The Storm Closes In: Google Loses Appeal Before the Ninth Circuit

Last Thursday, the Ninth Circuit issued a decision in the ongoing Epic v. Google saga.  Google had appealed both the jury's antitrust liability verdict and the Northern District of California's permanent injunction, but the three-judge panel upheld the Northern District's decision in full.  For a refresher on the outcome in the Northern District, you can read our write-up from December 2023 on the case here.

The Ninth Circuit's decision can ultimately be broken down into two major parts: the antitrust verdict and the validity of the injunction.

Antitrust Jury Verdict

Google argued on appeal that the seemingly opposite resolution in Epic's parallel lawsuit against Apple should be preclusive here.  But as we highlighted both in our prior blog post on this case and in our examination of the Epic v. Apple decision, the market definition proved key in the court's analysis.

Here, because the markets were defined differently, there were no identical issues and so there could be no preclusive findings.  Specifically, Apple created a "walled garden" where it controlled not only the App Store distribution platform, but also the very devices that platform operated on.  Google, on the other hand, maintained an "open distribution" approach by entering licensing deals with device manufacturers like Samsung and Motorola.  The theories of harm in the two cases were therefore different because Apple flatly rejected third-party app stores on the platform, whereas Google engaged in dealmaking to try and keep third-party stores off of Android devices. 

And even though Apple and Google had previously been found to compete in the broad "digital mobile gaming transactions" market, the case here dealt with the narrower submarket within the Android ecosystem.  Providing a fast-food analogy for overlapping markets and submarkets, the Ninth Circuit explained that while Chick-fil-A might compete with McDonald's in the fast-food market generally, they did not do so in the hamburger fast-food market specifically.  While Google and Apple may compete in the mobile gaming downloads and in-app transactions market, they do not do so in the Android market.  This ultimately doomed Google's appeal on the verdict.

Validity of the Permanent Injunction

The Ninth Circuit then proceeded to hold that the permanent injunction was valid and upheld it in full.  To quickly summarize, the permanent injunction imposes three major prohibitions on Google: it (1) prohibits Google from sharing Google Play Store revenues with actual or prospective competitors to prevent them from launching a competing app store on the Android ecosystem; (2) prohibits Google from conditioning payment or access to the Google Play Store on app distribution exclusivity or preinstallation of the Google Play Store on devices; and (3) prohibits Google from requiring the use of Google Play Billing for apps distributed on the Google Play Store.  The injunction also seeks to restore competition in the Android app-distribution market by requiring Google to permit third-party app stores to access Google Play's catalog of apps and preventing Google from banning third-party app distribution platforms from the Google Play Store.

On catalog access, Google argued that the injunction illegally imposed a "duty to deal" requiring them "to design new products and services tailor-made for [Google's] competitors."  Google also argued that the imposition of such a requirement without identifying a "significant causal connection" to Google's anticompetitive conduct was unjust.  The court rejected both arguments for several reasons.  First, catalog access does not require Google to create new products, but rather only grant developers access to existing data and data-processing resources that Google had, until now, restricted access to.  Second, while Google argued that its competitive advantage was primarily due to its "first mover" status in the Android marketplace—an argument that the court acknowledged as likely true to some extent—such status did not entitle them to maintain and magnify that advantage through anticompetitive conduct.  And third, the court held that there was a sufficient causal nexus between Google's anticompetitive conduct and the network enhancements that unfairly benefitted them in the Android app-distribution network.

Similar arguments were raised and disposed of regarding the app store distribution of third-party platforms.  The court noted the "yin and yang" of this two-sided market advantage for Google, where rival app stores were locked out of the platform and app developers were locked in.  Google's "duty to deal" argument rang even hollower here, as the injunction only compels Google to treat competitor app stores the same way it treats any other product on the platform.  Finally, the court determined that Google's procedural arguments against the injunction—including those targeting the specificity and clarity of the remedies, the propriety of the required three-person technical committee, and the sufficiency of the factual findings underlying the injunction—were all uncompelling.

What's Next?

Close on the heels of Epic’s other recent victory against Apple to enforce the injunction against that platform (which we detailed in our recent mid-year litigation roundup), this decision signals another big win for Epic.  So too is it a potential opportunity for other app developers and companies exploring the possibility of launching an app distribution program or platform for Android devices.

This is not the absolute end of the saga though, and Google is preparing for further appellate review of the injunction.  On Friday, the day after the Ninth Circuit issued its decision, Google requested, and the court granted, an emergency administrative pause on the looming deadline to open the Google Play Store to alternative distribution platforms to permit Google time to prepare an appeal to be heard by the court’s full panel.  Should this planned en banc appeal likewise fail, an appeal to the United States Supreme Court by Google also seems likely.  The likelihood of success of such an appeal is far from certain, however, especially after the Supreme Court denied cert in the Epic v. Apple case last January.