Google's bad legal week continued on Tuesday with
The legal actions likely assure both Google Play and
These competitors will battle Google, Apple and others to grab a share in the $50 billion in payment volume per quarter that flows through the two giant app stores, according to
Google and Apple have mostly controlled these payment flows due to policies that required app developers in most cases to use Google and Apple's internal payment systems. That kept developers inside Google and Apple's ecosystems, and the technology firms extracted fees of up to 30% per payment. That fee model is now under direct threat.
"Neither Apple nor Google is politically sympathetic," said Eric Grover, a principal at Intrepid Ventures, adding that in the European Union, where Apple and Google also face
"Apps developers, the proverbial little guy, generally, are sympathetic," Grover said. "It's inevitable, rightly or wrongly, that the tech titans' control of activity on their mobile app platforms will be loosened, and, consequently, their rich economics diminished."
Google's settlement
Under the settlement announced Monday, which still requires approval from a judge, Google will pay $630 million into a fund to pay consumers and $70 million in a fund for state use. Google will also open its payment system to outside processors.
All 50 states, the District of Columbia, Puerto Rico and the Virgin Islands are part of the case. Google settled claims that it overcharged consumers due to unnecessary fees for on-app transactions. Google did not admit wrongdoing. The settlement was reached in September with a federal court in San Francisco, but the announcement was delayed until Tuesday due to Google's case with Epic Games. The Epic Games/Google case was decided in a U.S. District Court in San Francisco last week.
"I would say that this Google payment settlement news may be the beginning of Big Tech firms, or at least Google, having to give up a little bit of their control over payments within their ecosystems," said Daniel Keyes, a senior analyst at Javelin Strategy & Research.
Google and Apple have long contended their respective payment policies, including the fees of up to 30%, fund security that protects transactions from payment fraud.
The cases between Apple, Google and Epic have waged for years. The battles drew international attention to the control that Apple and Google place on their app stores, whether the policies are fair and how much leverage the technology companies have over what fees they can levy.
"We now have two separate legal proceedings finding that it is illegal to force consumers to use a single wallet, in this case, Google Pay, in the context of purchasing digital goods," said Aaron McPherson, principal at AFM Consulting speaking of Tuesday's announcement and the Epic/Google case.
An opportunity for rivals
Apple also partially lost its similar Epic case. In April, the 9th
There are plenty of options available for outside payment processing if Apple and Google are forced to cede control.
It seems likely there is an opening for Amazon Pay at the app store level, which would be more convenient for consumers when using the Kindle and Prime Video apps, McPherson said. While these are "player apps," requiring the consumer to make a prior purchase on the website, Amazon Pay could be used directly within the app in an environment in which the app stores are open to external payment companies.
Early Warning, the bank-owned firm that operates the Zelle transfer app, has also developed the mobile wallet Paze, which is expected to roll out in 2024. Paze's scale could enable it to offer app store payments to a wide audience. But like other competitors, such as Block, Stripe and PayPal, Paze and Amazon Pay would need to build a user experience that is superior to the existing checkout systems that Apple and Google will continue to offer.
A new legal environment could also pit Apple and Google against each other.
"Assuming Apple is likewise forced to open up its app store, and the European Union appears likely to force this even if the U.S. courts do not, it opens up opportunities for Google Pay to offer payments on the Apple app store," McPherson said. "I think that most developers will still choose to use the 'native' option for in-app purchases, because Apple and Google will make it easier for them to do so, but there will probably be further price concessions."
Google has appealed its case against Epic, and there is a penalty phase pending for January. The Apple/Epic case is also under appeal.
Apple, Amazon and Early Warning did not provide comments by deadline. In a statement, Wilson White, vice president of government affairs and public policy at Google, said: "Android and Google Play have continuously evolved to provide more flexibility and choice in response to feedback from developers and regulators, as well as intense competition from Apple and app stores across the open Android ecosystem. We demonstrated this in the recent trial and were disappointed that the verdict did not recognize the choice and competition that our platforms enable. While we are challenging that verdict and our case with Epic is far from over, we remain committed to continually improving Android and Google Play. … Today, the details of a settlement reached in September with state attorneys general were filed publicly. This settlement builds on Android's choice and flexibility, maintains strong security protections and retains Google's ability to compete with other OS makers, and invest in the Android ecosystem for users and developers. We're pleased to resolve our case with the states and move forward."
