, which translated into spending “hundreds of millions of dollars on secret deals with over 20 top developers” considered the company most at risk of collapse under the “construction” of Epic.
And it seems that hug was at least partially successful. At any rate, Google paid $360m to Activision Blizzard, a leading video game company that, until now, has not opened its own app store. There may not have been any rocket scientists on that San Francisco jury, but its members were able to figure out what that kind of corporate behavior meant. They are good. I hope there will be more from that.
What I was reading
You are welcome, sir
Gideon Lewis-Kraus has written an excellent review essay, Maybe We Already Have Runaway Machines, n the New York about David Runciman’s new book on states and corporations.
Anti-social media
A very realistic essay by Freya India on the toxicity of Instagram, on the Persuasion site, is What the Algorithm For Young Girls.
I spy AI
Bruce Schneier has written an insightful blog post on his schneier.com site about what happens when surveillance capitalism meets AI.
