On Tuesday, Google’s CEO Sundar Pichai was once again called to appear in federal court to give testimony in an antitrust case that could potentially disrupt a major aspect of the internet empire that he played a role in constructing.
During his recent court hearing in San Francisco, Pichai spent over two hours advocating for the business methods employed by the Google Play Store. The store is responsible for distributing apps for the company’s Android software, which is used on the majority of smartphones worldwide.
Sometimes, Pichai appeared puzzled and annoyed by the challenging questions he received, despite his calm demeanor. Other moments, he resembled a teacher, breaking down intricate concepts for the 10-person jury present in the courtroom, as he was provided with a podium due to his difficulty sitting for extended periods.
Epic Games, the creator of the well-known game Fortnite, is attempting to persuade the jury that Google’s payment processing system on the Google Play store, which charges a 15% to 30% fee for in-app purchases, is unlawfully harming both consumers and software developers. According to Epic, Google obtains these fees by leveraging its dominant position in the market to hinder competing Android app stores, resulting in inflated prices and a lack of innovation.
This trial brings to mind a previous case where Epic sued Apple, the company behind the iPhone. Their relationship with Google is being portrayed as both adversarial and cooperative in this trial.
Pichai testified again after 15 days of traveling to Washington D.C. for a different antitrust case involving the U.S. Justice Department’s claim that Google has limited competition and innovation through the use of its dominant search engine, which originated in 1998.
Despite taking place in different locations and examining various aspects of a company valued at $1.7 trillion by investors, the two trials share similar themes: Google’s significant influence and its unique partnership with Apple, a larger technology giant.
Google argues that its Play Store does not have a monopoly on Android apps, citing competition from Apple’s iPhone, mobile operating system, and app store as a key factor in its defense against allegations of illegality.
The Justice Department’s case against Google in Washington involves deals made with Apple to guarantee that Google’s search engine is the default for queries on iPhones and Safari.
Pichai was compelled to verify the percentage of 36% that Google allegedly shared with Apple for Safari search queries during the antitrust trial in Washington. This was following the testimony of an expert witness on Monday. The questioning by Epic lawyer Lauren Moskowitz in San Francisco on Tuesday was often confrontational.
The situation became extremely tense, and just before taking a brief recess, U.S. District Judge James Donato characterized the exchange between Epic’s attorney and Pichai as a “vigorous 75 minutes.”
Prior to the commencement of the testimony, Donato had approved Moskowitz’s plea to reveal the exact sum of money paid by Google to Apple in 2021. This decision was met with opposition from lawyers representing both companies, but the specific amount was never disclosed.
Instead, Moskowitz convinced Pichai to admit that a significant portion of the $26.3 billion paid by Google in 2021 for agreements ensuring their search engine is the default on smartphones and browsers went to Apple. Experts have approximated that Apple profits anywhere from $15 billion to $20 billion annually from this deal with Google.
Moskowitz mentioned that Apple receives a 36% share of Google’s search ad revenue in the Safari browser, which is more than twice the 16% rate that Samsung, the leading seller of Android smartphones, receives. This was likely intended to portray Apple as a significant business partner for Google, rather than a major rival.
Despite Moskowitz’s aggressive questioning, Pichai remained steadfast in his belief that Google and Android fiercely compete against Apple and the iPhone. He claimed that this rivalry has resulted in more options for consumers and lowered prices.
According to Pichai, Android allows for the production of cheaper smartphones. Google offers this operating system to companies like Samsung at no cost, in return for including Google’s search engine and other services, like the Play Store, on their devices. In contrast, Pichai noted, this approach is distinct from Apple’s.
The presence of Apple continues to cast a shadow over the Play Store, especially since Epic Games has already faced defeat in a recent 2021 court case that focused on the payment structure of the iPhone app store.
Despite the majority of the ruling going in favor of Apple, a federal judge’s decision in the trial revealed a potential vulnerability in the iPhone’s digital security measures.
Both the judge and an appeals court have ruled that Apple must allow apps to include links to alternative payment methods, which could potentially decrease the commissions earned by both Apple and Google on in-app digital purchases. Apple is currently appealing this decision to the U.S. Supreme Court.
The evidence presented during Pichai’s testimony on Tuesday revealed the significant profitability of the Play Store for Google. In the first half of 2020 alone, the Play Store generated an operating profit of $4.4 billion.
Under the guidance of a Google attorney, Pichai noted that the aforementioned amount does not include the significant expenses incurred by the company for the Android operating system, which provides consumers with alternative smartphone choices to the iPhone. He also highlighted that the vast majority (97%) of software developers on Google Play do not pay any fees, as they do not sell digital products or earn enough revenue to meet the minimum threshold for commission charges.
According to Pichai, the success of Google Play is dependent on the success of its developers.