AG Mark Herring Sues Google For Antitrust Law Violations Over App Store

RICHMOND (July 7, 2021) – Attorney General Mark R. Herring has joined a coalition of 37 attorneys general in filing a lawsuit against Google. In their suit, Attorney General Herring and his colleagues allege exclusionary conduct relating to the Google Play Store for Android mobile devices and Google Billing. This antitrust lawsuit is the newest legal action against the tech giant, claiming illegal, anticompetitive, and unfair business practices. Attorney General Herring and his colleagues accuse Google of using its dominance to unfairly restrict competition with the Google Play Store, harming consumers by limiting choice and driving up app prices.

Attorney General Herring previously sued Google in December 2020 for anticompetitive conduct in violation of Section 2 of the Sherman Act. Attorney General Herring joined a bipartisan coalition of 38 attorneys general in filing the lawsuit alleging that Google illegally maintains its monopoly power over general search engines and related advertising markets through a series of anticompetitive exclusionary contracts and conduct.

“Google has really become a major player in the tech market, so much so that its products play a role in almost every aspect of Virginians’ daily lives, including their cell phones and the apps that they use on a regular basis,” said Attorney General Herring. “Because of this market dominance, Google has allegedly been able to tightly control app distribution – and the loss of competition here has cost Virginians hundreds if not thousands of dollars more than necessary when they buy phone apps and make in-app purchases on the apps they use. As attorney general, I take my obligation to protect Virginia consumers and maintain competitive markets seriously, and that means making sure that massively influential companies like Google act fairly and comply with the law.”

According to the Complaint, the heart of the case centers on Google’s exclusionary conduct, which substantially shuts out competing app distribution channels. Google also requires that app developers that offer their apps through the Google Play Store use Google Billing as a middleman. This arrangement, which ties a payment processing system to an app distribution channel, forces app consumers to pay Google’s commission – up to 30% – on in-app purchases of digital content made by consumers through apps that are distributed via the Google Play Store. This commission is much higher than the commission that consumers would pay if they had the ability to choose one of Google’s competitors instead. The lawsuit alleges that Google works to discourage or prevent competition, violating federal and state antitrust laws. Google had earlier promised app developers and device manufacturers that it would keep Android “open source,” allowing developers to create compatible apps and distribute them without unnecessary restrictions. The lawsuit alleges that Google did not keep that promise.

Google Closed the Android App Distribution Ecosystem to Competitors

When Google launched its Android OS, it originally marketed it as an “open source” platform. By promising to keep Android open, Google successfully enticed “OEMs” – mobile device manufacturers, such as Samsung – and “MNOs” – mobile network operators such as Verizon – to adopt Android, and more importantly, to forgo competing with Google’s Play Store at that time. Once Google had obtained the “critical mass” of Android OS adoption, Google moved to   close the Android OS ecosystem, and the relevant Android App Distribution Market, to any effective competition by, among other things, requiring OEMs and MNOs to enter into various contractual and other restraints. These contractual restraints disincentivize and restrict OEMs and MNOs from competing (or fostering competition) in the relevant market. The lawsuit filed by Attorney General Herring and his colleagues alleges that Google’s conduct constitutes unlawful monopoly maintenance, among other claims.

In aid of Google’s efforts discussed above, Attorney General Herring and his colleagues allege that Google also engaged in the following conduct, all aimed at enhancing and protecting Google’s monopoly position over Android app distribution:

• Google imposes technical barriers that strongly discourage or effectively prevent third-party app developers from distributing apps outside the Google Play Store. Google builds into Android a series of security warnings (regardless of actual security risk) and other barriers that discourage users from downloading apps from a source outside Google’s Play Store, effectively foreclosing app developers and app stores from direct distribution to consumers
• Google has not allowed Android to be “open source” for many years, effectively cutting off potential competition. Google forces OEMs that wish to sell devices that run Android to enter into agreements called “Android Compatibility Commitments” or ACCs. Under these “take it or leave it” agreements, OEMs must promise not to create or implement any variants or versions of Android that deviate from the Google-certified version of Android
• Google’s required contracts foreclose competition by forcing Google’s proprietary apps to be “pre-loaded” on essentially all devices designed to run on the Android OS and requires that Google’s apps be given the most prominent placement on device home screens
• Google “buys off” its potential competition in the market for app distribution. Google has successfully persuaded OEMs and MNOs not to compete with Google’s Play Store by entering into arrangements that reward OEMs and MNOs with a share of Google’s monopoly profits
• Google forces app developers and app users alike to use Google’s payment processing service, Google Play Billing, to process payments for in-app purchases of content consumed within the app. Thus, Google is unlawfully tying the use of Google’s payment processor, which is a separate service within a separate market for payment processing within apps, to distribution through the Google Play Store. By forcing this tie, Google is able to extract an exorbitant processing fee as high as 30% for each transaction and which is more than ten times as high as the fee charged by Google’s competitors

Attorney General Herring‘s Antitrust Unit Manager, Sarah Oxenham Allen, currently serves as the Chair of the National Association of Attorneys General (NAAG) Antitrust Taskforce. Additionally, Attorney General Herring previously served on the Antitrust Committee of NAAG.

Attorney General Herring has also filed three wide-ranging lawsuits against generic drug manufacturers for alleged antitrust violations that raised the cost of prescription drugs, and sued the maker of Suboxone, an opioid treatment medication, for illegally keeping monopoly profits.

In 2015, Attorney General Herring challenged a proposed merger of Sysco and US Foods that would have raised food prices for Virginians, and in 2017 he successfully blocked the anticompetitive proposed mergers of Aetna and Humana, as well as Cigna and Anthem, a proposed merger in which the Richmond, Virginia market was identified as the most negatively impacted market in the entire country.

Joining Attorney General Herring in filing today’s lawsuit are the attorneys general of Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, and West Virginia.