The cruellest month for Google in 2023 has been December. It has already seen Google lose its antitrust case against Epic Games. But now the terms of Google’s September settlement with US States concerning a Google Play monopoly have also emerged. In short, Google owes $700m and must satisfy several conditions. This figure may seem high and the conditions restrictive, but closer analysis reveals that these remedies are, in fact, insufficient and will quite possibly prove ineffective.
The Financials
To start with the money owed, $700m only seems large without an understanding of the scale of Google’s business model. The pleadings reveal that the States developed an economic model that showed Google to have obtained $10 billion of profits. And so $700m represents just 7% of total damages or, as Sean Hollister notes in the Verge, ‘roughly 21 days of Google’s operating profit from the app store alone’.[1] The Google Play store has been immensely profitable for Google over the last few years with margins reaching as high as 70%.
In this light, Google’s financial concession appears unlikely to inconvenience the global company in any meaningful way. The fact that the States did not proceed perhaps betrays their fear that the economic model they constructed would be rejected by the Court. In UK proceedings, the Court could verify the figure against an account of profits but this process was not mentioned in the case.
Committed to Change
The commitments which appear in the settlement alongside Google’s financial penalty are similarly ambivalent. One ostensibly potent clause establishes a four-year period in which Google will be unable to ‘enter into any new agreement or enforce any provision of any existing agreement with the purpose of … securing preload exclusivity or home screen exclusivity’.[2] As the DOJ’s exhibits from the Search trial indicate, exclusivity agreements have been central to Google’s business model for over fifteen years.[3] This commitment here seeks to neuter the competitive advantages that Google is able to leverage via these agreements by stopping them entirely.
But this is not what will happen in practice. Google will be unable to enforce these agreements in a legal capacity — as it began to do against Samsung in 2020.[4] And yet this clause is unlikely to impact the market because Google is still able to utilise its Revenue Share Agreements in negotiations. In reality, were a mobile manufacturer to challenge Google’s device dominance, the threat of Google to cease its Revenue Share payments would be enough to quash any rebellion. Because Google has such vast resources to hand, it will be able to maintain its market dominance without resorting to legal means.
The above clause betrays a certain naivety concerning the practicalities of digital industries. This naivety is even more evident in the ‘anti-steering’ commitment (6.11). In an effort to redress Google’s monopoly on payment systems, the commitment states that Google will let certain compliant developers ‘to … allow users who choose the developer’s alternative in-app billing system to complete transactions using the developer’s existing web-based billing solution in an embedded webview within its app’ (6.11.1 b). This lengthy clause means that users who elect to use third-party billing systems will be able to pay in-app, rather than be redirected onto the web to complete purchases.
This clause may not redress Google’s payment monopoly for two reasons: firstly, the ‘embedded webview’ that allegedly solves the payment problem will in all likelihood create latency and diminish user-experience, if it works at all. Other developers may be unable to match the seamlessness of Google’s payment system and so users would have no incentive to switch. This effect would be especially determinative for in-app purchases in gaming where latency is often a matter of virtual life and death.
And, secondly, the above analysis relies on the technical apparatus behind third-party developers’ payment systems working at all. It is highly likely that Google will remain uncooperative with developers at the technical level because it is not in the company’s interests to build impressive rivals to its own products. They would only do this if they feared that the Independent Compliance Professional would find them in lapse of their commitments — but the settlement’s wording is full of uncertain terminology.[5] It neglects to mention any engineering output measures which might quantify the success of Google’s efforts, such as a measurement of how users adopt the new unbundled systems.
Looking Ahead
And so this newstory is not the victory for the open web that it might have appeared to be at first sight. The remedy does not put the harmed back in the position in which they would have been absent the harm. The weakness of the provisions in the settlement, especially concerning real-world applicability, emphasises the current need for remedies that are realistic for industry. In 2024, there will be remedies discussions for the Epic case and, most likely, for the DOJ Search case. It is vital that the industry emerges from these opportunities with remedies against Google’s dominance that promote competition between different products based on the merits and that are, in the event, enforceable.
[1] Google to pay $700 million and make tiny app store changes to settle with 50 states – The Verge
[2] Tentative Settlement Agreement: Google settles with states over Google Play – DocumentCloud, 6.7.1.
[3] They produced a slide deck in 2007 called ‘On Strategic Value of Default Home Page to Google’. See Trial Exhibit – UPX0123: U.S. and Plaintiff States v. Google LLC [UPDATED] (justice.gov).
[4] See https://www.justice.gov/d9/2023-09/416675.pdf — an email exchange between Google employees about Samsung’s violation of Google’s exclusivity contracts.
[5] See, for instance, 7.2.4.
Header image by Mika Baumeister on Unsplash (licensed for free via Unsplash Licence).