The Legal Battle Over App Store Fees: Epic Games vs. Google Unfolding in California

The legality of Google's mobile app store fees is currently under scrutiny in California, as Epic Games, the publisher of Fortnite, filed a lawsuit against Google in 2020, reports PaymentsDive. Epic alleges that Google's Android operating system's app store constitutes an unlawful monopoly, particularly in relation to in-app purchase fees. The trial, initiated on November 7 in the U.S. District Court for the Northern District of California, is ongoing.

Epic Games, headquartered in Cary, North Carolina, seeks to compel Google to facilitate the use of non-Google payment methods. Google contends that such changes would undermine its ability to compete with Apple's iOS mobile operating system and compromise user security, as reported by technology news site The Verge.

The legal complaint from Epic Games aims to halt what it deems as Google's unfair, monopolistic, and anticompetitive actions, asserting that the current restrictions adversely affect app developers, payment processors, and consumers.

In response, Google published a blog post earlier this month, claiming that Epic simply desires to enjoy the benefits of Android and Google Play without paying for them. Google argues that Epic's demands would jeopardize critical security and privacy protections for billions of users.

The core legal question revolves around whether linking the app store with the payment system is inherently anti-competitive, according to Harvard Business School Assistant Professor Andy Wu. He, having closely followed the lawsuit, believes that, based on the prior Apple case outcome, it is unlikely for the court to rule in Epic's favor against Google.

Epic Games had also sued Apple in 2020 for similar reasons, challenging both companies' practice of running in-app purchases exclusively through their billing systems and taking a percentage cut, often up to 30%, of the payment fees.

The Apple trial in May 2021 resulted in a mixed decision favoring Apple on nine out of 10 counts. Despite appeals and ongoing legal battles, Wu suggests that it is improbable for the court to mandate changes in Google's payment terms. However, in the face of broader antitrust actions, there is a possibility that Google may choose to reduce its fees as a precautionary measure.

Michael Metzger, a partner at Drake Star Partners, a technology-focused investment bank, concurs with Wu, predicting that both Google and Apple are likely to lower their fees for gaming apps in the near future. Metzger notes a decline in the value provided by app stores for game developers over the years.

Epic's lawsuit against Apple has already impacted the tech giant's app-based revenue, leading to certain fee reductions, including commissions for certain app categories. Wu cites global pushback, citing Korea as an example, where governments are challenging Apple's fees for specific app types.

Both Epic Games and Google declined to comment on the ongoing lawsuit, while Apple did not respond to requests for comments regarding the digital payments lawsuit related to mobile app stores.