Google Play judge calls US$700mil settlement bad for customers

A federal judge appeared skeptical of Alphabet Inc.’s US$700mil (RM3.3bil) proposed settlement with states and consumers to resolve claims that the Google Play app store abuses its market power.

At a hearing Monday, US District Judge James Donato said the accord seems to give short-shrift to consumers both in the overall compensation it provides and the broad release it gives the company from future lawsuits.

“Right now I’m not saying it’s a bag of nothing, but it’s a bag of not great,” Donato said.

The deal was first disclosed in December and would resolve antitrust complaints brought by state attorneys general and consumers. In addition to the monetary payout, the settlement calls for changes to Play Store policies to reduce barriers to competition in the markets for app distribution and payment processing. But the accord has been criticised for allowing Google to continue to collect substantial service fees from app developers.

The state AGs alleged in their complaint, filed in 2021, that Google used unlawful tactics to block competition and ensure that developers have no choice but to go through the Play Store to reach users. In a separate class action on behalf of almost 21 million consumers, Google was accused of inflating Android app prices by taking as much as a 30% cut of Google Play transactions.

The lawsuits threatened billions of dollars in revenue generated by the sale and distribution of apps through Google Play.

Donato kicked off the hearing by pointing out to lawyers representing the state AGs that the settlement would ask the 127 million class members to essentially release any Google Play Store claims for the next seven years.

“This seems remarkably broad for the compensation you are proposing to pay for these claims,” Donato said.

When an attorney for Google countered that the release is needed so that the company doesn’t get immediately sued again for the same conduct, Donato said, “If you keep doing the same thing over and over again why isn’t it appropriate for you to get sued?”

He also criticised the monetary value of the settlement. An attorney for the states said that each user would get at least US$2 (RM9.55), with heavy users getting thousands of dollars and potentially tens of thousands. Donato said he’d need more clarity around how the settlement funds would be distributed.

“It looks to me – just as a matter of basic math – any single person isn’t gonna be getting much,” Donato said.

Donato also noted that he didn’t see anything in the settlement addressing the service fees Google charges.

“Your agreement is telling these 127 million consumers that if they don’t like Google’s fees they can’t sue?” Donato asked the attorneys.

At the end of the hearing, the judge gave attorneys on both sides 30 days to show him why the settlement is fair, reasonable and adequate.

Google last year lost a similar challenge brought by Fortnite maker Epic Games Inc. Google and Epic haven’t said yet what they will propose as a remedy in that case.

The case is In Re Google Play Store Antitrust Litigation, 21-md-02981, US District Court, Northern District of California (San Francisco). – Bloomberg