Alphabet (Nasdaq: GOOGL), the parent company of Google, made the headlines for all the wrong reasons yesterday. The state attorneys general of 36 US states have filed an antitrust lawsuit against Google, blaming the tech behemoth of misusing its market strength to unfairly generate revenue via developers who are very much dependent on the Android Play Store for distributing their applications. The stock closed at $2,500.88, down $28.60 or 1.13% from prior close.
Notably, this is the fourth antitrust case filed against the Mountain View, California-based company, by the US regulatory authorities in the past year. By concentrating on Play Store, the recent lawsuit hits on a feature of the popular search engine provider’s business that is comparable with that of Apple’s.
The App Store of Apple is facing multiple lawsuits and queries of lawmakers about the manner in which it generates revenue from developers who use the store to distribute their apps. Furthermore, there are also allegations that Apple backs its in-house applications and does not provide a fair playing field for its competitors.
The plaintiffs in the aforesaid lawsuit include attorneys general from 36 states in addition to the District of Columbia. Both Republicans and Democrats are on the list of plaintiffs. The lawsuit was filed Wednesday in the Northern District of California, which includes California, New York, Colorado, Iowa, North Carolina, and Nebraska.
The lawsuit alleges that Google has employed a monopolistic strategy to take a cut of 30% from users who subscribe and buy digital content using their Android phones. The lawsuit further claims that developers do not have any option other than using Google’s platform for distribution, partially because of the company’s practice of hard-hitting rival app stores.
In the meantime, consumers won’t have any choice as Android is the sole operating system that can be deployed on most smartphones.
Notably, the Google Play Store commands a share of more than 90% in the distribution of Android apps in the US. None of its rivals have a market share of more than 5%, as per plaintiffs.
In particular, the lawsuit points out how Apple attempted to bring Samsung, the leader in the manufacturer of Android phones, into its fold by offering attractive compensation to transform its Galaxy app store as a “white label” service for Google’s Play Store. Additionally, the lawsuit also states that the tech firm has crushed the initiatives of Amazon to promote its own store on Android.
The litigation further points out that Google’s dominance in the Android app distribution market, in addition to in-app subscription purchase business, is not based on contest on an even playing field. Furthermore, the suit states that Google ensures retaining its monopoly through made-up technical and agreement stipulations that Google enforces on the Android environment.
However, Google’s Senior Director of Public Policy, Wilson White, has refuted the allegations through a detailed blog post. White opined that the lawsuit filed by the attorneys general on a platform that offers transparency and more options than its competitors is bizarre.
He further stated that the lawsuit has no value and parallels the case filed by Epic Games against Google on similar lines. White pointed out that the complaint overlooks competition faced by the Play Store from the App Store of Apple. He also highlighted the fact that Android users are free to download multiple app stores on their gadgets.
As mentioned earlier, in addition to the latest lawsuit, Google is also facing a suit filed by the Department of Justice and numerous states blaming it for using restrictive agreements to guarantee default stature for its apps on gadgets from manufacturers that utilized its Android mobile operating platform.
The trial is underway in another lawsuit filed by a team of Republican attorneys general on its alleged anti-competitive strategies employed in the advertising technology business.
A dual team of attorneys general had filed the third lawsuit (the one earlier to the latest) that alleges the company of intentionally restricting the vertical search facilitators such as Yelp and Tripadvisor from reaching clients through the use of “discriminatory conduct on its search results page.”
The plaintiffs in the lawsuit filed on Wednesday have also pointed out that consumers are affected due to tech stagnation. Google has nothing to gain by offering a better facility, and its rivals do not have any distribution channel to reach a large audience.
The lawsuit seeks to revive competition and forbid Google from being involved in a similar pursuit in the years ahead.
The news of another antitrust lawsuit against Google is expected to keep the stock range-bound with a slight bearish bias in the near term.
The historical price chart indicates that the stock is making a negative divergence with the stochastics indicator, implying a likelihood of a sharp price correction in the days ahead. Furthermore, the stochastic indicator is also in the overbought region. Therefore, we are anticipating a further decline in the stock’s price in the days ahead.
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