Google Defense Ignores the Reality of Its Dominance

Google has responded to its latest antitrust lawsuit, arguing that consumers have more choice on Android than they do on iPhone. That’s true, but it’s also irrelevant.

“We built Android to create more choices in mobile technology,” Google senior director Wilson White writes. “Today, anyone, including our competitors, can customize and build devices with the Android operating system — for free.”

Neither of those statements is true. Google built Android because it feared that smartphone makers would ignore its search business in a market that was then quickly overtaking the desktop PC market and would deprive it of billions in ad-based revenues. And no company can build Android-based devices for free; what they can build for free is Android Open Source Project (AOSP) devices, that lack the Google Play services and Google apps that make an Android device an Android device. For those rights, companies must pay.

And that’s just the opening paragraph.

So rather than tear down this silliness word-by-word, let’s move up to a higher level and examine some key themes in Google’s defense of its anti-competitive actions. They are:

Google Play competes vigorously and fairly. That one is so funny it’s hard to take seriously. But Google’s argument here has little to do with that phrase. Instead, it notes that the 37 attorneys general who are suing the firm are “ignoring” that Android competes with iPhone, and that iPhone accounts for more revenues in mobile apps than does Android. Again, true but irrelevant: Governments are antitrust regulators are free to define markets as they wish, and Android, with its over 3 billion active devices, absolutely constitutes a market in and of itself. (In the U.S., which is the relevant market here, Android controls over 50 percent of the market by sales volume and probably usage.) And the point of antitrust in the U.S. to protect consumers, and since half of all U.S. consumers are subjected to the end results of Google’s alleged anticompetitive business practices, going after the apps store that delivers over 90 percent of those apps to them doesn’t just make sense, it’s the right thing to do.

Android increases competition and choice. Google argues that consumers have choices other than the Play Store, much like Microsoft argued that consumers had choices other than Windows over 20 years ago; in both cases, these firms controlled over 90 percent of the market and so this argument is both true and irrelevant. Plus, as Epic demonstrated in its antitrust suit against Google, the ability to “side-load” apps on Android is no strength as this process is non-discoverable, difficult, and comes with several warnings and harming the security and integrity of the device. Google also notes that the Play Store “allows developers to communicate with their customers outside the app about subscription offers or a lower-cost offering on a rival app store or the developer’s website,” unlike Apple. That’s true, but … you know. Being slightly better than the worst abuser doesn’t make you an angel, Google. It just makes you an abuser.

Google Play helps developers succeed. After arguing about all the wonderful other choices that Google’s customers have, the firm turns the tables to claim that the Play Store—again, with 90+ percent market share—has generated over $80 billion in revenues for developers. (I guess that means that all the other stores combined generated less than 10 percent of that.) It’s hard to balance the “choice” argument with the dominance that these numbers reveal since virtually no one is making other choices.

The economic model of Play and Android benefits developers. This is an interesting title since Google immediately argues that its “rules on Android and Google Play benefit consumers,” and not developers. But Google claims that 97 percent of the developers who target Google Play do not “sell digital content” (whatever that means) through the Store and thus aren’t charged fees. Of the remaining 3 percent, the vast majority only pay a 15 percent fee since Google copied Apple and lowered its fees for developers who earn less than $1 million per year. Again, true but irrelevant: All developers that target Google Play must use Google’s payment processing system, which is at the very heart of this suit. And don’t forget, Google earns money through tracking and advertising and that requires devices running real Android. So one might argue that its ad business subsidizes its store in ways that Apple won’t/can’t. In other words, just using Android harms consumers today. “Developers who don’t like our policies can still distribute their apps to Android users directly or through rival app stores without using our billing system or paying us a cent,” Google claims in the most nonsensical argument I’ve ever read.

Case closed.

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Conversation 25 comments

  • thejoefin

    Premium Member
    08 July, 2021 - 9:51 am

    <p>Your headline really nails it Paul. So many people think anti-trust law should get enforced exactly equal, but in reality it is only about focusing on dominant players. </p><p><br></p><p>I appreciate the coverage you are giving to these cases!</p>

  • codymesh

    08 July, 2021 - 10:05 am

    <p>love to be helping developers succeed by being the only easy way to uniformly distribute software on phones</p>

  • mikegalos

    08 July, 2021 - 10:07 am

    <p>It’s worth noting that in the DoJ v Microsoft suit there was also the bizarre argument by the prosecution that "The market doesn’t include Apple as Macintosh is a different market" while simultaneously bringing a charge that Microsoft abused the Windows monopoly power by actions that hurt Apple as a competitor in that same market.</p><p><br></p><p>It was a very, very odd case that included things like putting key testimony in the morning session since the judge had a tendency to nod off during the afternoon sessions. </p>

    • Paul Thurrott

      Premium Member
      09 July, 2021 - 8:44 am

      <p>Defining the market is the first step in any antitrust prosecution. And that argument is not bizarre just as excluding Apple from this one is not bizarre: The market for Windows-based PCs, or for Android-based devices, is still a market in and of itself because of the various barriers to switching platforms and because of their size and size relative to related markets. Windows was dominant in the late 1990s in the same way that Android is today. </p>

      • ianbetteridge

        12 July, 2021 - 3:07 am

        <p>Absolutely spot on. "The market for mobile phones" is a market. "The market for Android phones" is a market. Antitrust cases can make arguments in both, either, or none at all.</p>

  • anoldamigauser

    Premium Member
    08 July, 2021 - 10:54 am

    <p>Well, hopefully, they will frame their case more carefully than the FTC did against Facebook.</p><p><br></p><p><em>"</em><strong><em>All </em></strong><em>developers that target Google Play must use Google’s payment processing system, which is at the very heart of this suit. And don’t forget, Google earns money through tracking and advertising and that requires devices running real Android."</em></p><p><br></p><p>This is the heart of the issue. Developers must use the payment processing system, and they must use the Google APIs, which add tracking bits. Consumers must agree to the terms and conditions, or nothing works. OEMs are not free to make and sell AOSP devices if they want to sell devices that work with Google Play. No one has a choice, it is play by Google’s rules or they will take the ball and go home.</p><p><br></p><p>The devil will be in demonstrating how this is different from any of our other tech "choices".</p>

    • ianbetteridge

      12 July, 2021 - 3:05 am

      <p>The devil is in showing this creates harm to consumers – doesn’t matter if it reduces the profits of other companies. And given the prices of mobile software, it’s REALLY hard to show this (or anything else) has inflated prices. </p>

  • lvthunder

    Premium Member
    08 July, 2021 - 10:54 am

    <p>"Governments are antitrust regulators are free to define markets as they wish"</p><p><br></p><p>This is false. Regulators can try to define markets, but the judge and/or jury can throw those out if they are outlandish.</p>

    • mikegalos

      08 July, 2021 - 11:48 am

      <p>The judge is part of the government. Paul didn’t say "the prosecution can define markets". </p>

      • lvthunder

        Premium Member
        08 July, 2021 - 12:42 pm

        <p>Judges aren’t "antitrust regulators" which is what Paul wrote.</p>

        • fishnet37222

          Premium Member
          08 July, 2021 - 1:28 pm

          <p>He wrote "governments and antitrust regulators". Judges aren’t antitrust regulators, but they are part of the government.</p>

        • Paul Thurrott

          Premium Member
          09 July, 2021 - 8:45 am

          <p>That is not what I wrote.</p>

    • jim_vernon

      09 July, 2021 - 12:27 am

      <p>Judges are part of the government, too, in case you forgot.</p>

  • ngc224

    08 July, 2021 - 11:00 am

    <p>Google (and Big Tech in general)’s dominance precludes any meaningful competition.</p>

    • Greg Green

      10 July, 2021 - 10:34 am

      <p>And their campaign contributions intend to keep it that way. We can expect no help from congress.</p>

  • bettyblue

    08 July, 2021 - 2:04 pm

    <p>All of this is companies vs developers. Users do NOT care about this BS. </p><p><br></p><p>Users do care about privacy, security and not having 15 apps stores to manage your info on.</p><p><br></p><p>The only time I think the government should get involved is if for instance Apple or Google have secret API’s or low level access to one of their own apps that hurts a developers app in the same category because the developer does not have the same access. Like a note taking app vs Apple notes, even if Apple is giving it away for free.</p><p><br></p><p>Outside of that it is a free market. If Apple or Google, Microsoft, Sony….etc do stupid things to developers or users they will stop using their products. NONE of this is life saving stuff. None of its essential.</p>

    • jim_vernon

      09 July, 2021 - 12:29 am

      <p>People babbling on about "free markets" always seem to ignore that the big players in the markets want to make the markets anything but "free".</p>

      • ianbetteridge

        12 July, 2021 - 3:03 am

        <p>Of course, and similarly every single small player who gets large wants to control the market. It’s intrinsic in capitalism, which is why we have antitrust law, and why the only thing that matters in antitrust law is harm to consumers, not other companies. </p>

  • toukale

    08 July, 2021 - 3:14 pm

    <p>I tried to read the government case but gave up, I am not sure what the government is asking for here? What is the resolution they want? All those cases seems to be about moving profits from Google/Apple to other parties, as a user (which I am sure most people would agree) I do not care about any of this bs. IMHO, I see people keep making arguments that AppStore/PlayStore fees should be where credit card transactions are which is bs. Those stores don’t just process credit card transactions, for anyone arguing that I won’t even engage. Folks are free to engage in what it could be but it should not be anywhere close to what credit card transactions are. As bettyblue pointed above (as a user, I don’t care about managing a bunch of accounts for a bunch of different stores, that does not help me).</p>

    • ianbetteridge

      12 July, 2021 - 2:58 am

      <p>You are correct, and that is why people are focusing on completely the wrong things.</p><p><br></p><p>The government is struggling to show consumer harm at the moment, and what might surprise people here is that consumer harm is what matters in anti-trust: whether developers make more/less money, or like it, or even go broke is not really an issue in anti-trust. Consumer harm is all that matters. </p><p><br></p><p>And there is a strong case that not only have app stores not harmed consumers, they have massively benefitted. Prices for software on mobile are incredibly low, which makes it almost impossible to show that the percentages Google/Apple take are too high. The app market is vibrant –&nbsp;if anything, it has a problem with too much software, because barriers to entry are so low. Pre-app stores, mobile software was often in the same prices ranges as desktop computer software – now if an app is over $10, people are screaming that it’s too expensive, such is the state of the market. </p><p><br></p><p>Unrestricted side loading of apps might annoy a few geeks, but it’s difficult to show the harm to the vast majority of consumers compared with the benefits of simplicity and security. And, again, harm to consumers is what matters – but that doesn’t mean your product has to tailor to the desires of every single potential consumer on the planet. </p><p><br></p><p>All of these points are barking up the wrong tree. The challenge for anti-trust posed by these cases is that what Apple and Google have is the ability to arbitrarily control access to a market, via app stores. There is *potential* for consumer harm in this, for example by inconsistent application of rules, or use of the app stores to create effective "tying" of one of their own products to another. Potential abuses, though, are not enough. There are cases where both companies have done this: but largely not the big ones which people are seeing (Apple would have been arbitrarily applying its own rules if it *hadn’t* dumped Epic, for one thing). </p><p><br></p><p>What I’m saying is this: this is not the open and shut case that people focusing on things like the App Store percentage or allowing alternate app stores think it is. If the government focuses on those areas it will probably lose, and governments rarely actually lose cases like this. There will be a settlement of some description, but it is very unlikely the rules in that settlement will extend to the areas that people are talking about right now, instead focusing on preventing the arbitrary application of rules.</p>

  • Daishi

    Premium Member
    08 July, 2021 - 6:59 pm

    <p><em style="color: rgb(0, 0, 0);">I see people keep making arguments that AppStore/PlayStore fees should be where credit card transactions are which is bs.&nbsp;</em></p><p><br></p><p><span style="color: rgb(0, 0, 0);">No, they absolutely should be. Not because they are forced to by the government setting prices, but because developers should be free to use whichever payment service they want so that price will be driven down by competition.</span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">’But the fees cover more than just the cost of processing the transaction’ I hear you cry. Sure, so here’s a crazy idea, charge the developers directly for those costs. If you insist that you really do vet and review every app and update that goes into the store, charge a review fee. If it’s expensive to run the data centres that hold the Store catalog, charge them a monthly hosting fee. Hell, if you really want to be tight, maybe even charge a fraction of a cent per download to cover the bandwidth.</span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">What they absolutely should not be doing is declaring themselves entitled to 30% of the developers work because “it’s a nice app you have here. It’s be a shame if something happened to it” the way they do now.</span></p>

    • ianbetteridge

      12 July, 2021 - 2:34 am

      <p>Increased competition in payment processing won’t drive down prices. Payment processes are notorious for abusing monopolies, and have been the subject of several investigations globally. </p>

  • melinau

    Premium Member
    09 July, 2021 - 10:41 am

    <p>Interesting to see if US has the courage to actually do anything to stop Google (and\or Apple for that matter) from persistently exploiting &amp; abusing its customers. EU has made threatening noises &amp; imposed a few fines but (surprise) nothing significant has changed.</p><p><br></p><p>I have every sympathy with Developers &amp; sellers of "digital content" who are stuck with The Big Bad Wolf or an Even Bigger Badder Wolf (Now THAT’s what I call a "Free Market"!). </p><p><br></p><p>Surely we poor insignificant little insect-people who use this stuff deserve some consideration too. Kyboshing the dodgy duo’s monopolies to charge a fortune to allow Devs to sell on their platforms and\or allowing other Payment systems should theoretically reduce prices to consumers (Yeah, Really). This isn’t the most critical issue though. </p><p>What most of us really what to see regulated is the existence of "walled gardens" where the duopoly control (to all intents &amp; purposes) what Joe Public can run on our own gear &amp; the real privacy of our data within their systems. Whenever Google gets found-out misappropriating our data everyone nods sagely &amp; accepts it as though it is a Law of Nature. It isn’t its Google’s business model &amp; it stinks. </p><p>It would seem perfectly reasonable for Google (&amp; Apple, MS etc.) to pay <strong><em>us</em></strong> a chunky percentage of the revenue they gain from aggregating &amp; flogging or using our Pertsonal Data for profit. It won’t be easy, but hey these re those genius "disruptors" who changed the World, surely a trivial task for them?</p>

  • Greg Green

    10 July, 2021 - 10:36 am

    <p>if the judge doesn’t use google for research he/she’s got a better chance of unbiased results, and a better ruling.</p>

  • M. S. Chan

    20 July, 2021 - 3:02 am

    <p>If they want to focus on in-app processing, then go after that and that only. The resolution could be making mandatory in-app processing via Google Play as the one only one method illegal; developer can free to choose any in-app payment method they want. </p><p><br></p><p>However complaining about warning messages on sideloading will get them nowhere. If phones are able to sideload any app, without warning, without notice, and cause rampant security issues, are those 37 attorneys general&nbsp;be held responsible for that?</p><p><br></p>


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