* Latest case aimed at forcing more competition on Android
* States point to "enormous profit margins" for Play Store
* Case alleges Google intended to pay Samsung not to compete
* Google says case seeks to benefit big developers
(Adds Samsung decline to comment)
WASHINGTON/OAKLAND, Calif., July 7 (Reuters) - Thirty-seven
U.S. state and district attorneys general sued Alphabet Inc's
Google on Wednesday, alleging that it bought off
competitors and used restrictive contracts to unlawfully
maintain a monopoly for its app store on Android phones.
The allegations about Google's Play Store stem from an
investigation involving nearly every U.S. state that began in
September 2019 and have already resulted in three other lawsuits
against the company. The cases threaten to force major changes
to how it generates billions of dollars in revenue across its
businesses, including advertising, in-app purchases and smart
Google said on Wednesday the litigation was about boosting a
handful of major app developers that want preferential treatment
rather than about helping small businesses or consumers. It
maintains that unlike Apple Inc with its App Store on
iPhones, Android supports competitors to the Play Store.
"Android and Google Play provide openness and choice that
other platforms simply don't," the company said in a blog post.
The states, led by Utah, New York, North Carolina and
Tennessee, argue that Google has generated "enormous profit
margins" from the Play Store by engaging in illegal tactics to
preserve monopolies in selling Android apps and in-app goods.
In the United States, Google Play accounts for 90% of
Android apps downloaded, according to the lawsuit.
"Google leverages its monopoly power with Android to
unlawfully maintain its monopoly in the Android app distribution
market," the lawsuit stated.
The states pointed to agreements already targeted in other
lawsuits such as those Google has with mobile carriers and
smartphone makers to promote its services.
But they added fresh claims after newly reviewing internal
company documents. The states alleged that Google bought off
developers so they would not support competing app stores, and
that through numerous secret projects it intended to pay Samsung
Electronics Co, whose rival app store posed the
biggest threat, to stop competing.
Samsung declined to comment.
The plaintiffs, which include California and the District of
Columbia, also say Google has unlawfully mandated that some apps
use the company's payment tools and give Google as much as 30%
of digital goods sales. The "extravagant commission," compared
with the 3% other marketplaces charge, has forced app makers to
raise prices and consumers to spend more, the states said.
"Google Play is not fair play," Utah Attorney General Sean
Reyes said in a statement. "It must stop using its monopolistic
power and hyper-dominant market position to unlawfully leverage
billions of added dollars from smaller companies, competitors
and consumers beyond what should be paid."
The states want the consumers to get their money back. They
also called for civil penalties and a court-imposed monitor to
ensure Google eases the process for consumers, app developers
and smartphone makers to use or promote alternatives to the Play
Store and the official payment system for 20 years. In addition,
the states seek to stop Google's payments to Samsung and
The states said on Wednesday they have not ruled out taking
similar action against Apple over its App Store.
The filing drew praise from Meghan DiMuzio, executive
director for the Coalition for App Fairness, which represents
companies including Match Group Inc and Spotify
Technology SA that oppose some of the Play Store rules.
"Anti-competitive policies stifle innovation, inhibit
consumer freedom, inflate costs, and limit transparent
communication between developers and their customers," DiMuzio
The lawsuit said that while Google does enable consumers to
avoid the Play Store, it displays "generally misleading warnings
and hurdles" to discourage such activity.
Google does not break out Play Store's financial performance
but has said the unit along with several others together
generated $21.7 billion in revenue last year, or about 12% of
Google's worries about Samsung grew after the South Korean
company worked with video game maker Epic Games Inc to
exclusively launch "Fortnite" for Android devices in 2018,
according to the lawsuit.
Epic's bypassing of the Play Store cost Google some millions
of dollars in revenue, the states said.
Google "immediately launched multiple coordinated
initiatives designed to block the emergence of a competing
Galaxy Store," the lawsuit said. "Google viewed these
projects as an integrated approach to eliminating the threat of
more developers following Epic's lead."
Last year, Epic itself sued Google and Apple separately in
federal court in California over app store policies. Proposed
classes of developers and consumers have joined the cases.
A judge's decision in the Apple fight is expected in the
coming weeks, and a hearing on Google's effort to dismiss the
case against it is scheduled for July 22.
The lawsuits come amid growing antitrust scrutiny of big
tech companies, but regulators suffered an early blow last week
when a judge dismissed a Federal Trade Commission lawsuit
against Facebook Inc.
The ruling should not affect the Play Store case because it
covers different circumstances, the states suing Google said.
(Reporting by Diane Bartz, Paresh Dave and Karen Freifeld;
Additional reporting by Joyce Lee; Editing by Leslie Adler and