Google sued by states over alleged Play Store abuse

July 7, 2021, 11:36 PM UTC

Dozens of states sued Alphabet’s Google alleging that the company illegally abused its power over developers that distribute apps through the Google Play store on mobile devices.

State attorneys general are targeting the fees Google takes from developers for purchases and subscriptions inside apps. The complaint was filed by 36 states and the District of Columbia in San Francisco federal court Wednesday.

The complaint marks a new attack by government officials in the U.S. against the search engine’s business practices. The Justice Department and a group of states filed separate complaints over Google’s search business last year, while another state coalition sued over Google’s digital advertising business.

The states are taking on Google even after a federal judge in Washington last week threw out their antitrust lawsuit against Facebook. That case accused Facebook of illegally crushing competition by buying Instagram and WhatsApp because it saw them as threats to its business. The judge said the states waited too long to challenge the acquisitions.

Alphabet fell 0.2% to $2,523.20 at 4:12 p.m. New York time in extended trading. The shares are up 44% this year, outperforming broader U.S. indexes. Google didn’t immediately respond to a request for comment on the pending lawsuit.

Google and Apple are a duopoly dominating the app economy of the Western world. The companies have come under intense pressure from regulators and some developers who complain that high app store fees and complex rules raise costs for consumers. A total of $143 billion was spent in mobile app stores in 2020, a 20% jump from the previous year, according to analytics firm App Annie.

At a Senate hearing in April on app stores, Senator Amy Klobuchar of Minnesota, a Democrat who chairs the Senate’s antitrust panel, accused Apple and Google of acting as gatekeepers that have the power to decide how or whether apps can reach iPhone and Android users, even as they compete against apps with their own services.

Epic Games, the maker of Fortnite, sued Apple and Google in separate antitrust cases. The Apple case went to trial in May and is awaiting a judge’s ruling.

Critics of the dominant tech platforms cheered news of the states’ case against Google.

“The massive price Google and Apple charge app users and developers is only possible because of the stranglehold these companies have over the way apps are delivered on mobile phones,” Alex Harman, competition policy advocate at Public Citizen, said in a statement. “This abuse needs to be stopped.”

But NetChoice, an organization that represents tech companies, including Google, lambasted the case, saying it threatens innovation. Consumers aren’t forced to use Android-powered devices, it said.

Google announced in March that it was halving the percentage it takes from app developers on sales through the Play store, following a similar move by Apple. Mountain View, California-based Google said it was reducing the fees to 15% from 30% for the first $1 million in revenue on sales of apps and in-app-purchases each year. After the first $1 million, developers will pay the typical 30% fee.

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