Google’s Play Store Ruled an Illegal Monopoly, Facing Potential $10B Revenue Loss

Summary

  • Google’s Play Store, owned by Alphabet, has been ruled as an illegal monopoly by a Californian jury due to stifling competition and charging high fees, up to 30%, to app developers.
  • Epic Games now has an opportunity to suggest legal actions on how to adjust the Play Store, potentially jeopardizing $10 billion of Google’s annual revenue.
  • Google’s business model could be significantly impacted if it is forced to allow developers to use payment systems other than its own.
  • Google is facing increased scrutiny due to this ruling amidst its antitrust lawsuit with the U.S. Justice Department.
  • The ruling over Google is expected to draw attention to the market dominance of Apple, who won a similar case against Epic Games.

The Play Store Monopoly

Jaspreet Singh and Harshita Mary Varghese report that a Californian jury has declared Google’s Play Store an illegal monopoly. The store, owned by Alphabet, was found to be suppressing competition and imposing unjustifiably high charges of up to 30% on application developers.

The Potential Impact on Google

The verdict offers Epic Games an opportunity to propose how the Play Store operations should be rectified. This could jeopardize an estimated $10 billion in annual sales and in-app purchase revenue for Google, according to Wells Fargo. Analysts, including Pinar Akman, a professor of competition law at the University of Leeds, recognise this as a significant victory for Epic Games.

Changes to the Business Model

Akman notes that Google may be pressured to permit app developers to employ payment systems beyond its own, which could significantly influence the entire ecosystem and business model. Google earns a cut from each digital transaction in the Play Store, a high-margin business, despite representing a fraction of total sales.

The Impact of Market Dominance

The unanimous ruling adds to Google’s current legal challenges with the U.S. Justice Department, alleging antitrust violations. Furthermore, it could deepen scrutiny regarding Apple’s market dominance. Both Apple and Epic Games have approached the Supreme Court to review their ongoing dispute. Eleanor Fox, professor emerita at the New York University School of Law, suggests that this could lead to increased concerns about Apple’s potential monopoly.

The Path Ahead

Google has indicated its intent to appeal the ruling. The case is now headed for the San Francisco-based 9th U.S. Circuit Court of Appeals. A hearing before U.S District Judge James Donato in San Francisco is scheduled for January to hear Epic’s injunction request. Despite expected delays due to the appeal, the overall strength and scope of the remedy will undoubtedly impact Google.

The outcome of this case is financially significant, potentially shaking up the tech giant’s functioning and having ramifications on foreign exchange and trading of assets like Google’s shares on NASDAQ, which fell nearly 1% on Tuesday.

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