After Epic Demolition Job, Google’s and Apple’s Walled Gardens Are Still Standing — For Now | Opinion

After Epic Demolition Job, Google’s and Apple’s Walled Gardens Are Still Standing — For Now

Google's loss to Epic Games in a landmark antitrust case has dislodged a brick in the app stores, but the foundations are strong and designed to last.

By:BLOOMBERG
| Updated on: Dec 14 2023, 07:08 IST
Google Pay launches 5 new lending products for consumers and merchants in India; Know them all
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1/6 At the Google for India 2023 event, the tech giant announced multiple India-centric announcements, ranging from AI, online safety, accessibility to small businesses, to Pixel phones. Google also launched 5 different lending products in India for both consumers and merchants by collaborating with banks and NBFCs. These credit services are aimed at addressing the credit gap in India. (Shaurya/HT Tech)
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2/6 Earlier this year, Google Pay added the facility to add Rupay credit cards to the app, and using them to seamlessly make payments via UPI.  Extending this functionality further, in collaboration with its PSP ICICI Bank, users can now avail credit lines from banks on UPI, and use it to make payments via Google Pay in the same way that they would with a UPI payment.  (Shaurya/HT Tech)
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3/6 Personal loans have been available on Google Pay for the last few years in collaboration with its partner DMI Finance. This portfolio is expanding with Axis Bank making its personal loans available on Google Pay, with more partners to follow shortly.  (Shaurya/HT Tech)
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4/6 Expanding the portfolio of merchant loans: On the merchant side, Google announced its new partnership with ICICI Bank and seamless repeat loans powered by Indifi.  (Shaurya/HT Tech)
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5/6 Merchants often require smaller ticket loans and simpler repayment options. To address this, Google Pay is enabling on its platform, sachet loans in collaboration with DMI Finance. These start as low as Rs. 15000 and can be repaid with easy repayment options starting at just Rs. 111. This offering is aimed at bringing ease and convenience to SMBs.  (Shaurya/HT Tech)
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6/6 Google Pay is enabling a credit line for merchants in partnership with ePayLater. This product will help solve the working capital requirements of merchants. Merchants can use this line across all online and offline distributors to buy their stock and supplies and grow their business.  (Shaurya/HT Tech)
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Know if Apple and Google will continue to partner in future after the massive loss with Epic Games. (REUTERS)

A San Francisco jury took less than four hours to decide on Monday that Google was running an illegal monopoly designed to exact huge fees from app developers. The verdict was a huge victory for Epic Games Inc., the maker of Fortnite, and signals that the onerous terms imposed by Google and Apple Inc. for using their walled-offed app stores may be on the way out — but not for a while.

Epic, which sued both Google parent Alphabet Inc. and Apple in 2020, had been being kicked out of Google's Play Store and Apple's App Store for attempting to circumvent the required payment systems — and the cut of up to 30% the companies take from transactions that go through them. 

And while Epic lost its case against Apple, its victory against Google is already being heralded as a turning point in the mobile app economy, one that stands to help companies like Epic make many billions of dollars more in revenue each year. (Google has said it plans to appeal.)

Epic Chief Executive Officer Tim Sweeney put it plainly in a Bloomberg interview on Monday: “The dominoes are going to start falling here. The end of 30% is in sight.”

In sight, maybe, but still a long way off. The walled gardens of iOS and Android are built on foundations strong enough to withstand this one verdict. Investors know this — the stock prices of both companies barely moved on Tuesday morning despite the fact that, for Google, the jury's decision likely means a heavy penalty when the judge decides on remedies early next year.

But a brick has been dislodged. The fees that Apple and Google take from app sales and in-app purchases have long been a significant sticking point that could never last indefinitely as the mobile app market matured. Currently, the fees generate around $200 billion a year for the companies — income they both say is fair compensation for maintaining and running the stores securely. They argue that consumers and developers both benefit from the simplicity and security of a centralized store on each respective platform. Many developers don't see it that way, however, and it's through Epic that they have found a knight in shining armor with the deep pockets required to wage the fight. 

It's important to consider why Epic won its case against Google but lost against Apple. What marked Google's behavior as particularly egregious was the immense effort to deter potential competitors from launching mobile app distribution efforts of their own. It invested hundreds of millions — at least — in an effort called Project Hug that involved approaching top games developers with financial incentives in the hope of steering them away from agitating for better terms. 

Some companies, like Netflix Inc. and Spotify Technology SA, were offered sweetheart deals that meant they paid a smaller percentage of commissions on in-app transactions. In addition, Google put in place expensive agreements to make sure device manufacturers like Samsung prioritized Google's store over any possible others. 

Apple, by contrast, treats everyone on its store equally (as far as anyone is aware) and has no need to pressure any device maker because it makes its own phones. Developers may not like it, but as the judge in its case with Epic put it, “success is not illegal.” 

But the judge in the Apple case did impose one order on the iPhone maker — a taste of some of the pro-consumer tweaks to app store policy that can be expected over the coming months and years. She forced (pending a potential Supreme Court appeal) the company to abandon its “anti-steering” rules that prohibit app makers from directing users to alternative ways to pay for subscriptions and in-app purchases outside of the app, such as going to a company's website directly through a browser. Europe's Digital Markets Act will eventually force Apple and Google to permit those alternative payment methods right there in the app. It also will force them to let third parties have entire app stores of their own available on iOS and Android.(1) 

If the US can get its regulatory act together, similar ideas could take hold here. There is still merit in giving Apple and Google strong controls over what goes on their platforms. They're called walled “gardens” for good reason — they're pleasant and well maintained. Nobody wants to go back to the wild west of buying things online. But more choice is good for consumers as long as it's done in a way that protects customer safety and security. Companies like Epic are rightly salivating at this opening up of opportunity. 

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First Published Date: 14 Dec, 07:08 IST
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