Google Faces Antitrust Lawsuit Over App Store Fees

Software developers have accused the company of harsh policies and taking a large cut of financial transactions in their apps.

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WASHINGTON — A group of 36 states and the District of Columbia sued Google on Wednesday over claims that its mobile app store abuses its market power and forces aggressive terms on software developers, expanding the legal challenges facing the internet search giant.

The suit is the fourth state or federal antitrust lawsuit filed against Google since October, but the first to scrutinize the company’s lucrative app store. Utah, North Carolina, New York and Tennessee led the suit, which was filed in federal court in the Northern District of California.

Developers of mobile apps have taken issue with the way Google makes them use its own system for some payments inside their products. That system charges a 30 percent commission on top of many transactions, which the developers say forces them to charge higher prices for their services.

The lawsuit echoed those concerns, saying Google seized control of the distribution of mobile apps in its Android smartphone operating system.

“Because of Google’s anticompetitive conduct, Google Play Store’s market share — which is well over 90 percent — faces no credible threats, and market forces cannot exert pressure on its supracompetitive commissions,” the complaint said.

Google called the lawsuit “meritless” in a blog post. It said it was strange that the attorneys general had chosen to attack its Play Store instead of its rival Apple.

“Android and Google Play provide openness and choice that other platforms simply don’t,” wrote William White, senior director of public policy at Google. “This lawsuit isn’t about helping the little guy or protecting consumers. It’s about boosting a handful of major app developers who want the benefits of Google Play without paying for it.”

The lawsuit, which was reported earlier by Bloomberg News, signals that state and federal regulators are continuing to investigate Google’s empire of businesses for examples of monopolistic practices. For years, regulators chose not to act against Google even as its businesses grew more dominant and rivals complained about how it was unfairly leveraging its power.

The recent slew of antitrust complaints against Google have largely focused on search and advertising. The Department of Justice sued the company last year on claims that it illegally protected its monopoly over online search advertising. A later suit by state attorneys general accused Google of abusing its power over advertising technology, and they separately sued it for squeezing smaller search services.

Google has argued that it allows other companies, such as Samsung and Epic Games, the creator of Fortnite, to operate app stores for its Android software. In the complaint, the states said that while the Google Play Store was the source of more than 90 percent of all Android apps in the United States, no other Android app store had more than 5 percent of the market.

The complaints join other cases against the tech giants or investigations into their practices. The Federal Trade Commission and a group of states both filed antitrust lawsuits against Facebook last year; a judge dismissed the complaints last month. The F.T.C. has also been investigating Amazon, and the Justice Department has asked questions about Apple’s business.

Apple, which operates the other major app store for smartphones, is also under scrutiny for the cut it takes from developers for app sales and subscriptions. Epic Games filed an antitrust suit against Apple last year, accusing it of abusing its market power to charge app makers unfairly high commissions. It is awaiting a decision on the case next month.

As the money flowing through Apple’s and Google’s marketplaces has grown into the tens of billions annually, developers said the companies were charging too heavy a tax for access. Since the two companies’ software controls almost all of the smartphones in the world, they said, developers have little choice but to adhere to their policies and pay the fees.

Last year, Google started cracking down on subscription-based app developers such as Netflix and Spotify, which circumvented the company’s payment system to avoid paying fees in its Play Store. Google said at the time that it was providing clarity on what types of transactions required using its payment system. It had said it would start forcing companies to integrate their payments with Google’s billing system in September 2021.

But as antitrust scrutiny on its Play Store started to build, Google said this year that it would reduce store fees for developers on the first $1 million in revenue every year to 15 percent from 30 percent.

The lawsuit on Wednesday also puts pressure on how Apple runs its own App Store. While Android allows people to circumvent the Play Store and add apps to their phones through other means, Apple’s mobile software does not. Effectively, it means there is no alternative to putting software on an iPhone without going through the App Store.

“The app store issues are so clearly in the strike zone for Apple,” said Alex Harman, a competition policy advocate at Public Citizen, a group that has pushed for more aggressive antitrust enforcement against the tech giants.

Sean Reyes, the attorney general of Utah, said in an interview that he was interested in the issues raised by Apple’s practices. “Nothing in this lawsuit or this investigation precludes us from investigating or filing against any other entity,” he said.

Apple did not return a request for comment.

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