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Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 1 of 74
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`BLOOD HURST & O’REARDON, LLP
`TIMOTHY G. BLOOD (149343)
`THOMAS J. O’REARDON II (247952)
`501 West Broadway, Suite 1490
`San Diego, CA 92101
`Tel: 619/338-1100
`619/338-1101 (fax)
`tblood@bholaw.com
`toreardon@bholaw.com
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`THE LAW OFFICES OF ANDREW J. BROWN
`ANDREW J. BROWN (160562)
`501 West Broadway, Suite 1490
`San Diego, CA 92101
`Tel: 619/501-6550
`andrewb@thebrownlawfirm.com
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`Attorneys for Plaintiffs
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION
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`Plaintiffs,
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`v.
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`JOHN COFFEE, MEI-LING MONTANEZ,
`and S.M., a minor by MEI-LING
`MONTANEZ, S.M.’s parent and guardian, on
`behalf of themselves and all others similarly
`situated,
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`
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`GOOGLE LLC,
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`Defendant.
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`Case No. 5:20-cv-03901-BLF
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`FIRST AMENDED CLASS ACTION
`COMPLAINT
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`CLASS ACTION
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`District Judge Beth Labson Freeman
`Courtroom 3, 5th Floor, San Jose
`Magistrate Judge Susan van Keulen
`Courtroom 6, 4th Floor, San Jose
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`Complaint Filed:
`Trial Date:
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`JURY TRIAL DEMANDED
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`June 12, 2020
`Not Set
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`Case No. 5:20-cv-03901-BLF
`FIRST AMENDED CLASS ACTION COMPLAINT
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`Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 2 of 74
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`TABLE OF CONTENTS
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`Page
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`NATURE OF THE ACTION .............................................................................................................5
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`THE PARTIES ...................................................................................................................................8
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`JURISDICTION AND VENUE .......................................................................................................10
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`INTRADISTRICT ASSIGNMENT .................................................................................................10
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`SUBSTANTIVE ALLEGATIONS ..................................................................................................11
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`A. The Rise of In-App Purchases, Google Play Store, and Google’s Control of
`Apps .........................................................................................................................11
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`B. What Is a Loot Box? .................................................................................................16
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`C. Examples of Loot Boxes ...........................................................................................18
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`D. Loot Boxes Create and Reinforce Addictive Behaviors Akin to Gambling
`Addiction ..................................................................................................................27
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` 1. Loot Boxes Are Structurally Similar to Traditional Gambling Games
`and Exploit Gambling’s Cognitive Traps ...........................................................28
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` 2. Loot Box Gambling Exploits Vulnerable Populations Such as Children ..........34
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` 3. All Published, Quantitative Research Demonstrates Loot Boxes Are
`Linked to Problem Gambling .............................................................................37
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`E. Countries Have Banned Loot Boxes For Violating Gambling Laws ........................42
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`F. The Hague’s October 2020 Ruling That Loot Boxes Are Illegal Gambling .............46
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`G. Loot Boxes Constitute Gambling in Violation of California Law...........................48
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` 1. Violations of California Penal Code §§ 330 et seq. ...........................................48
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` 2. Violations of California’s Gambling Control Act ..............................................55
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`CLASS ACTION ALLEGATIONS .................................................................................................56
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`FIRST CAUSE OF ACTION
`Violation of the “Unlawful Prong” of California’s Unfair Competition Law
`(“UCL”) (Cal. Bus. & Prof. Code §§ 17200, et seq.) ...........................................................58
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`SECOND CAUSE OF ACTION
`Violation of the “Unfair Prong” of California’s Unfair Competition Law (“UCL”)
`(Cal. Bus. & Prof. Code §§ 17200, et seq.) ..........................................................................62
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`THIRD CAUSE OF ACTION
`Violation of the Consumers Legal Remedies Act (Cal. Civ. Code §§ 1750, et seq.) ..........67
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`FOURTH CAUSE OF ACTION
`Unjust Enrichment ................................................................................................................72
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`PRAYER FOR RELIEF ...................................................................................................................73
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`DEMAND FOR JURY TRIAL ........................................................................................................73
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`“We should be very reticent of creating an experience where the outcome can be
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`influenced by spending money. Loot boxes play on all the mechanics of gambling except
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`for the ability to get more money out in the end.”
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`“Do we want to be like Las Vegas, with slot machines or do we want to be widely
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`respected as creators of products that customers can trust?”
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`“We have businesses that profit by doing their customers harm.”
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`- Tim Sweeney, Co-Founder of Epic Games
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`Plaintiffs John Coffee, Mei-Ling Montanez, and S.M., a minor by Mei-Ling Montanez,
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`S.M.’s parent and legal guardian (“Plaintiffs”), file this Class Action Complaint against Google LLC
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`(“Google” or “the Company”). Plaintiffs bring this action based upon personal knowledge of the
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`facts pertaining to themselves, and on information and belief as to all other matters, by and through
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`undersigned counsel.
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`NATURE OF THE ACTION
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`1.
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`Though its Google Play Store, Google promotes and sells randomized chances to win
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`prizes through “loot boxes,” a type of gambling device. A loot box is a type of slot machine. A
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`player pays money to take a chance on a loot box. Playing a loot box takes no skill. One simply pays
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`money and then clicks on the loot box, like a gambler pulling the arm of a slot machine. The loot
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`box then lights up, flashes, and makes noises to build excitement as the player anxiously waits to
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`see if he or she will win a rare and valuable prize. The chance of winning a prize is randomized,
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`with the more desirable prizes much less likely to win. Playing a loot box is a gamble because one
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`never knows what the loot box contains until after the wager is made and the loot box is opened.
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`Sought-after prizes include important or better weapons, costumes, or player appearances (called
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`“skins”), or some other in-game item or feature designed or perceived to enhance gameplay or
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`provide competitive advantage. By design, the prizes that are the least likely to win are the most
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`valuable to players. While these prizes often can be bartered or sold, they also have inherent value.
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`Google, in concert with game developers, purposefully limits the availability of certain prizes so
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`their scarcity increases their value; conceptually like the JPG file by the artist Beeple that recently
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`sold at an art auction for $69.3 million. The JPG file is nothing but a virtual image that could be
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`infinitely, indefinitely, and perfectly duplicated. However, because the artist made the JPG file
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`scarce – limited to just one copy – it broke art sale records. The virtual file has value to the purchaser,
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`just like the virtual prizes offered through loot boxes.
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`2.
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`Loot boxes are very common. 58% of the top-100 grossing games in the Google Play
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`Store contain loot boxes. Of those, 93% are rated at the Google Play Store as suitable for children
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`aged 12 and above, and 57% are rated suitable for children aged 7 and up. Loot box games rated
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`suitable for children aged 3 and up were installed 545 million times from the Google Play Store.
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`3.
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`Loot boxes constitute an illegal gambling device under California law. The
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`California Legislature has declared gambling against public policy and has enacted laws broadly
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`defining and prohibiting it, including prohibiting the control, operation, and dissemination of
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`gambling devices. As the Legislature declared: “Gambling can become addictive and is not an
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`activity to be promoted or legitimized as entertainment for children and families.” Cal. Bus. & Prof.
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`Code § 19801(c).
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`4.
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`Computer games used to be sold, but now are available online for free. Google,
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`working in concert with game developers, has monetize these seemingly free games through in-
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`game purchases. Loot box are the king of in-app purchases, making up a large percentage of in-
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`game sales. Google exercises absolute control over the types of games and other activities permitted
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`on the Google Play Store. While Google prohibits other forms of gambling, it promotes and
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`encourages game developers to place loot boxes in games. It even coaches game developers on
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`“[h]ow to build and grow your app’s revenue streams” through “implementing the right
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`monetization strategy” with loot boxes. In return for its active participation in permitting,
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`controlling, and developing loot boxes, Google receives 30% of all loot box plays sold.
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`5.
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`Loot boxes are also predatory, just like other forms of gambling. High quality
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`research shows loot boxes foster the same compulsive and addictive behavior, including gambling
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`addiction, as other forms of gambling. The compulsive behavior Google fosters in children,
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`teenagers, and adults generates hundreds of millions of dollars for Google annually in violation
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`California’s gambling laws and established public policy designed to protect children, families, and
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`other consumers from this type of predatory conduct.
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`6.
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` Google exercises absolute control over the types of games and other activities
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`permitted on the Google Play Store. While Google prohibits other forms of gambling, it encourages
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`game developers to place loot boxes in games. It even coaches game developers on “[h]ow to build
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`and grow your app’s revenue streams” through “implementing the right monetization strategy” with
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`loot boxes. In return for its active participation in permitting, controlling, and developing loot boxes,
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`Google receives 30% of all loot box plays sold.
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`7.
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`With regard to loot boxes, Defendant’s Google Play Store is no different than a
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`physical casino. Just like a casino, Google permits, promotes, facilitates, and profits off gambling.
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`Because Google makes it so, the Google Play Store is the only place to buy the currency to play the
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`loot boxes, and it is the only place where they can be accessed. Just like casinos, while Google may
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`not manufacture the slot machines or design their random-chance algorithms, Google houses the
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`slot machine, and takes a cut off the top from every wager that is placed. However, unlike and worse
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`than a traditional licensed casino, Google facilitates gambling practices that are entirely unregulated,
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`bring 24/7 access to gambling into the homes of families everywhere, and exploit children as young
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`as four years old. Given the structural and psychological similarities, researchers have characterized
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`loot boxes as “gamblification of gaming” (Brooks & Clark 2019) and “predatory monetization
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`schemes” that disguise long-terms costs and “entraps” the player in a belief that repeated spending
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`of money is justified as it increases the likelihood of obtaining valuable items (King & Delfrabbro
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`2018). The “disguised character” of the loot box gambling game “is extra problematic in the case of
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`children.”1
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`8.
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`Governments, regulators, psychologists, and other researchers agree loot boxes are
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`gambling devices that foster, create, and reinforce addictive behaviors. Those who have studied the
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`issue unanimously agree that loot boxes have all the structural and psychological hallmarks of
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`gambling and correlate with problem gambling among children, teenagers, and adults. The proven
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`link to problem gambling is robust. Numerous regulators around the world have prohibited or
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`restricted the use of loot boxes. Countries that have expressly regulated or are considering
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`regulations of loot boxes include the Netherlands, Belgium, the United Kingdom, Japan, France,
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`and China.
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`9.
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`While Google does not itself create these videogames or the loot box games used to
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`entice gamers to gamble, Google works hand-in-glove with game developers in the creation,
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`marketing and sale of loot boxes in these games. Google’s contract with game developers makes
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`1
`Belgian Gaming Commission, Research Report on Loot Boxes (April 2018), available at
`https://www.gamingcommission.be/opencms/export/sites/default/jhksweb_nl/documents/onderzoe
`ksrapport-loot-boxen-Engels-publicatie.pdf
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`Google their agent and merchant of record for every loot box sale. It also requires certain content
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`regarding loot boxes, and specifically allows them even though it purports to otherwise prohibit
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`“gambling.” Google thus profits handsomely by facilitating and providing ancillary and necessary
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`services to the illegal and predatory practices at issue, including by 1) marketing, selling, and/or
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`distributing the games on Google products and through its Google Play Store platform; 2) acting as
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`the exclusive agent and merchant of record for the game developer in selling the loot boxes; and
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`3) processing, permitting, and handling all of the transactions with gamers, including taking a 30%
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`cut of all money spent by players before transferring the remainder to the developer.
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`10.
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`Plaintiffs bring this action on behalf of all persons who paid to receive randomized
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`virtual items from a loot box within an app downloaded from the Google Play Store. On behalf of
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`themselves and the Class, Plaintiffs assert claims violations of the unlawful prong of Californian
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`Business & Professions Code § 17200, the unfair prong of California Business & Professions Code
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`§ 17200, the Consumers Legal Remedies Act, and unjust enrichment for damages, restitution, and
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`injunctive relief.
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`11.
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`Plaintiff John Coffee is a citizen of the State of California and a resident of Tehama
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`THE PARTIES
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`County. Since at least 2018, Plaintiff has owned and played Final Fantasy Brave Exvius, a game
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`marketed, sold and/or distributed by Google, and which he downloaded through the Google Play
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`Store onto his Android mobile device. While playing Final Fantasy Brave Exvius and other games
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`including War of the Visions: Final Fantasy Brave Exvius, Dragon Ball Legends, The Seven Deadly
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`Sins: Grand Cross, Dragon Quest, Puzzles & Dragons, Dragon Ball Z Dokkan Battle, Brave
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`Frontier, Arms of War, Mobius Final Fantasy, Final Fantasy Record Keeper, and Clash Royale, and
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`as a result of Defendant’s conduct, Plaintiff lost money and property by purchasing “loot boxes” in-
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`game and suffered injury in fact. The only way to purchase a chance on a loot box is to purchase
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`with money virtual currency2 directly from Google, and Plaintiff has done just that. Therefore,
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`Virtual currency is a type of unregulated digital currency that is only available in electronic
`form. It is stored and transacted through designated software, mobile or computer applications, or
`through dedicated digital wallets, and the transactions occur over the internet through secure,
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`Plaintiff has lost money and property as a result of Google’s unfair business practices alleged when
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`he purchased virtual coins with money to buy chances on loot boxes and lost property in the form
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`of the virtual coins he used to buy chances on loot boxes. Plaintiff Coffee estimates he has paid
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`Google more than $500 to purchase plays on loot boxes in exchange for the random chance of
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`winning valuable items. These amounts were charged by and paid to Google. Using his Google Play
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`Store-linked device to engage in the transaction, these amounts were charged by Google to
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`Plaintiff’s credit card that Google keeps on file. Plaintiff Coffee still owns and plays Final Fantasy
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`Brave Exvius and other games with loot boxes downloaded through the Google Play Store. To the
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`extent he plays these games on his Google Android mobile device in the future, he will be subjected
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`to Google’s predatory conduct involving loot boxes.
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`12.
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`Plaintiff Mei-Ling Montanez is the parent and legal guardian of S.M., a minor. She
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`is and at all relevant times was a citizen of the State of New York who resides in Brooklyn, New
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`York. Since at least 2019, her son S.M. has owned and played Dragon Ball Z Dokkan Battle
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`(“Dragon Ball Z”), a game sold and distributed by Google. While playing Dragon Ball Z and other
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`games on Android devices, Plaintiff’s son S.M. has been induced to spend his parents’ money and
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`perhaps his own money to purchase loot boxes in-game from Google. Specifically, S.M. purchased
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`a chance on a “Summons,” which is the name given the loot box in Dragon Ball Z. Plaintiff and her
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`son lost money and property by purchasing loot boxes and suffered injury in fact. They lost money
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`when S.M. purchased virtual coins to buy chances on loot boxes and lost property in the form of the
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`virtual coins when he used them to buy chances on loot boxes. Therefore, Plaintiff and S.M. lost
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`money and property as a result of Google’s unfair business practices alleged.
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`13.
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`Plaintiff S.M. is a minor. He is and at all relevant times was a citizen of the State of
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`New York who resides in Brooklyn. Since at least 2019, S.M. has owned and played Dragon Ball
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`Z. Dragon Ball Z was downloaded by S.M. from the Google Play Store onto a Samsung smartphone
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`device, which uses the Google Android operating system. S.M.’s mother estimates S.M. has paid
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`Google more than $100 on in-app purchases from the Google Play Store, including on purchasing
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`dedicated networks. Cryptocurrency is also a form of digital currency.
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`the virtual currency required to buy loot boxes. S.M. used his parents’ credit card to buy the loot
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`box, which is on file with Google. S.M. played, and continues to play, Dragon Ball Z on his Samsung
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`smartphone. To the extent he plays these games in the future, he will be subjected to Google’s
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`predatory conduct involving loot boxes.
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`14.
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`Defendant Google LLC is a Delaware limited liability company with its principal
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`place of business and global headquarters at 1600 Amphitheatre Parkway, Mountain View,
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`California, 94043. Google is a global technology company that specializes in internet-related
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`services and products. Google developed, owns, controls, manages, and operates the Google Play
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`Store and Android operating system.
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`JURISDICTION AND VENUE
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`15.
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`This Court has diversity jurisdiction over the claims asserted herein on behalf of a
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`nationwide class pursuant to 28 U.S.C. § 1332, as amended in February 2005 by the Class Action
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`Fairness Act. Jurisdiction is proper because:
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`(a)
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`The proposed class includes more than 100 members, and many of the named
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`plaintiffs and class members are citizens of states that are diverse from the state of Defendants’
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`citizenship, the amount in controversy in this class action exceeds five million dollars, exclusive of
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`interest and costs; and
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`(b)
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`Defendants have purposefully availed themselves of the privilege of
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`conducting business activities within the State of California, where Google has its principal place
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`of business; where its officers direct, control, and coordinate Google’s activities, and where Google
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`engaged in the unlawful conduct alleged herein.
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`16.
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`Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391, because a
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`substantial part of the challenged conduct or omissions complained of herein occurred in this judicial
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`district, and defendant caused harm to at least one of the named plaintiffs and numerous class
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`members in this judicial district.
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`INTRADISTRICT ASSIGNMENT
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`17.
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`Pursuant to Civil L.R. 3-2(c) and (d), assignment to the San Jose Division is proper
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`because a substantial part of the conduct which gives rise to Plaintiffs’ claims occurred in this district
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`Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 11 of 74
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`and specifically in Santa Clara County where Google is headquartered. Additionally, Google’s
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`Terms of Service contain a provision in favor of this Division.
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`SUBSTANTIVE ALLEGATIONS
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`A.
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`18.
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`The Rise of In-App Purchases, Google Play Store, and Google’s Control of Apps
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`Videogames have been popular for decades. For much of that time, game developers
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`created and sold videogames to consumers either directly or through third-party retailers, such as
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`GameStop, a model known as “pay-to-play.” Before the widespread use of the internet, pay-to-play
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`was the way for videogames generates revenue. Under this model, consumers paid an upfront, single
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`price to obtain a fully functional videogame: most of the time consumers paid for a physical
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`computer disc or cartridge that was loaded with the game. With the advent of the internet, the “free-
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`to-play” model began, which was further accelerated by the rise of smartphone use and apps. With
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`the free-to-play model, anyone could play the functional game for free, but the game had a mixed
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`variety of paid and free business models with assorted monetization strategies. They included selling
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`advertisements, but also “microtransactions.” “Microtransactions” are transactions where players
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`can purchase virtual items for relatively small amounts of money. They are commonly employed in
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`free-to-play games. Loot boxes are a form of in-app microtransaction.
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`19. As the pay-to-play model started to disappear, Google met the demand for free and
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`low-cost apps through its Google Play Store. About one billion people have devices loaded with
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`Google’s Android operating system, the most pervasive operating system in the world. To load an
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`app onto one of these Android devices, one must go to the Google Play Store, accessed through its
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`own app that comes preloaded on Android devices.
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`20.
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`As of March 2020, the Google Play Store featured over 2.9 million apps. Ninety five
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`percent of these apps are free to download. In 2019, Google Play customers downloaded 84.3 billion
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`mobile apps globally.
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`21.
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`The Google Play Store contains thousands of game apps which can be downloaded
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`directly onto the Android-based device and played. Game apps are an activity, just like any other
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`game. Game apps are simply videogames – computer code that turns smart phones, tablets, and
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`computers into gaming devices.
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`Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 12 of 74
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`22.
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`In concert with game developers, Google makes enormous profits from its free-to-
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`download videogames through microtransactions such as loot boxes, something for which the
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`Google Play Store is ideally optimized.
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`23.
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`Google promotes and markets game apps directly to those with Android device users
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`and places the apps on virtual shelves in the Google Play Store.
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`24.
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`Google requires all game developers who want to sell games through the Google
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`Play Store to enter into a “Developer Distribution Agreement.” The Developer Distribution
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`Agreement is a partnership contract between Google and the developers. By its terms, the Developer
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`Distribution Agreement creates an agency relationship between Google and the game developers in
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`the commercial enterprise of distributing, marketing, and selling loot box plays and their contents.
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`Google and the game developers consider loot boxes to be products. The Developer Distribution
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`Agreement states:
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`2.1 This agreement (“Agreement”) forms a legally binding contract between
`You and Google in relation to Your use of Google Play to distribute Products.
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`* * *
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`3.1 You hereby appoint Google as Your agent or marketplace service
`provider as outlined here to make Your Products available in Google Play.
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`25.
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`Google’s Developer Distribution Agreement contains the following definitions:
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`Developer or You: Any person or company who provides Products for
`distribution through Google Play in accordance with the terms of this
`Agreement.
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`Google Play: The software and services, including the Play Console, which
`allow Developers to distribute Products to users of Devices.
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`Products: Software, content, digital materials, and other items and services as
`made available by Developers via the Play Console.
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`26.
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`The Developer Distribution Agreement contains numerous other provisions in which
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`Google is given the right and obligation to act on behalf of the game developer, including exercising
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`sole control over payment for in-game purchases, including loot boxes, the collection and payment
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`of taxes (at Google’s discretion), and refunding payments to consumers (again, at Google’s
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`discretion).
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`Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 13 of 74
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`27.
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`Google is the “Merchant of Record” under the Developer Distribution Agreement
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`for the in-game purchases distributed and sold in the United States.
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`3.4 Acting as Your agent, and with You acting as a principal, Google is the
`merchant of record for Products sold or made available to users in the
`countries/territories described here.
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`28.
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`Google provides a variety of services in addition to processing payments of in-app
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`purchases. It promotes, markets, and sells in-app purchases. It also helps game developers design
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`in-app purchases to maximize revenue potential and provides software development kits to assist
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`game developers in creating loot boxes.
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`29.
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`Google is well paid for the many services it provides in the development and sale of
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`loot boxes and other in-app items. In accordance with the Developer Distribution Agreement, the
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`payment for all in-game purchases, including loot boxes, is controlled entirely by Google. Using
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`Google Play’s required billing payment system, the payments go directly to Google. However, as
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`illustrated by the pay structure, Google does far more than merely process online payments. An
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`online payment processor charges about 3% for processing payments over the internet. In
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`recognition of the role Google plays, Google and its game developers have a revenue sharing
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`arrangement where Google receives 30% of all revenue from the sale of loot boxes.
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`30.
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`Google helps game developers create loot boxes and other in-game purchases that
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`maximize revenue. In so doing, Google exercises absolute control over numerous aspects of the
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`development, marketing, and sale of loot boxes and other in-app purchases, including deciding
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`whether to permit activities such as loot boxes and other forms of gambling through the Google Play
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`Store.
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`31.
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`Under the Developer Distribution Agreement, Google requires game developers to
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`comply with its Developer Program Policy and provides that the game developers will develop and
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`sell in-app purchases with Google. The Developer Program Policy explains:
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`///
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`Case 5:20-cv-03901-BLF Document 59 Filed 03/19/21 Page 14 of 74
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`Your innovation is what drives our shared success, but with it comes responsibility.
`These Developer Program Policies, along with the Developer Distribution
`Agreement, ensure that together we continue to deliver the world’s most innovative
`and trusted apps to over a billion people through Google Play.3
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`32.
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`Through the Developer Distribution Agreement, Google creates and controls much
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`of the content of these games. For example, Google requires game developers to use Google’s
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`“Software Development Kit” for the games to be offered on Google Play. Only by using Google’s
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`SDK can the game developer also use the Google Analytics service to gain information about a
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`gamer’s use of the game, or use Google’s “ad exchange” services such as AdMob.
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`33.
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`The Software Development Kit has its own code that is written and developed by
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`Google. Google requires it to be incorporated into every app game. The Software Development Kit
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`content provides Google a significant commercial benefit in addition to in-app loot box purchases
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`because not only is it the means for a developer to access the Google Play payment processor, but
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`it causes the app games to copy and transmit many different types of “communications” between
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`the user on the one hand, and the game developers on the other hand, which Google can use for
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`targeted advertising and other commercial purposes.4
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`34.
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`Google’s Developer Program Policy controls and regulates the type of games and in-
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`app purchases that are allowed, including whether to permit activities such as gambling and the
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`extent to which they are permitted by Google, including loot boxes.
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`35.
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`The Developer Program Policy permits loot boxes, while prohibiting all other types
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`of gambling. The Developer Program Policy prohibits wagering with money or with in-app items
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`purchased with money, such as virtual currency. With respect to gambling generally, the Developer
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`Program Policy advises game developers that:
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`We don’t allow content or services that enable or facilitate users’ ability to wager,
`stake, or participate using real money (including in-app items purchased with money)
`to obtain a prize of real world monetary value. This includes but is not limited to,
`online casinos, sports betting, and lotteries that fail to meet the requirements for
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