“Ten years ago, Match Group was Google’s partner. We are now its hostage. Google lured app developers to its platform with assurances that we could offer users a choice over how to pay for the services they want. But once it monopolized the market for Android app distribution with Google Play by riding the coattails of the most popular app developers, Google sought to ban alternative in-app payment processing services so it could take a cut of nearly every in-app transaction on Android. This Complaint lays bare Google’s misdeeds that made it possible,” Match Group, the owner of popular dating apps like Tinder, Match.com, Hinge, OkCupid, and PlentyofFish, said in its lawsuit against Google filed in a federal court in California on May 9.
Match’s lawsuit comes ahead of Google’s June 1 deadline to remove apps not compliant with its new payments policy, which requires all apps to mandatorily use the company’s own billing system for sales of digital goods and services.
“This lawsuit is a measure of last resort. We tried, in good faith, to resolve these concerns with Google, but their insistence and threats has left us no choice.” — Match Chief Executive Shar Dubey
In India, Google has given developers until October 31, 2022, to comply with the new payments policy, but the fate of this policy, and the Play Store itself, is dependent on the outcome of the Competition Commission of India’s antitrust investigation.
The lawsuit adds to the growing list of legal battles and regulatory scrutiny that Google Play Store (and Apple App Store) is facing from around the world. In the US, Play Store faces another lawsuit by Fortnite-maker Epic Games, which is backed by 35 US states.
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What has Match Group alleged in its lawsuit?
- Google assured Match and other developers that they can use their own billing systems: Match Group explained that, although its apps have been available on Android for many years, they did not always offer the ability to make in-app purchases and users had to rely on Match’s web-based solutions instead. But Google realised the benefits of Match offering in-app purchases and assured the company that if it enabled in-app purchases in its dating apps on Android, Match could use its own payment systems for in-app purchases. Match agreed to this and launched in-app purchases on Android using both Google Play Billing and its own in-house payment processing system, the company explained.
- Google changed its policy in a bait and switch after getting powerful: Android is now the dominant licensable mobile operating system used by nearly 70% of all smart mobile devices globally and Google Play is equally dominant, processing over 90% of all Android app downloads across the globe, Match claimed. No competing Android app store has more than 5% of the market. With this new power, Google announced in September 2020 that it would require all apps that sell digital goods and services to use the Google Play Billing system exclusively. Match alleged that Google in its early years of owning Android baited developers, saying that they can use their own billing systems, and now is forcing them to switch after it got powerful. “Google’s policy change eliminated the promised exception that had previously enticed Match Group and other popular apps—like streaming services—to offer in-app purchases,” Match submitted. “Google has abused its monopoly power in violation of federal and California law,” Match alleged.
- Arbitrary definition of “digital good or service”: The new payments policy only applies to the sale of digital goods and services and not physical goods and services, but what constitutes a “digital good or service” is ill-defined and arbitrarily applied, Match Group said. “Clothing and food delivery and ride-sharing apps do not qualify. But Match Group’s dating apps do qualify, even though they enable users to meet in the real world for a date, just like a ride-sharing app enables a user to find a driver in the real world for a ride,” Match Group explained.
- Google profiting at the cost of consumers and developers: “Google’s motivation is obvious: monopolizing the Android in-app payment processing market allows Google to impose a 15-30% tax on the billions of dollars users spend on so-called “digital goods or services” on Android. The timing is obvious, too, given Google’s lacklustre financial performance in the first quarter of 2022. That tax comes out of the pockets of consumers in the form of higher prices and the revenue that app developers would and should otherwise earn for the sale of their services,” Match submitted.
- The policy change allows Google to collect reams of sensitive data: “Monopolizing the in-app payment processing market also allows Google to collect reams of sensitive consumer data—such as consumer identities and pricing, credit card information, propensity to purchase dating services, etc.—that Google can further monetize, as well as use to build competing apps or services,” Match said. “Google uses that data to support its vast advertisement business by, among other things, selling access to the data back to the developers (who would otherwise be able to collect it themselves). Google’s ability to collect user data also enables Google to compete with apps across numerous market segments by targeting those apps’ best customers. In changing its policies to entrench its dominance,” Match continued.
- Google’s “fee” bears no relation to the cost or value of services Google provides: Match submitted that all developers with apps on Google Play benefit from the exact same services, and they all pay Google a $25.00 registration fee, but only the small handful who sell “digital goods and services,” pay the Google tax. “Google disingenuously calls this extortionate tax a “fee” even though it is nearly ten times the actual fees other payment processors charge in competitive marketplaces,” Match added.
- Google offered hush money to developers to get onboard its new policy: As the deadline approached, Google resorted to “offering hush money to developers, including Match Group, in the form of hundreds of millions of dollars in credits and rebates (with myriad strings attached) to give up its own payment processor and stop advocating that government officials protect consumers and developers from Google’s harmful conduct,” Match alleged. Google also threatened to retract such an offer from Match on the eve of a Match officer’s planned testimony about Google’s stranglehold on app developers before the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, Match claimed.
- Google launched the User Choice Billing as a political stunt to thwart regulatory concerns: A week before Google’s March 31, 2022, deadline for its new payments policy, Google announced a new pilot program called User Choice Billing, under which developers may offer their own billing system alongside Google’s. But currently, Spotify is the only developer selected for the program and Google rejected Match’s request to be part of it stating that it is only a pilot program at a “very early stage.” “The User Choice Billing ‘pilot program’ is nothing more than a political stunt designed to thwart regulatory scrutiny of Google Play Billing and a thinly veiled attempt to lure certain hold-out developers, like Spotify, to begin using Google Play Billing,” Match alleged. Google has previously allowed apps like Uber and Lyft to operate their own payment processors, so there’s no need for a “pilot” test of a program that’s been in use for a decade, Match said.
- Google forces OEMs to promote the Play Store: “Despite building Android on promises of being an “open” ecosystem, over time, Google has forced original equipment manufacturers (OEMs) to accept contractual limitations requiring them to give Google Play insurmountable advantages over competing app stores. For example, Google required OEMs to pre-install Google Play on the home screen of every Android device in exchange for access to essential Google services. Google also developed a program whereby OEMs received a percentage of Google’s search and Google Play Billing revenue if they provided Google Play exclusively. Google also limits access to competing app stores by imposing technological restraints on Android OS users,” Match alleged.
- Google has one-sided agreements with developers: Google ensures that transactions only occur on Google Play Billing by including onerous, one-sided terms in its developer agreements, Match alleged. “Google’s developer agreement is an adhesion contract—in other words, Google dictates the terms and app developers can either agree to Google’s terms or be excluded. One of those terms is an anti-steering provision, which prohibits developers from communicating with users inside their apps about a user’s ability to purchase upgrades or additional functionality outside the app, including at lower prices, through, for example, the developer’s own website,” Match explained.
- Google’s actions will irreparably harm Match Group: Match explained that millions of consumers have used its payment systems to subscribe and pay for services on Match Group’s apps and if Google succeeds in banning this payment option, “Match Group will have to abandon its prior investments and incur substantial, additional, and unnecessary costs to redesign its apps and ensure continuity of service for its customers” and “despite Match Group’s best efforts to mitigate the damage, Google’s unlawful acts will inevitably and irrevocably disrupt many of Match Group’s customer contracts and economic relationships.” If the company does not comply with the policy change, it will be kicked out of the Play Store, “a death knell threat for Match Group that Google already carried out against another app developer, Epic Games,” Match said.
- Play Store is being challenged around the world: Match submitted that it is not alone in alleging unlawful conduct by Google, and regulators in countries around the world, including the US, the UK, Germany, France, South Africa, India, Japan, Australia, Netherlands, are scrutinising the company’s practices. Match also cited new regulations like the EU’s Digital Markets Act and South Korea’s amendment to the Telecommunications Business Act, which require platforms like Google to allow third-party payment options for in-app payments and alternative app stores. “Through all the enforcement actions and new regulations across the globe, it is clear that Google’s business model has either already been or soon will be declared illegal in roughly half the world. The entire world is recognizing that Google has manipulated laws passed to protect innovation, competition, and a free market in the most calculated manner to destroy innovation and competition,” Match stated.
What does Match Group seek from the Court?
- A judgment in favour of Match Group and against Google on all causes of action. Match Group has listed a total of 13 causes of action in its lawsuit.
- Orders enjoining Google from engaging in the following “anti-competitive, unfair, and tortious conduct”:
- Preventing Match Group from offering its own payment options for users
- Preventing Match Group’s apps from accessing or distributing their apps and services on Google Play
- Preventing Match Group’s apps from informing or directing customers to payment methods other than Google Play Billing
- Retaliating against Match Group in the app review process, including but not limited to, by delaying approval of Match Group’s app updates
- Charging above-market fees for processing purchases of apps and in-app digital content
- For compensatory, consequential, and punitive, including treble, damages for injuries directly and proximately caused by Google
- For attorneys’ fees and costs, including the costs of this lawsuit
- For such other and further relief as the Court may deem just and fair
Google’s response to Match’s allegation
In a statement to The Verge, Google spokesperson Dan Jackson said:
“This is just a continuation of Match Group’s self-interested campaign to avoid paying for the significant value they receive from the mobile platforms they’ve built their business on. Like any business, we charge for our services, and like any responsible platform, we protect users against fraud and abuse in apps. Match Group is currently attracting regulator concerns over things like deceptive subscription practices, and with this filing they continue to put money ahead of user protection.
Match Group’s apps are eligible to pay just 15% on Google Play for digital subscriptions, which is the lowest rate among major app platforms. But even if they don’t want to comply with Google Play’s policies, Android’s openness still provides them multiple ways of distributing their apps to Android users, including through other Android app stores, directly to users via their website or as consumption-only apps.”
Google has also published a blog post addressing the lawsuit.
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