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Google reaches $700 million settlement with US states on anti-competitive Play Store practices

Google’s User Choice Billing program, lets developers steer clear of payments through the Play Store while still allowing the company to charge a hefty 26 percent commission

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Google has agreed to a $700 million settlement and plans to overhaul its app store to encourage greater competition, according to documents filed in a San Francisco federal court on Monday. However, most of the concessions come with time limits, and almost all of them are tied to Google’s contentious ‘User Choice Billing’ program. 

While the settlement might sound sizeable at first glance, it has to be noted that $700 million is less than a month’s worth of Google’s profits from its app store alone. Additionally, the changes that Google is making are fairly minor concessions in the way it runs its app store business. Most consequential among those changes is Google’s willingness to now allow developers to steer users to third-party payment methods. But even that concession has to be taken with a pinch of salt. Google is instead steering developers towards what it calls ‘User Choice Billing’. In essence, using User Choice Billing would mean that developers would have to shell out 26 percent in commissions instead of the 30 percent flat fee on the Play Store. And that is hardly a discount, considering that app developers would have to pay for the payment gateway that they ultimately end up using. 

Under the settlement terms, Google will allocate $630 million to a fund for consumers and $70 million to a fund for use by states. However, it’s important to note that the settlement is still pending final approval from a judge. Eligible consumers will receive a minimum payment of $2, with the possibility of additional compensation based on their spending within the Google Play Store between August 16, 2016, and September 30, 2023.

All 50 states, along with the District of Columbia, Puerto Rico, and the Virgin Islands, have joined this settlement. The allegations against Google involved claims of overcharging consumers due to restrictions on app distribution for Android devices and in-app transaction fees. Google, however, did not admit any wrongdoing.

The terms of this settlement had been kept confidential until now, as they were related to Google’s legal battle with Epic Games, the maker of Fortnite. A California federal jury recently ruled in favor of Epic Games, finding that Google’s app business practices were anti-competitive.

Epic Games maintains that the settlement does not adequately address Google’s “unlawful and anticompetitive behavior.” Epic Games CEO Tim Sweeney tweeted that the settlement “endorses Google’s 30% monopoly rent imposition, by replacing the anticompetitive Google Play Billing tie with a new anticompetitive Google-imposed ‘user choice billing’ tie which adds a useless 26% Google Tax for payments they don’t process.” A judge is yet to decide what Epic Games is liable to receive post the verdict in the Epic vs Google trial. The states will request Judge James Donato (same judge overseeing the Epic vs Google trial) to approve the settlement on February 8th next year. 

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