Federal judge orders Google to open its Android app store to competition

SAN FRANCISCO -- A federal judge on Monday ordered Google to tear down the digital walls shielding its Android app store from competition as punishment for maintaining an illegal monopoly that helped expand the company's internet empire.

The injunction issued by U.S. District Judge James Donato will require Google to make several changes that the Mountain View, California, company had been resisting. Those include a provision that will require its Play Store for Android apps to distribute rival third-party app stores so consumers can download them to their phones, if they so desire.

The judge’s order will also make the millions of Android apps in the Play Store library accessible to rivals, allowing them to offer up a competitive selection.

Donato is giving Google until November to make the revisions dictated in his order. The company had insisted it would take 12 to 16 months to design the safeguards needed to reduce the chances of potentially malicious software making its way into rival Android app stores and infecting millions of Samsung phones and other mobile devices running on its free Android software.

The court-mandated overhaul is meant to prevent Google from walling off competition in the Android app market as part of an effort to protect a commission system that has been a boon for one of the world's most prosperous companies and helped elevate the market value of its corporate parent Alphabet Inc. to $2 trillion.

Google said in a blog post that it will ask the court to pause the pending changes, and will appeal the court’s decision.

Donato also ruled that, for a period of three years ending Nov. 1, 2027, Google won't be able to share revenue from its Play Store with anyone who distributes Android apps or is considering launching an Android app distribution platform or store. It also won't be allowed to pay developers, or share revenue, so that they will launch an app in the Google Play Store first or exclusively, and can't make deals with manufacturers to preinstall the Google Play store on any specific location on an Android device. It also won't be able to require apps to use its billing system or tell customers that they can download apps elsewhere and potentially for cheaper.

The Play Store has been earning billions of dollars annually for years, primarily through 15% to 30% commissions that Google has been imposing on digital transactions completed within Android apps. It's a similar fee structure to the one that Apple deploys in its iPhone app store — a structure that prompted video game maker Epic Games to file antitrust lawsuits four years ago in an effort to foster competition that could help drive down prices for both app makers and consumers.

A federal judge mostly sided with Apple in a September 2021 decision that was upheld by an appeals court. Still, a jury favored Epic Games after the completion of a four-week trial completed last year and delivered a verdict that tarred the Play Store as an illegal monopoly.

That prompted another round of hearings this year to help Donato determine what steps should be taken to restore fair competition. Google argued that Epic Games was seeking some extreme changes, saddling the company with costs that could run as high as $600 billion. Epic contended Google could level the playing field for as little as $1 million. It's unclear how much the changes ordered by Donato will cost Google.

Although Epic lost its antitrust case against Apple, Donato's ruling could still have ripple effects on the iPhone app store as another federal judge weighs whether Apple is making it easy enough to promote different ways that consumers can pay for digital transactions. Apple was ordered to allow in-app links to alternative payment systems as part of U.S. District Judge Yvonne Gonzalez Rogers' decision in that case, but Epic contends the provision is being undermined with the creation of another commission system that stifles consumer choice.

The forthcoming Play Store shakeup could be just the first unwelcome shock that antitrust law delivers to Google. In the biggest antitrust case brought by the U.S. Justice Department in a quarter century, U.S. District Judge Amit Mehta in August declared Google's dominant search engine to be an illegal monopoly, too, and is now getting ready to start hearings on how to punish Google for that bad behavior. Google is appealing Mehta's ruling in the search engine case in hopes of warding off a penalty that could hurt its business even more than the changes being ordered in the Play Store.

“Provided the ruling survives the appeals process, Google will almost certainly take a revenue hit,” said Emarketer analyst Evelyn Mitchell-Wolf. “No doubt some of the largest app developers like Epic Games will start encroaching on Google Play Store’s market share, meaning Google will lose out on its usual cut of subscription and in-app purchases.”

The analyst added that, while the Google Play Store will likely continue to benefit from brand recognition since it was the default Android app store for so long, “some consumers may defect if they can get better deals on their favorite apps elsewhere.” And app developers will likely take advantage of the opportunity to let consumers know about direct downloads.

“So Google may see fewer Play Store revenues even among the Android users that stick to the default,” Mitchell-Wolf said.

Alphabet's shares fell $4.08, or 2.4%, to close Monday at $162.98.