Lawsuits are not uncommon for Apple and Google, but for the first time in many years, several countries are calling out these tech giants. Why, you may ask? Their growing monopoly when it comes to app distribution practices leads to fewer profit margins for the developers and increases the entry barrier for newer players.
As we write this, U.S., U.K., South Korea, the European Union, and many more have ongoing Antitrust lawsuits against big tech companies. What are these lawsuits, and why is it relevant for you being the end-user of Apple or Google? Can Apple and Google make amendments to their application stores, or will the monopoly continue? Let’s find answers to all of this in detail.
How did it all begin?
Apple and Google have constantly been decreasing the profit margins for their in-app purchases over the course of time. The two tech giants have dominated the app distribution space and that forced developers to either submit to their authoritarian behaviour or look for alternatives.
Making your apps available for sideloading was tricky as it brings a sense of fear and uncertainty in terms of security (while iOS doesn’t even allow sideloading of apps anymore), and the strict norms against listing an alternate payment method indicated their anti-consumer nature. New players could not decrease their subscription prices below a certain bar because of these exorbitant cuts or try any other way around to bypass the extreme scrutiny. While users and developers still have the option to choose from among a wide range of alternative app stores on Android, the iOS app ecosystem is fairly domineered by Apple, and that led to frustration for many.
It was about time that someone had to speak up, and, in this case, it was Epic Games. In 2020, Epic Games was all set to release their popular title Fortnite for Android and iOS devices. Epic Games was highly doleful about the whole situation, and it decided to raise its voices against these monopolies. If you know the P.C. gaming world, you would know that Epic Games is no small player.
Doing what it was capable of, Epic Games took it head-on with Apple and Google. It added an option to pay for their subscriptions through their website and avail a 20% discount on every purchase. And you guessed it right! Apple and Google were unhappy about the whole situation and immediately removed Fortnite from their respective stores. Later, Epic went on to call out these tech giants for their unfair practices and filed a lawsuit against Apple in California. Epic Games even went on to say, “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation.”
In a separate case, the attorneys general of 36 U.S. states stepped in and filed a complaint against Google in Northern California’s federal court. The crux of this lawsuit was pretty similar to the Apple vs. Epic Games case we just saw. The attorney generals were skeptical about the 30% commission fee that Google charges on the in-app purchases made on the Play Store.
Although there were previous lawsuits on similar grounds against these companies, it was only after the Epic Games vs. Apple lawsuit that unfair app practices came under the spotlight.
Lawsuits for unfair app distribution practices around the world
Here are some lawsuits against Google and Apple centered around their unfair app distribution practices across the globe, and the complete story behind them:
Google’s Antitrust Lawsuit in the USA
Made to stop absolute use of power by monopolies and allow free competition in every industry, the USA’s antitrust laws give attorney generals the power to step in against any business that starts turning into a monopoly. USA has witnessed some of the most dramatic antitrust cases against AT&T, Kodak, and Standard Oil, but the law remained dormant for a long time until recently.
Considering the unfair app distribution practices by Google, 36 state attorneys filed an antitrust lawsuit against the tech giant. The case objected to the 30% commission on all in-app purchases from the Google Play Store and the practice of forcefully loading Google apps on all Android devices.
Every Android phone comes pre-installed with stock Google apps like Google Maps, YouTube, Chrome, Google Drive, and others. The attorneys believed Google adds these apps forcefully to their operating system and therefore misuses its power as an operating system maker. Josh Stein, the attorney general of North Carolina, even went on to say, “Google isn’t. It is using its monopoly power to cut off competition and increase its power and profits at the expense of North Carolina consumers by forcing Google Play Store customers to overpay for apps.“
In response to the lawsuit, Google’s senior director of public policy, Wilson White wrote in a blog, “the lawsuit completely ignores the competition we face from other platforms like Apple’s incredibly successful app store, which accounts for a majority of mobile app store revenues according to third-party estimates.“
Apple vs. Epic Games case in the USA
As mentioned already, the Apple vs. Epic Games was among the earliest instances that spurred attention towards these tech giants’ unfair app distribution practices. Unhappy about getting kicked out of the Android and iOS app stores, Epic Games decided to file a lawsuit against the tech giants. Although Epic filed separate cases against Apple and Google, calling out their unfair practices, Apple’s case completely out shadowed the latter.
Apple, in response to the Epic Games lawsuit, said, “We thank the court for recognizing that Epic’s problem is entirely self-inflicted and is in their power to resolve. Our very first priority is making sure App Store users have a great experience in a safe and trusted environment, including iPhone users who play Fortnite and who are looking forward to the game’s next season. If Epic takes the steps the judge has recommended, we will gladly welcome Fortnite back onto iOS.
We look forward to making our case to the court in September.“
Lasting over a year, the Epic vs. Apple battle finally ended in December 2021, with Apple winning parts of the lawsuit. As Epic could not prove any antitrust violations from Apple, Fortnite could not make it back to the App Store, but it indeed sparked controversy against unfair app distribution practices.
As a result, the court will continue the trial and look into the unfair use of Apple’s power to decide whether it needs to change its App Store policies. Summarizing the whole event, the lawsuit, which began as Epic vs. Apple, has now turned into an antitrust case against Apple’s App Store policies. Fortnite still remains unavailable in the App Store, and there are no signs of its return anytime soon.
Apple’s Antitrust Charge in the E.U.
Following similar lines to the U.S. antitrust lawsuits, the European Union initiated a lawsuit against the unfair app distribution practices in Apple’s App Store. But unlike the American lawsuit that started because of the Epic vs. Apple debate, E.U.’s lawsuit is a result of Spotify’s complaint filed in 2018.
Spotify complained that Apple takes a massive cut from their in-app purchases, which results in a higher price for all their subscriptions. While Spotify and every other music streaming service have to raise their prices, Apple uses its unfair advantage to bring Apple Music at a lower price.
The commission’s vice president in charge of the antitrust enforcement, Margrethe Vestager, said, “By setting strict rules on the App Store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition.”
In response to these allegations, Apple said that its App Store policies do pretty much the opposite of what the lawsuits state. The App Store is a platform that helps creators reach millions of customers, and it promotes free competition rather than curbing it. The tech giant further went on to say that Spotify went on to become the world’s largest music streaming platform partly because of the App Store.
As of now, Apple shows no intentions of making amendments to its App Store policies in response to the lawsuit. Apple even showed a willingness to go as far as possible with the regulators. Even the E.U. has no intentions of stepping a step back as it is close to agreeing on a Digital Markets Act concerning all big tech companies. One of the many regulations under this act requires Apple and Google to allow other app stores to function without restrictions on their operating systems.
Joint Antitrust Probe against Google and Apple in the U.K.
In order to perform an in-depth analysis of the mobile situation, the U.K. launched an antitrust investigation against Apple and Google previously in 2021. As you might have guessed, the reasons for this probe were very similar to that in the USA, E.U., and other nations. Although the probe targets these tech companies, it can have much more enormous implications for the tech policies for big tech companies.
The market study will consider numerous factors before submitting its 12-month long report. Moreover, the study will not only include data about app distribution practices but also their operating systems, default apps, mobile devices, and the whole ecosystem in general. On top of it, the probe will also look into Google’s ad tracking processes, amongst other things.
Here’s what the Chief Executive of the CMA, Andrea Coscelli said about the smartphone situation, “Apple and Google have developed a vice-like grip over how we use mobile phones, and we’re concerned that it’s causing millions of people across the U.K. to lose out. Most people know that Apple and Google are the main players when it comes to choosing a phone. But it can be easy to forget that they set all the rules too – from determining which apps are available on their app stores to making it difficult for us to switch to alternative browsers on our phones. This control can limit innovation and choice, and lead to higher prices – none of which is good news for users.”
Apple and Google’s backlash with the South Korean Government
The case in South Korea is different from the ones we saw in other nations. While other countries are doing their parts in making the app marketplace beneficial for the developers and the end-users by filing lawsuits or search probes, the South Korean government has already amended the Telecommunication Business Act. The act stops big tech companies from asserting their in-app dominance distribution and charging unacceptable commissions.
After the law came into effect, Apple and Google were forced to change their app store policies to continue their services in South Korea. While Google agreed to comply with the amendments in law soon after it came into action, Apple showed no signs of accepting the law. Apple told the South Korean agencies that it was already compliant with the new regulations and did not need to make any changes.
Why did Google agree to the law but Apple did not? The answer lies in the way they both operate in the smartphone market. It’s true that both these companies devise their own operating systems that run on millions of smartphones, but they are fundamentally different. There are only a limited number of Google manufactured phones in the Android smartphone market, and therefore it has lesser control over the phone’s hardware. On the other hand, Apple controls every bit of an Apple smartphone, be it the hardware or the software.
Complying with this law will make Apple lose its grip over its smartphones. That’s the biggest reason why Apple is adamant about fighting these laws in every country and bringing the decisions to their favor.
This is what South Korean lawmaker Jo Seoung had to say about Apple’s response to the new amendments, “Frankly, we are not satisfied… Apple’s claim that it’s already complying is nonsensical.” He later went on to add that “Excessive fees take away developers’ chances for innovation … parliament is to be closely informed as to the government drafts detailed regulations to make sure there is accountability.”
What do these lawsuits mean for the end-user?
We have seen that almost every major country is trying to curb Apple and Google’s dominance in the mobile app market. Every lawsuit says that these reforms will benefit the end-user but how exactly? Let’s find the answer to this question.
There are chances that you like Apple or Google or even both of them, and you don’t seem to care about the whole monopoly/duopoly situation. But here’s the catch; history has shown time and again that whenever a company gains complete control over a market, it only cares about maximizing its profits and not the users’. Here’s a likely situation that may happen if these lawsuits don’t keep big tech companies under a check.
- Apple and Google can frequently push their in-app payment commissions to an even higher number, which will eventually lead to increased subscription costs across the platform.
- Google’s pre-loaded apps like Chrome, Google Drive, and YouTube start to saturate in their feature set. Remember, newer players won’t be able to replace these apps as Google won’t allow this.
- Sideloading apps, which is already getting more challenging in Android, may become extinct in a while. Forget modding your apps and showing your creativity to the world.
- Fewer developers will show interest in making mobile applications as the incentives would decrease further.
If all this seems like a nightmare, remember the lawsuits are still active, and they could still force big tech companies to change their app store policies. Here’s what you can expect if the cases go in against Google and Apple:
- If the courts order Apple and Google to decrease their commissions, it could lead to massive price drops in subscription prices across Play Store and App Stores.
- You could see newer app stores with better features or more extensive app libraries.
- Sideloading apps would be much easier than it is right now. This means that you can make changes to the .apk files according to your needs and still use them without doing any hackery.
- You may not see any pre-loaded apps on your smartphones which gives an unfair advantage to Google and Apple. This idea can have much more enormous implications than just removing bloatware. For instance, the concept of replacing YouTube as your primary video streaming platform seems impossible today, but imagine if it was on equal ground. Chances are that a better video streaming service would make it through and replace YouTube.
What have Apple and Google done so far?
First of all, Apple and Google have defended themselves, saying these accusations are baseless. Also, they have made some changes in their respective app store amidst extreme scrutiny from governments worldwide. The most significant difference is that both these app stores have decreased the in-app payment commissions from 30% to 15% for all small developers.
Remember how Apple and Google didn’t allow app developers to mention alternate payment methods anywhere in their applications. Apple has finally agreed to change this, and now developers can contact you, informing you about alternate payment methods. Apple has also decided to devise a $100 million fund for small app developers. On the other hand, Google has exempted apps from the Play Store until January 2022 for not using Google’s in-app billing method.
Google and Apple’s Defence
Google has presented a lousy defense saying that the Play Store provides more freedom to app developers than other competitors. That’s definitely not the case once you include the 30% commission on top of other restrictions.
On the other hand, Apple says that the strict norms associated with the App Store are Apple’s way of improving user privacy and security. If Apple allows sideloading apps on iOS, it could lead to malicious apps getting installed on smartphones. This would decrease the overall safety of the Apple ecosystem. Still, none of these arguments justify the 30% commission charges.
Antitrust lawsuits have become common against big tech companies. Not just bad in-app practices, big tech companies face lawsuits for privacy breaches, lousy advertising practices, unacceptable commission rates, and a lot more.
Like any other accused, Apple and Google have tried to defend themselves against these accusations. Google has said that the high commission rates are because of the extreme competition in the market (ironically enough, Google disapproves of any other app stores, which means it is pretty much the only app store for Android).
Ironically still, Apple says that the App Store makes way for free competition, and the App Store is a way for developers to meet millions of their customers. So, does this make it fair to take hefty commissions from the developers and force them to use your payment methods? The question remains until these lawsuits get resolved.