Epic Games and Google are currently embroiled in an antitrust grudge match. The Fortnite developer sued the tech giant in the District Court of Northern California over purportedly anti-competitive business practices. The trial began last week.
Epic claims that the policies of the Google App Store Google Play, available on Android operating systems, are restrictive, specifically calling out Google’s initiative “Project Hug,” through which Google offered free advertising credits to participating developers published on Google Play. Google doled out $360 million worth of incentives to persuade Activision Blizzard to bring Call of Duty to the platform. Epic equated the project to bribing publishers to partner with Google.
Under “Project Hug,” Epic was offered $147 million to make Fortnite available on the App Store. That looks like a pretty good deal, so why is Epic so aggressively pursuing legal action? The real cause of this dispute is not antitrust behavior on the part of Google, but Epic’s concern that the company’s application programming interface fees, which support publisher access for small developers, will reduce Epic’s market share.
Epic’s accusation that developers were bribed is misleading: None of the game publishers were given a lump sum of cash. The incentives offered by Google, per VP Purina Kochikar, were “advertising credits,” which are credits provided to purchase platform-sponsored advertisements. Providing incentives to platform users/partners is a widespread practice. Firms such as Yelp, Bing, Pinterest, and even Facebook offer free ad credits to new companies partnering with them. However eye-catching it might be for a tech giant such as Google to offer benefits to elite game developers, this is nothing more than a fixed quantity of free advertising.
In addition to accusations of bribery, Epic claims Google Play has monopolized the market for mobile application sales. Epic’s lawsuit demonstrates the Achilles’ heel of antitrust law: market definition. To determine whether a company has a secured monopoly over a given market, the market in question must first be clearly defined. Considering the applications market, Google Play couldn’t possibly be considered a monopoly. Even though Google Play has 3,130,995 apps available (compared to Apple’s 1,618,215), most apps are operating system-specific. Google Play is not available on Apple devices, and iPhones make up 56.4 percent of the market.
Simultaneously, it doesn’t seem like Google Play has a complete monopoly on the market for mobile app stores. Google Play earned its market position by creating a user-friendly and convenient platform. If consumers want to remove the app and use another platform, the process is simple. Consider the 1998 antitrust complaint against Microsoft (US v Microsoft, 1998), where Microsoft’s default web browser made it difficult to install browsers developed by competitors (Netscape). In contrast, Google has clear instructions on its website on how to install the Google Play app.
Further, game developers are free to enter the market with their app stores (for example Epic). Google’s conduct does not prevent an innovator from making its own spot. Epic chooses to squander resources on legal actions, rather than developing better products for both vendors and consumers.
Far from monopolizing the market, Google Play increases competition in the gaming app and app store spheres. Because app stores function as a two-sided market ( a platform or service that connects buyers with sellers), Google Play needs to accommodate both producers and customers (app users). 97 percent of the apps available on the platform are free for users to download. Bigger app developers are charged a 15 percent fee to publish on Google Play. That fee covers the certification and distribution of applications made by startups. For end users, this is beneficial because it provides greater access to a wide variety of applications. But it also fosters competition within the app space by lowering the barriers to entry for start-ups. This also means that Epic will have more competition from free apps. Considering Epic raked in $5.7 billion in revenue in 2021, these fees are far from prohibitive.
Epic’s claims of bribery and antitrust behaviors are nothing more than rent-seeking. If Epic wins this antitrust suit, Google Play might start applying fees to all vendors on the platform, resulting in fewer competitors offering free games.
Epic’s attempt at creating an app store received lukewarm reviews. Instead of wasting time and resources on suing Google, a truly competitive firm would reallocate these resources to make a better product.
Epic’s arguments are as shallow as the ones it used in its previous case against Apple. The smokescreen of platform fees, purported bribery, and tactless jokes doesn’t make Google a monopoly. If anything, the platform’s policies have increased consumer choice and competition among app developers.