Saturday, September 17, 2022

Match Group--like EU General Court--says Google Play Store doesn't really compete with Apple's App Store because users rarely switch between mobile ecosystems

In my rapid response on Wednesday to the EU General Court's decision to overwhelmingly affirm the European Commission's Google Android decision, which I wrote BTW while following an Ericsson v. Apple patent infringement hearing, I highlighted "one key aspect of DG COMP's decision [that has a bearing on various other cases throughout and beyond the EU]": that is, "the leverage Google gets from its control over Android app distribution--and the dominant market position of the Google Play Store."

While the EUGC's landmark ruling isn't cited there, Match Group (best known for Tinder) filed an answer to Google's counterclaims in the Northern District of California, in which it takes a position consistent with the EUGC's findings of fact on the question of Google's monopoly power. I've uploaded the filing to DocumentCloud. For the most part, it's just the usual "deny almost everything" type of answer. All I'm interested in at this stage is what the filing says about Apple's App Store for iOS not actually constituting a competitive constraints on Google Play:

"15. In the market for the distribution of Android apps, Google does not compete with the Apple iOS, the Apple App Store, developer websites, or non-mobile platforms. The Match Plaintiffs admit that other Android app stores exist in the market for distribution of Android apps. Because Google has monopolized this market, however, no Android app store can meaningfully compete with Google Play. Rather, app developers’ only viable means of distributing apps to Android users is Google Play. [...]" (emphases added)

"32. [...] The Match Plaintiffs admit that hypothetically a user could pay for a subscription in a Match Plaintiff app downloaded on an iPad, then switch to an Android phone, download the same app from Google Play, and use the subscription in the Google Play downloaded app. However, few users do this because users typically choose one operating system (e.g., iOS or Android) and rarely switch between operating systems. [...]" (emphases added)

This non-competition between the App Store and Google Play is very relevant to cases targeting Google, but even more so when Apple is the defendant, as Android's worldwide market share is still high though it's been steadily ceding ground (almost in free fall) in the U.S. market. In Epic Games v. Apple case the cross-appeal of which will be heard in a little over a month, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California got the law (Kodak), the economics, and the technology wrong with respect to the foremarket part of Epic's proposed single-brand market definition (she also produced almost 300 typos and similar errors). Judge YGR ended up defining the relevant market as "digital mobile gaming transactions"--a wording that makes no sense because all mobile devices of the last two decades have been digital, but the worst part is that Google Play and Apple's App Store don't actually compete with each other for the reasons Match Group stated in the passages quoted above and similar findings by the European Commission that the EUGC affirmed in this week's Google Android judgment.

I'm in great company with respect to my focus on the Google Play market power aspect of the EU decision. On LinkedIn, Hausfeld attorney Philipp Westerhoff--a rising star in EU antitrust law--described as he key takeaway from the decision that there is no such as thing as "fierce head-to-head competition" between Google Apple because "the indirect competitive constraints are insufficient to counter Google's dominance as regards licensable smart mobile operating systems and Android app stores." The header section of the EUGC decision lists Mr. Westerhoff after Hausfeld partner Professor Thomas Hoeppner ("Höppner" in German) as counsel of record for certain intervenors supporting DG COMP (more specifically, two associations of German publishers and the Qwant search engine).

On Thursday, Professor Hoeppner and Mr. Westerhoff published a short SSRN paper on the EUGC ruling that I'd also like to recommend.

Here are a few key passages from the EUGC decision that address Google's bogus claim of "fierce" competition from Apple (it's not a bogus claim at the device or mobile operating system level, but that doesn't help Android OEMs, Android app developers, or Android users when Google exploits Google Play's market power):

"162. In any event, the Commission cannot be criticised for having overlooked in the contested decision the competition from Apple as regards users and app developers, the Commission having taken that into account in concluding that competition was both indirect and insufficient."

"205. [...] [T]he Commission did not err in finding that switching to another mobile OS could lead to additional cost, constituting a further barrier to users switching to Apple."

"218. [...] [I]t should be noted that the Commission correctly explained why an app developer would continue to operate for Android in the event of a small quality degradation of the OS. Android was the most widely used platform, therefore app developers had every interest in targeting the large majority of users (see recital 553 of the contested decision)."

"219. To the extent that users were unlikely to switch to another mobile OS in the event of a small deterioration in the quality of Android, the same would be true of app developers, who could not reasonably abandon the majority of their customers." (emphasis added)

"221. [...] [T]he Commission did not make errors of assessment by finding that app developers would not switch from Android in the event of a small deterioration in the quality of that OS."

"222. Consequently, the Commission correctly found that the relative intensity of competition from Apple justified not extending the relevant market to all mobile OSs and excluding any competitive constraint exerted by non-licensable OSs from Google's considerable power on the market for licensable OSs. Whether it is users’ loyalty to their OS, the effect of Apple’s pricing policy, in particular for users with lower-end devices, and the costs involved in switching to another OS, the Commission rightly considered that the numerous obstacles, taken together, enabled the impact of the competitive constraint exercised by Apple on Google’s market power to be limited." (emphases added)

"243. In the first place, it should be noted that Google contests only a limited number of the grounds of the contested decision. The complaints do not cover all of the factors that led the Commission to conclude that, through the Play Store, Google held a dominant position on the market for Android app stores. Google focuses exclusively on the Commission’s failure to take account of the competitive constraint from Apple." (emphasis added)

Google can appeal the EUGC's decision to the European Court of Justice, but only on legal grounds: the EUGC's affirmance of the Commission's factual findings is final. At this point I don't want to elaborate on the "anti-fragmentation" part of the decision, but suffice it to say that app developers like me are against fragmentation, so we wouldn't necessarily agree to the full extent with the EUGC's dismissal of Google's anti-fragmentation arguments. But we don't want the fight against fragmentation to be used as a prext for anti-competitive terms and policies that end up harming us, too.