Jury Finds Google Guilty of Violating Federal and California State Antitrust Laws

Anderson Kill Antitrust Alert

PUBLISHED ON: January 19, 2024

In 2020, Epic Games, Inc. (“Epic”), a video game and software developer, filed an antitrust action against Google LLC (“Google”) alleging violations of Sections 1 and 2 of the Sherman Act and California’s State antitrust law. Epic sought to hold Google liable under both statutory provisions for unreasonable restraint of trade and for maintaining a monopoly over the distribution of mobile apps and billing services on Android devices.

  1. Present Posture

On December 11, 2023 a jury delivered a resounding defeat to Google in less than four hours, a record for a complicated antitrust litigation.  The  verdict upheld all of Epic’s core allegations.

Epic’s victory was something of a surprise, as the company had filed a broadly similar but less successful action Apple. In a bench trial, a judge in that case found that Apple did not violate the federal antitrust laws but did violate California’s unfair competition law.  After the Ninth Circuit Court of Appeals affirmed the trial court’s decision last April, Apple and Epic  filed Petitions for Certiorari with the U.S. Supreme Court.

  1. Facts

As Epic pointed out in its complaint, Google had an  honorable launching in 1998 as its moto was “Don’t Be Evil.”  Epic alleged and the jury found that after acquiring the Android mobile operating system, Google acquired and maintained anti-competitive restraints and monopoly power over the distribution of mobile apps,  preventing competitors from developing an alternative method for consumers to access Android based apps, as well as the payment system for such apps.

In its First Amended Complaint (the “Complaint”), Epic  stated,

Google has eliminated competition in the distribution of Android apps using myriad contractual and technical barriers. Google’s actions force app developers and consumers into Google’s own monopolized ‘app store’-the Google Play Store. Google has thus installed itself as an unavoidable middleman for app developers who wish to reach Android users and vice versa. Google uses this monopoly power to impose a tax that siphons monopoly profits for itself every time an app developer transacts with a consumer for the sale of an app or an in-app digital content. Google further siphons off all user data exchanged in such transactions to benefit as its own app designs and advertising business.” Complaint at Paragraph 5.

The violations detailed below in the Complaint provided the basis of the Jury’s verdict in finding Google liable under the federal and state antitrust laws.

      

  1. Legal Issues: Applicable to both the Google App Store and Google App Payment Processing Under the Sherman and Cartwright Acts
  2. Section 2 of the Sherman Act, 15 U.S.C. Section 2

Section 2 prohibits monopolization of any part of trade or commerce among the several States or with foreign nations. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power through unlawful, anti-competitive conduct violates Section 2. U.S. v. Grinnell, 384 U.S. 563, 570-571 (1966).

Google has maintained monopoly power in the Android App Distribution market by conditioning the licensing of the Google Play store on the agreement of device manufacturers to provide the Google Play Store with preferential treatment.

  1. Section 1 of the Sherman Act, 15 U.S.C. Section 1

Section 1 prohibits every contract, combination or conspiracy in restraint of trade or commerce among the several states or with foreign nations.     Google has violated Section 1 by tying its offering of Google Play Store as the primary and only viable app store on Android mobile devices. Complaint at Paragraph 181. Not only has Google entered into exclusivity agreements with Android mobile devices but, Google has also contracted to prevent alternative app stores from being installed on the default home screens of Android mobile devices. Complaint at Paragraph 182, including other restrictive agreements as a specific condition for to grant being distributed on the Google app store. Complaint at Paragraph 190.

  1. Conclusion: Lessons for App Developers, Mobile Devices, Consumers and App Stores

The jury found that all of the above four categories, App Developers, Mobile Devices, Consumers and App Stores, have been harmed by Google’s anti-competitive conduct.  Epic’s requested relief is the issuance of an injunction prohibiting the continuance of Google’s anti-competitive conduct, as detailed in its complaint and found by the Jury.

While Epic did not specifically seek damages in its complaint, it did leave open the possibility by making the standard request that the Court grant “other and further relief as the court deems just and proper.” The verdict would also not preclude any of the other affected parties from asserting damage claims upon the filing of an antitrust action predicated on the factual proof asserted by Epic.

Paul M. Kaplan is a shareholder in the New York Office of Anderson Kill and co-chair of the  firm’s Antitrust and Unfair Competition Practice Group.