Friday, May 20, 2022

BREAKING: Google blinks in in-app payments antitrust fight with Epic Games, will keep Bandcamp music marketplace on Google Play Store to moot Epic's motion for preliminary injunction


It sometimes appears that the "A" in "Apple" means "adamant" (about certain principles as well as non-principled pretexts). By comparison, Google has always tried to strike a less belligerent tone with respect to app distribution antitrust issues. Google wasn't necessarily much softer on substance, but at least more diplomatic. This Friday, however, Google made the first significant concession in the app store antitrust context: between 1 and 2 AM Pacific Time, Epic Games and Google submitted, by stipulation, a proposed order to Judge James Donato, who really really didn't want to have to adjudicate Epic's motion for a preliminary injunction over this issue. If approved (and I can't see anything in it that the judge would foreseeably take issue with), this stipulation will have the following effects--note that this is strictly just about Bandcamp, not Fortnite:

  • For the time being, Google won't kick the Bandcamp app out of its Google Play app store for Android for continuing to circumvent Google Billing. Google had allowed certain types of apps, such as that one, to use the billing system of their choice for many years, but last year announced that come June 2022, Google would rigidly enforce its requirement that all in-app purchasing (IAP) be handled by Google Billing. Google described it as a mere clarification, though I would agree with Epic and others that in reality it constituted a policy change, an about-face.

  • By "[f]or the time being" I meant that this is just temporary, like a moratorium:

    • At the very latest, this agreement terminates when the United States District Court for the Northern District of California has entered final judgment in, or otherwise disposed of, Epic Games v. Google.

    • Either party can also terminate the agreement before, with 60 days written notice.

    • Epic can seek a preliminary injunction not only after any termination of the agreement but also if the agreement "is breached by Google."

  • Both parties make it very clear in the proposed order that they don't give up any rights. Epic has to put into escrow the 10% of in-app purchases in the Bandcamp app that it would owe Google as a (reduced) commission if the new rule was enforced as of June 1. Depending on what the final outcome in the dispute is, Google might get even more than the escrow amount, or less, or nothing. If necessary, a balancing payment will be made by Epic; alternatively, the escrow account will be returned to Epic in whole or in part (if in part, Google gets the balance).

While I'm sure Google would not officially agree with my analysis that it blinked, it's a fact that Judge Donato expressed serious doubts about whether Epic could prove irreparable harm, and he was reluctant to make a determination on the merits at this stage. In order for Epic to win, he'd actually have had to find a very high likelihood of success on the merits in order to offset other shortcomings such as that Bandcamp, prior to being acquired by Epic, was preparing to comply with Google's rule. So Google could have played hardball and declined to make any meaningful concession, as I explained about a week ago. Instead, Google is now going to accept, even if only on a provisional basis, what it would normally consider a serious breach of its app distribution terms--serious enough to kick out non-compliant apps.

Judge Donato had called on the parties to be "willow trees, not redwoods" on this issue, as the Courthouse News Service reported a week ago. Google has clearly heeded what he said. What Google has stipulated to is materially consistent with what Epic's counsel asked for at the case management hearing (according to Courthouse News, quoting Cravath's Lauren Moskowitz): "If Google would agree to withdraw this policy until trial, that's all we're asking." The escrow arrangement is part and parcel of agreements in such situations, and Epic has billions of dollars in the bank, so this is not an issue. And it's not a "win" for Google that it can later seek damages for a breach of its rules (should it prevail). The bottom line is that Google wanted to vigorously enforce its new rule (mislabeled as a clarification) as of next month, and is going to refrain from doing so for the time being. The trial will take place next January, but a decision would likely still take a number of months, so this interim agreement could be in place for about a year.

What about other apps?

This here is just an inter partes agreement, not a decision by Google to generally waive its rule. But other app makers than Epic will also be affected by the new rule. One of them is Match Group (best known for Tinder). Match Group filed a motion for a temporary restraining order. Google has struck largely the same kind of agreement with Match Group, though it's unclear how soon the trial in the Match Group case will take place (theoretically the court could try to rush things the way Judge Yvonne Gonzalez Rogers did in Epic Games v. Apple, and then the Match Group complaint could be tried at the same time, or right after, Epic's case, but that would be a highly ambitious schedule).

The fact that others might now ask for the same kind of grace period must have played a role in Google's analysis of its option, which further supports my take that Google has blinked.

To be clear, I don't mean it negatively when a company tries to work out solutions rather than exacerbate problems and escalate conflicts. Apple might try that for a change.

Just this week, Microsoft President Brad Smith gave a speech in Brussels on Microsoft's attitude, which he elaborated on in a blog post, Microsoft responds to European Cloud Provider feedback with new programs and principles. Professor (and well-known EU antitrust attorney) Damien Geradin discussed Mr. Smith's speech on the Platform Law Blog and would also like to see other players "[e]mbrac[e] rather than fight[] digital regulation."

The most optimistic way to look at both Microsoft's speech and Google's interim agreement with Epic is that cooperation trumps confrontation and that this is now a trend--with everyone waiting for Apple to join.

Finally, here's the Epic-Google stipulation:

Share with other professionals via LinkedIn: