Case 3:21-md-02981-JD Document 82 Filed 08/20/21 Page 1 of 85
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`Paul J. Riehle (SBN 115199)
`paul.riehle@faegredrinker.com
`FAEGRE DRINKER BIDDLE & REATH LLP
`Four Embarcadero Center
`San Francisco, California 94111
`Telephone: (415) 591-7500
`Facsimile: (415) 591-7510
`
`Christine A. Varney (pro hac vice)
`cvarney@cravath.com
`Katherine B. Forrest (pro hac vice)
`kforrest@cravath.com
`Gary A. Bornstein (pro hac vice)
`gbornstein@cravath.com
`Timothy G. Cameron (pro hac vice)
`tcameron@cravath.com
`Yonatan Even (pro hac vice)
`yeven@cravath.com
`Lauren A. Moskowitz (pro hac vice)
`lmoskowitz@cravath.com
`Justin C. Clarke (pro hac vice)
`jcclarke@cravath.com
`M. Brent Byars (pro hac vice)
`mbyars@cravath.com
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`New York, New York 10019
`Telephone: (212) 474-1000
`Facsimile: (212) 474-3700
`
`Attorneys for Plaintiff Epic Games, Inc.
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`EPIC GAMES, INC., a Maryland
`Corporation,
`
`Plaintiff,
`
`
`
`Case No. 3:20-CV-05671-JD
`
`v.
`GOOGLE LLC; GOOGLE IRELAND
`LIMITED; GOOGLE COMMERCE
`LIMITED; GOOGLE ASIA PACIFIC
`PTE. LIMITED; and GOOGLE
`PAYMENT CORP.,
`
`
`
`
`FIRST AMENDED COMPLAINT
`FOR INJUNCTIVE RELIEF
`
`
`
`
`Defendants.
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`Case 3:21-md-02981-JD Document 82 Filed 08/20/21 Page 2 of 85
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`II.
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`TABLE OF CONTENTS
`PRELIMINARY STATEMENT ..................................................................................... 1
`PARTIES........................................................................................................................ 13
`JURISDICTION AND VENUE .................................................................................... 15
`INTRADISTRICT ASSIGNMENT .............................................................................. 17
`RELEVANT FACTS ..................................................................................................... 17
`I.
`Google Dominates the Merchant Market for Mobile Operating Systems. ......... 17
`A.
`The Merchant Market for Mobile Operating Systems .............................. 17
`Product Market Definition .............................................................. 17
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`Geographic Market Definition ........................................................ 19
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`Google’s Monopoly Power in the Merchant Market for Mobile OSs ...... 20
`B.
`Google Unlawfully Maintains a Monopoly in the Android App Distribution
`Market. ................................................................................................................. 23
`A.
`The Android App Distribution Market ..................................................... 25
`Product Market Definition .............................................................. 25
`
`Geographic Market Definition ........................................................ 26
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`Google’s Monopoly Power in the Android App Distribution Market ...... 27
`Google’s Anti-Competitive Conduct Concerning the Android App
`Distribution Market ................................................................................... 33
`Google’s Conduct Toward OEMs and Mobile Network
`
`Operators ......................................................................................... 33
`Google’s Conduct Toward App Distributors and Developers ........ 47
` Google’s Conduct Toward Consumers ........................................... 50
`D. Anti-Competitive Effects in the Android App Distribution Market ......... 55
`III. Google Unlawfully Acquired and Maintains a Monopoly in the Android In-
`App Payment Processing Market. ....................................................................... 57
`A.
`The Android In-App Payment Processing Market .................................... 57
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`B.
`C.
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`Product Market Definition .............................................................. 57
`Geographic Market Definition ........................................................ 59
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`Google’s Monopoly Power in the Android In-App Payment
`Processing Market ..................................................................................... 59
`Google’s Anti-Competitive Conduct Concerning the Android In-App
`Payment Processing Market ...................................................................... 60
`D. Anti-Competitive Effects in the Android In-App Payment Processing
`Market........................................................................................................ 62
`COUNT 1: Sherman Act § 2 (Unlawful Monopoly Maintenance in the Android
`App Distribution Market) .................................................................................... 63
`COUNT 2: Sherman Act § 1 (Unreasonable restraints of trade concerning
`Android App Distribution Market: OEMs) ........................................................ 64
`COUNT 3: Sherman Act § 1 (Unreasonable restraints of trade concerning
`Android App Distribution Market: Developer Distribution Agreement)........... 66
`COUNT 4: Sherman Act § 2 (Unlawful Monopolization and Monopoly
`Maintenance in the Android In-App Payment Processing Market) ................... 67
`COUNT 5: Sherman Act § 1 (Unreasonable restraints of trade concerning
`Android In-App Payment Processing Market: Developer Distribution
`Agreement) .......................................................................................................... 68
`COUNT 6: Sherman Act § 1 (Tying Google Play Store to Google Play Billing)....... 70
`COUNT 7: California Cartwright Act (Unreasonable restraints of trade in
`Android App Distribution Market: OEMs) ......................................................... 71
`COUNT 8: California Cartwright Act (Unreasonable restraints of trade in
`Android App Distribution Market: Developer Distribution Agreement)............ 73
`COUNT 9: California Cartwright Act (Unreasonable restraints of trade in
`Android In-App Payment Processing Market: Developer Distribution
`Agreement) .......................................................................................................... 75
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`B.
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`C.
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`COUNT 10: California Cartwright Act (Tying Google Play Store to Google Play
`Billing) ................................................................................................................. 77
`COUNT 11: California Unfair Competition Law ......................................................... 79
`PRAYER FOR RELIEF ................................................................................................ 80
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`On the basis of documents produced to date by Defendants Google LLC,
`Google Ireland Limited, Google Commerce Limited, Google Asia Pacific Pte. Limited,
`and Google Payment Corp. (collectively, “Google”), it is clear that very carefully
`phrased arguments in Google’s pending motion to dismiss give a misleading picture of
`the full scope of Google’s anticompetitive conduct. Accordingly, although Plaintiff
`Epic Games, Inc. (“Epic”) believes its initial Complaint was more than sufficient, it
`hereby alleges, by its undersigned counsel, as a First Amended Complaint, with
`knowledge with respect to its own acts and on information and belief as to other
`matters, as follows:
`
`PRELIMINARY STATEMENT
`In 1998, Google was founded as an exciting young company with a
`1.
`unique motto: “Don’t Be Evil”. Google’s Code of Conduct explained that this
`admonishment was about “how we serve our users” and “much more than that . . . it’s
`also about doing the right thing more generally”.1 Twenty-two years later, Google has
`relegated its motto to nearly an afterthought, and is using its size to do evil upon
`competitors, innovators, customers, and users in a slew of markets it has grown to
`monopolize. This case is about doing the right thing in one important area, the Android
`mobile ecosystem, where Google unlawfully maintains monopolies in multiple related
`markets and engages in unlawful restraints of trade, denying consumers the freedom to
`enjoy their mobile devices—freedom that Google always promised Android users
`would have.
`
`Google acquired the Android mobile operating system more than a
`2.
`decade ago, promising repeatedly over time that Android would be the basis for an
`“open” ecosystem in which industry participants could freely innovate and compete
`
`
`1 Kate Conger, Google Removes ‘Don’t Be Evil’ Clause from Its Code of Conduct, Gizmodo
`(May 18, 2018), https://gizmodo.com/google-removes-nearly-all-mentions-of-dont-be-evil-from-
`1826153393.
`First Amended Complaint for Injunctive Relief
`[[DMS:5678823v1:07/20/2021--12:17 PM]]
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`without unnecessary restrictions.2 Google’s CEO, Sundar Pichai, represented in 2014
`that Android “is one of the most open systems that I’ve ever seen”.3 And Andy Rubin,
`an Android founder who is described by some as the “Father of Android”, said when he
`departed Google in 2013 that “at its core, Android has always been about openness”.4
`Since then, Google has changed its course of conduct, deliberately and systematically
`closing the Android ecosystem to competition, breaking the promises it made. Google’s
`anti-competitive conduct has now been condemned by regulators the world over.
`Epic brings claims under Sections 1 and 2 of the Sherman Act and
`3.
`under California law to end Google’s unlawful monopolization and anti-competitive
`restraints in two separate markets: (1) the market for the distribution of mobile apps to
`Android users and (2) the market for payment processing solutions for digital content
`within Android mobile apps. Epic seeks to end Google’s unfair, monopolistic and anti-
`competitive actions in each of these markets, which harm device makers, app
`developers, app distributors, payment processors, and consumers.
`Epic does not seek monetary compensation from this Court for
`4.
`the injuries it has suffered. Epic likewise does not seek a side deal or favorable
`treatment from Google for itself. Instead, Epic seeks injunctive relief that would make
`
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`2 See, e.g., Google Blog, News and notes from Android team, The Benefits & Importance of
`Compatibility, (Sept. 14, 2012), https://android.googleblog.com/2012/09/the-benefits-importance-of-
`compatibility.html (“We built Android to be an open source mobile platform freely available to anyone
`wishing to use it . . . . This openness allows device manufacturers to customize Android and enable
`new user experiences, driving innovation and consumer choice.”); Stuart Dredge, Google’s Sundar
`Pichai on wearable tech: ‘We’re just scratching the surface’, The Guardian (Mar. 9, 2014),
`https://www.theguardian.com/technology/2014/mar/09/google-sundar-pichai-android-chrome-sxsw
`(“Android is one of the most open systems that I’ve ever seen”); Andy Rubin, Andy Rubin’s Email to
`Android Partners, The Wall Street Journal (Mar. 13, 2013), available at
`https://blogs.wsj.com/digits/2013/03/13/andy-rubins-email-to-android-partners/?mod=WSJBlog (“At
`its core, Android has always been about openness”).
`3 Stuart Dredge, Google’s Sundar Pichai on wearable tech: ‘We’re just scratching the surface’, The
`Guardian (Mar. 9, 2014), https://www.theguardian.com/technology/2014/mar/09/google-sundar-
`pichai-android-chrome-sxsw.
`4 Andy Rubin, Andy Rubin’s Email to Android Partners, The Wall Street Journal (Mar. 13, 2013),
`available at https://blogs.wsj.com/digits/2013/03/13/andy-rubins-email-to-android-
`partners/?mod=WSJBlog.
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`First Amended Complaint for Injunctive Relief
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`good on Google’s broken promise: an open, competitive Android ecosystem for all
`users and industry participants. Such injunctive relief is sorely needed.
`Google has eliminated competition in the distribution of Android
`5.
`apps using myriad contractual and technical barriers. Google’s actions force app
`developers and consumers into Google’s own monopolized “app store”—the Google
`Play Store. Google has thus installed itself as an unavoidable middleman for app
`developers who wish to reach Android users and vice versa. Google uses this monopoly
`power to impose a tax that siphons monopoly profits for itself every time an app
`developer transacts with a consumer for the sale of an app or in-app digital content.
`Google further siphons off all user data exchanged in such transactions to benefit its
`own app designs and advertising business.
`The conduct described below shows that Google’s persistent
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`monopoly is the result of deliberate efforts by Google to achieve and maintain it. Not
`content with the contractual and technical barriers it has carefully constructed to
`eliminate competition, Google uses its size, influence, power, and money to induce third
`parties into anticompetitive agreements that further entrench its monopolies. For
`example, Google has gone so far as to share its monopoly profits with business partners
`to secure their agreement to fence out competition, has developed a series of internal
`projects to address the “contagion” it perceived from efforts by Epic and others to offer
`consumers and developers competitive alternatives, and has even contemplated buying
`some or all of Epic to squelch this threat.
`If not for Google’s anti-competitive behavior, the Android
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`ecosystem could live up to Google’s promise of open competition, providing Android
`users and developers with competing app stores that offer more innovation, significantly
`lower prices, and a choice of payment processors. Such an open system is not hard to
`imagine. Two decades ago, through the actions of courts and regulators, Microsoft was
`forced to open up the Windows for PC ecosystem. As a result, PC users have multiple
`options for downloading software onto their computers, either directly from developers’
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`websites or from several competing stores. No single entity controls that ecosystem or
`imposes a tax on all transactions. And Google, as the developer of software such as the
`Chrome browser, is a direct beneficiary of this competitive landscape. Android users
`and developers likewise deserve free and fair competition.
`*
`*
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`In today’s world, virtually all consumers and businesses stay
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`connected, informed, and entertained through smart mobile computing devices such as
`smartphones and tablets. Mobile applications (“apps”) are innovative software products
`that greatly contribute to those devices’ value. Consumers the world over use smart
`mobile devices and mobile apps to video chat with friends, pay bills, stay current with
`the news, listen to music, watch videos, play games, and more.
`Epic develops and distributes entertainment, social networking and
`9.
`utility applications for personal computers, gaming consoles, and smart mobile devices.
`Epic operates a store for the distribution of personal computer apps, which it would
`have expanded to distribute Android apps but for Google’s conduct. Epic also develops
`and licenses Unreal Engine, a powerful software suite available to third-party
`developers that allows them to create and distribute three-dimensional and immersive
`digital content and apps, including Android apps, movies, and other three-dimensional
`environments. Google’s practices have impacted each of Epic’s lines of business.
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`10. App Development: Epic develops multiple applications, including
`Fortnite, Fall Guys and Rocket League, the social networking app Houseparty, and apps
`that support Epic’s Unreal Engine, such as Live Link Face, which enables users to
`capture facial animation with their mobile phones.
`11. Fortnite is a massive virtual world where hundreds of millions of
`people connect, meet, play, talk, compete, dance, or attend concerts and cultural events.
`Fortnite Battle Royale offers users competitive gameplay as well as the opportunity to
`mingle, watch movies, attend concerts or participate in cultural events with friends and
`other users. Fortnite Creative Mode allows users to design and build their own
`experiences within the Fortnite universe.
`a. Fortnite is free for everyone to download and experience, including
`by playing games, attending events, socializing with friends or
`creating new content. To generate revenue, Epic offers users various
`in-app purchases of content for use within the app, such as digital
`avatars, costumes, dances, concert or movie-themed items, or other
`cosmetic enhancements.
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`b. In the first year after Fortnite was released in 2017, it attracted over
`125 million users; in the years since, Fortnite has topped 400 million
`users and has become a global cultural phenomenon.
`12. App Distribution: Epic operates an online app store, the Epic
`Games Store, which it launched in 2018. Titles available on the Epic Games Store
`include popular gaming apps (e.g., the Grand Theft Auto franchise) and non-gaming
`apps (e.g., Spotify, iHeartRadio). The Epic Games Store also distributes at least one
`third-party app store, itch.io. It offers developers an 88/12 revenue share arrangement
`for all revenues from the sale of a developer’s games through the Epic Games Store.
`For in-app purchases, the Epic Games Store provides developers the choice of using the
`developer’s own payment processor (at no fee) or Epic’s own payment solution, Epic
`Direct Payment (for a fee equal to a 12% share of sales revenue).
`13. Unreal Engine: First launched in 1998, Epic’s Unreal Engine is a
`powerful, three dimensional environment graphics engine used to build digital three-
`dimensional environments for multiple uses including architecture projects, film &
`television production, medical training, and more. Unreal Engine is used to create
`software applications on all major platforms (PC, Mac, Android, iOS, major gaming
`consoles and more) and for use in films, television and other fields.
`a. The Unreal Engine’s source code is free to use. For developers who
`use Unreal Engine to develop and sell their games or other projects
`commercially, Epic typically collects a 5% royalty after the
`developer reaches $1 million in gross sales. Alternatively,
`developers can negotiate custom or royalty-free licenses with Epic.
`b. Unreal Engine powers some of the world’s most popular digital
`games, including (in addition to Fortnite) PlayerUnknown’s
`Battlegrounds (known as “PUBG”), ARK, Gears of War,
`Borderlands, and Batman: Arkham City.
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`c. The Unreal Engine is also used far beyond the realm of video games.
`Unreal Engine received its first Emmy in 2018 for its contribution to
`televised broadcasts such as the 2018 Winter Olympics, Super Bowl
`LII, and numerous e-sports tournaments. Since 2016, Unreal Engine
`has been used in more than 100 film and television productions. For
`example, The Mandalorian—Disney’s television series in the Star
`Wars franchise—was filmed on a stage set within a huge oval LED
`display. The exteriors and interiors—virtually every background and
`set—were created in Unreal Engine and displayed in real time
`behind the actors. Similarly, the popular HBO series Westworld
`turned to Unreal Engine to develop many of its visual effects. Car
`makers, including Audi and Ford, have used Unreal Engine for a
`variety of uses including automotive design and engineering, as well
`as developing digital showrooms in which customers can configure
`their vehicles with high-fidelity visuals. In aviation, Gulfstream
`visualizes its jets for its employees and clients. Unreal Engine has
`even helped brain surgeons train for and perform some of the most
`intricate and challenging aspects of brain surgeries by allowing for
`detailed real-time digital anatomy simulations. In total, Unreal
`Engine boasts a community of 11 million users.
`d. As noted above, utility apps designed for use with Unreal Engine are
`available in the Google Play Store, including, Unreal Match 3 and
`Action RPG Game Sample, both of which help developers learn how
`to use Unreal Engine to develop their own mobile games.
`14. Similar to a PC or a Mac personal computer, smart mobile devices
`use an “operating system” or “OS” to provide core device functionality and to enable
`the operation of compatible programs. As with PCs, the commercial viability of an OS
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`for mobile devices (a “mobile OS”) depends on the availability of a large number of
`compatible apps that cater to the preferences and needs of users.
`15. Google controls the most ubiquitous OS in mobile devices, the
`Android OS. Android OS is used by billions of users the world over, and boasts nearly
`3 million compatible apps.
`16. Android is the only commercially viable OS that is widely available
`to license by companies that design and sell smart mobile devices, known as original
`equipment manufacturers (“OEMs”). Accordingly, when OEMs select a mobile OS to
`install on their devices, they have only one option: Google’s Android OS. Google
`therefore has monopoly power in the market for mobile operating systems that are
`available for licensing by OEMs (the Merchant Market for Mobile Operating Systems
`(infra Part I)).
`17. Google has not been satisfied with its control of the Android OS.
`Notwithstanding its promises to make Android devices open to competition, Google has
`deliberately changed its course of conduct, erecting contractual and technological
`barriers that foreclose competing ways of distributing apps to Android users, ensuring
`that the Google Play Store accounts for nearly all the downloads of apps from app stores
`on Android devices. Google thus maintains a monopoly over the market for distributing
`mobile apps to Android users, referred to herein as the “Android App Distribution
`Market” (infra Part II).
`18. For example, through a series of revenue-sharing and licensing
`agreements with OEMs, Google bundles the Google Play Store with a set of other
`Google services that Android OEMs must have on their devices (such as Gmail, Google
`Search, Google Maps, and YouTube) and conditions the licensing of those services on
`an OEM’s agreement to pre-install the Google Play Store and to prominently display it.
`Google then interferes with OEMs’ ability to make third-party app stores or apps
`available on the devices they make, including through its so-called “Anti-Fragmentation
`Agreements” (“AFAs”) that foreclose OEMs from modifying Android to offer fast and
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`simple (or “frictionless”) downloading of apps in the same way they are offered through
`Google Play. These restrictions effectively foreclose competing app stores—and even
`single apps—from what could be a primary distribution channel. Google’s documents
`show that it pushes OEMs into making Google Play the exclusive app store on the
`OEMs’ devices through a series of coercive carrots and sticks, including by offering
`significant financial incentives to those that do so, and withholding those benefits from
`those that do not. Google’s documents further show that Google has erected these
`contractual barriers to competition for Android app distribution in the recognition that
`Google stands to lose billions of dollars if Android app distribution were opened to
`competition and competing Android app stores, including an “Epic Store”, were allowed
`to “gain full traction”.
`19. Epic’s experience with one OEM, OnePlus, is illustrative. Epic
`struck a deal with OnePlus to make Epic games available on its phones through an Epic
`Games app. The Epic Games app would have allowed users to seamlessly install and
`update Epic games, including Fortnite, without obstacles imposed by Google’s Android
`OS. But Google forced OnePlus to renege on the deal, citing Google’s “particular[]
`concern” about Epic having the ability to install and update mobile games while
`“bypassing the Google Play Store”.
`20. Another OEM, LG, told Epic that its contract with Google did not
`allow it to enable the direct distribution of apps, and that the OEM could not offer any
`functionality that would install and update Epic apps except through the Google Play
`Store.
`
`21. Google also enforces anti-competitive restrictions against app
`developers and distributors. Specifically, Google contractually prohibits app developers
`and would-be distributors from offering on the Google Play Store any app that could be
`used to download other apps, i.e., any app that could compete with the Google Play
`Store in app distribution. And Google further requires app developers to distribute apps
`through the Google Play Store if they wish to advertise those apps through valuable
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`advertising channels controlled by Google, such as ad placements on Google Search or
`on YouTube that are specially optimized to advertise mobile apps.
`22. Finally, Google stifles or blocks consumers’ ability to download app
`stores and apps directly from developers’ websites. As anyone who has tried to
`download directly on an Android device knows, it is significantly different than the
`simple process available on a personal computer: directly downloading Fortnite on an
`Android device can involve a dozen steps, requiring the user to change default settings
`and bravely click through multiple dire warnings. Accordingly, leading Google Play
`executives have acknowledged that directly downloading Fortnite from a source other
`than Google Play is “an awful experience”, and developers like Epic should “worry that
`most will not go through the 15+ steps”. And even if a persistent user manages to
`install a competing app store, Google has prevented such stores from competing on
`equal footing with the Google Play Store by restricting them from offering basic
`functions, such as automatic updating of apps in the background, which is available for
`apps downloaded from the Google Play Store.
`23. Google engages in these anticompetitive acts to eliminate consumer
`choice and competition in mobile app distribution. Google has no legitimate
`justification for these restrictions. Google therefore has changed its course of conduct,
`breaking its promise that Android would be an “open” ecosystem in which other
`participants could participate fairly.
`24. But Google does not stop at app distribution. Google also imposes
`anti-competitive restrictions in the separate Market for Android In-App Payment
`Processing (infra Part III).
`25. App developers who sell digital content for consumption within apps
`require seamless payment processing solutions to execute purchases. App developers,
`including Epic, have developed payment processing solutions internally. Others may
`use a host of payment processing solutions offered by multiple competing third parties.
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`26. Google, however, ties distribution through its Google Play Store
`with developers’ exclusive use of Google’s own payment processing solution, called
`Google Play Billing, to process in-app purchases of digital content. Indeed, app
`developers that distribute through the Google Play Store are even prohibited from
`offering Android users the choice of additional payment processing options alongside
`Google’s for digital content. And because Google has a monopoly in the Android App
`Distribution Market, app developers cannot practically avoid this anti-competitive tie by
`electing app distribution through an alternative channel.
`27. The result is that in every in-app transaction for digital content, it is
`Google, not the app developer, that collects the payment in the first instance. Google
`then taxes the transaction at up to an exorbitant 30% rate, remitting the remaining 70%
`to the developer who actually made the sale. This 30% commission is often ten times
`higher than the price typically paid for the use of other electronic payment solutions.
`28. Moreover, through this tie, Google inserts itself as an intermediary
`between each seller and each buyer for every purchase of digital content within the
`Android ecosystem, collecting for itself the personal information of users, which Google
`then uses to give an anti-competitive edge to its own advertising services and mobile
`app development business.
`29. Google’s anticompetitive conduct has substantially foreclosed
`competing stores from offering consumers and developers choice in distribution and
`payment processing. Indeed, Epic, which distributes apps through its own store to users
`of personal computers, would open a store to compete with Google’s and offer
`developers more innovation, better security, and more choice, including for in-app
`payment processing. App developers would not have to pay Google’s supra-
`competitive tax of 30%, as the price of distribution and payment processing alike would
`be set by market forces rather than Google’s fiat. Developers could address any
`payment-related issues (such as refunds) directly with their own customers, rather than
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`through Google. And users and developers, jointly, would get to decide whether users’
`data should be utilized for other purposes.
`30. Google’s anti-competitive conduct has injured Epic, both as an app
`developer and as a potential competitor in app distribution and payment processing.
`Epic repeatedly approached Google and asked to negotiate relief that would stop
`Google’s unlawful and anti-competitive restrictions on app developers and consumers.
`But Google would not budge.
`31. Because of Google’s refusal to stop its ongoing anti-competitive and
`unlawful conduct, on August 13, 2020, Epic began providing Fortnite users the choice
`of using Epic’s own direct payment tool as an alternative to Google’s overpriced billing
`tool, sharing with users who chose to use Epic