Published on Oct 08, 2024
Epic v. Google judge rejects refusal-to-deal defense in sweeping injunction; Google set to appeal. For three years, Google (GOOG) must open its Google Play ecosystem to competing app stores, Northern District of California Court Judge James Donato ruled Monday in an injunction that mostly aligned with what Epic Games proposed in April. Google will be prohibited from using exclusive contracts and technological ties to lock Android users into Google’s app store and payment method, and the search giant must share its catalog of apps with rival stores. Google quickly said it would appeal the ruling.
In an order accompanying the injunction, Donato dedicated multiple pages to rejecting the company’s refusal-to-deal defense, perhaps in an attempt to get ahead of Google’s likely arguments on appeal.
Donato and a three-member committee will oversee Google’s compliance with the remedy, the three-year time limit for which will begin once the firm is done incorporating the necessary changes. Google had estimated that implementing the features would take between 12 and 16 months; Donato gave the company 8 months.
The main difference between Epic’s proposed injunction and Donato’s ruling is the length. Epic’s request was for 6 years, which Donato said was too long. If Epic accuses Google of violating the injunction, Google will “bear the burden” of proving its requirements are “strictly necessary and narrowly tailored,” with Donato having the final say, he wrote.
Donato repeatedly cited testimony and internal documents showing that Google didn’t consider Amazon (AMZN) a competitive threat, despite the e-commerce empire’s vast resources. “Although Google may legitimately claim some early mover advantage, it was not entitled to maintain and magnify network effects, and thereby entrench its dominant position,” he wrote in the accompanying order.
At one point, Donato quoted an amicus brief filed by the Federal Trade Commission, which described how a platform operator, after “establishing dominance,” will be incentivized to stop innovating and start building a moat to shield itself from competition. “The injunction must bridge the moat,” Donato wrote. He also reiterated his longstanding frustration with Google’s legal tactics, writing that the company “has, on several occasions, fired blunderbuss of comments and complaints that are underdeveloped and consequently unhelpful in deciding the issues.”
Google is appealing the ruling, and said in a blog post (which it pointed to in a request for comment) that it would ask the courts to delay implementing the remedies. The “Epic-requested changes” would endanger consumers’ privacy and security and “reduce competition on devices,” wrote Lee-Anne Mulholland, Google’s vice president of regulatory affairs. Donato’s ruling is “completely contrary” to another court’s 2021 ruling in favor of Apple in Epic v. Apple, she wrote, “even though, unlike iOS, Android is an open platform that has always allowed for choice and flexibility like multiple app stores.” Mulholland argued that the injunction would cripple Google’s ability to compete with Apple.
Epic CEO Tim Sweeney lauded the injunction in a post on social media. “Big news! The Epic Games Store and other app stores are coming to the Google Play Store in 2025 in the USA – without Google’s scare screens and Google’s 30% app tax,” Sweeney said, adding that the ruling “applies to the United States only, so the legal and regulatory battle will continue around the world.” (An Epic spokesperson referred to Sweeney’s tweet when asked for comment.)
In his order, Donato rebuffed one legal strategy Google may employ on appeal: casting its conduct as a refusal to deal with rivals. “Google’s frequent mentions of Trinko are misplaced,” he wrote, referencing Verizon v. Trinko, the foundational refusal-to-deal case. “Google seems to find a ‘vibe’ in Trinko to the effect that the remedy for a monopolist’s anticompetitive conduct cannot involve affirmative conduct with respect to a rival. Trinko says nothing of the sort, and Google’s frequent mention of the case is simply a red herring.”
Big Tech firms like Apple (AAPL) have also turned to refusal-to-deal precedent in antitrust cases, and Google used the same strategy in defense of its advertising technology business. “Nothing in the verdict or the evidence at trial condemned Google for not extending a helping hand to a rival,” Donato wrote.
The injunction comes on the heels of Google’s ad-tech trial and just a day before the Department of Justice presents a “high-level framework” of its proposed remedies for Google’s search monopoly. Although Epic didn’t request structural remedies, such as the divestiture of the Play store altogether, Donato’s relatively unusual stipulation that Google share its app catalog with rivals could foreshadow far-reaching structural remedies in DOJ’s suits. Breaking up Google or requiring it to share its search data with rivals are among the remedies DOJ is reportedly considering in the search case, and the department is seeking multiple divestitures in the ad-tech case.
Big money (and, reportedly, exclusivity) for OpenAI. OpenAI has raised $6.6 billion, giving it a valuation of $157 billion. It’s the largest venture capital funding round ever, and nearly doubles OpenAI’s previous valuation of $86 billion.
“The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems,” the company said in a statement.
Bloomberg reported that investors included: Microsoft (MSFT), which has already given OpenAI $13 billion; Khosla Ventures (KVSA); Fidelity (FNF); MGX; Nvidia (NVDA); Softbank (SFTBY); Tiger Global Management; Altimeter Capital; and Thrive Capital, which invested the most at $1.3 billion. Noticeably absent from the list was Apple, which was reportedly considering investing but recently dropped out.
The Financial Times noted that OpenAI asked its investors not to invest in its competitors, including Anthropic and xAI—an unusual but not unheard-of arrangement that might pique the interest of antitrust enforcers who are already looking into the company’s partnership with Microsoft.
Regulation/Legislation
FTC’s Amazon case will move forward, mostly intact. The FTC v. Amazon motion to dismiss has been unsealed and it is largely favorable to the agency. When the opinion initially came out, some FTC critics, seeing only that some claims were dismissed but not knowing which ones, framed it as a win for Amazon. But all of the agency’s claims will be allowed to move forward and only some state-level claims (from Pennsylvania, New Jersey, Oklahoma, Maryland), were dismissed. The case will also be bifurcated into a liability phase and a penalty phase, as per the agency’s request.
“We are pleased with the court’s decision and look forward to moving this case forward,” FTC spokesperson Douglas Farrar said in a statement. “The ways Amazon illegally maintains its monopolies and the harm they cause—including suppressed competition and higher prices for shoppers and sellers—will be on full display at trial. This case ultimately seeks to pry loose Amazon’s monopolistic control and restore competition.”
“The FTC will have to prove its claims in court, and we’re confident those claims will not hold up when the FTC has to prove them with evidence,” Amazon spokesperson Tim Doyle said in a statement. “The truth is that Amazon’s practices are good for competition, consumers, and the small- and medium-sized businesses that sell in our store, while the FTC’s approach would make shopping more difficult and costly.”
OMB guidance on federal AI contracts stresses pro-competitive approach. New guidance released Thursday by the Office of Management and Budget instructs federal agencies to promote competition and avoid vendor lock-in as they ink contracts with AI vendors.
With an emphasis on data portability and interoperability, the guidance seeks to establish “innovative acquisition practices as a means of shaping and diversifying the AI marketplace.” For example, OMB advises agencies to find cloud vendors that don’t charge expensive (and normally unwarranted) “egress fees” to transfer data out-of-network—fees that have drawn FTC scrutiny.
OMB also recommends that agencies factor an AI model’s openness into their acquisition decisions. That can look like an AI model with an open-source license, or a vendor that doesn’t self-preference through vertical integration or require the purchase of product bundles.
And the guidance cautions against unnecessarily long contracts or lowest-price bidding processes, which could favor Big Tech firms. “Explore the offerings of non-incumbent providers of AI systems or services, even when current providers offer similar features,” it says.
DOJ gets rock star treatment from Rolling Stone. The antitrust division got a profile and photoshoot from Rolling Stone about its Live Nation/Ticketmaster case, complete with photos of Jonathan Kanter holding a few of what we are told are dozens of guitars in his collection. A DOJ spokesperson confirmed that this is the first time the antitrust division has ever gotten a Rolling Stone feature like this.
Why now? Well, there’s the obvious link to the music industry with the Live Nation case, but there’s also a mention at the end of the article that the future of the antitrust division is very much in doubt with the upcoming election. Donald Trump is sure to replace them if he wins, and Kamala Harris may well appoint her own team if she wins.
Things are slightly different at the FTC, where the new president could give the chair position to a different commissioner without having to go through a confirmation process, but Lina Khan would still continue as commissioner until she either resigns or a successor (her term officially ended last month) is confirmed. That might take a while, depending on who wins the presidential and Senate elections.
So if you’re wondering why Biden’s antitrust enforcers seem to have gotten an uptick of media attention in the last few weeks, it may well be an effort to make their case to Harris—and the American public—that their work should be allowed to continue.
Litigation
Apple tries to include employees in tech “tutorials”; DOJ cries foul. DOJ on Monday pushed back on Apple’s request to have its employees deliver its educational “technology tutorials,” given that those employees could be future witnesses.
Though Apple said in a filing that the parties could “stipulate that the tutorial is not evidence” and that Apple employees “know the technology best,” DOJ said the tutorials would amount to premature “one-sided testimony.”
“Apple employees are interested parties, and presenting their testimony before discovery risks receiving disputed or biased information that may later be contradicted or disputed by other fact witnesses,” the department wrote.
Technology tutorials from DOJ and Apple are scheduled for Nov. 6, and District Court Judge Julien Neals has instructed the parties to submit a joint letter outlining tutorial format by Oct. 25. Neals will hear oral arguments on Apple’s motion to dismiss DOJ’s suit on Nov. 20.
Judge Donato to preside over Epic v. Samsung. The North District of California judge, who is also the judge on the Epic v. Google trial, will be presiding over the recently filed Epic v. Samsung/Google case. Epic asked for it to be assigned to him, given its relation to Epic v. Google.
Epic Games is accusing Samsung (SSNLF) and Google of conspiring to freeze out competing app stores by adding a feature to Samsung phones called “Auto Blocker.” Auto Blocker blocks apps that don’t come from Samsung or Google’s app stores from being downloaded onto Samsung phones and is now on by default (it was initially introduced in summer 2023 as an opt-in feature). Samsung has said that Auto Blocker is a security feature and called Epic’s claims “baseless.”
Donato was also on Utah v. Google, an antitrust lawsuit brought by all 50 states, D.C., and two territories over Google’s Play store. He rejected a proposed $700 million settlement in that case, believing it was too favorable to Google. And he had some harsh words for Google in his recent ruling on remedies for Epic v. Google, which included injunctions on Google making certain agreements with equipment manufacturers and carriers (see our more detailed explanation of the order above).
TikTok changes lead counsel, requests en banc hearing in Third Circuit Section 230 case. The embattled video-sharing app has indeed asked for Anderson v. TikTok to be reheard in front of a full panel of judges in the Third Circuit Court of Appeals. A three-judge panel recently ruled that Section 230 did not apply to algorithmic recommendations, departing from decades of legal precedent that largely protected digital platforms from liability for content posted by third parties—a decision that may well have massive implications for tech companies and services that have come to heavily rely on algorithmic recommendations.
In this case, a girl accidentally killed herself while doing a “Blackout Challenge” she allegedly learned about through TikTok’s content recommendations. The panel’s decision was based on a Supreme Court opinion issued just a month prior, which said that the First Amendment may apply to algorithms. This, in the panel’s view, meant that algorithms were the platforms’ own speech and therefore Section 230 did not apply to them.
A separate filing in the case also notes that Andrew Pincus has withdrawn as TikTok’s counsel, with Paul Clement of Clement Murphy taking over. Pincus is also one of TikTok’s lawyers in its appeal to have the “ban” law overturned, which the D.C Circuit Court is currently mulling over. He told The Capitol Forum that he’s still on that case.
Hiring
NEW AMD: Senior Corporate Counsel, M&A and Securities. “Experience in the semiconductor or technology industry is a plus.” Based in Santa Clara, local candidates preferred.
NEW Indiana Office of Attorney General: Deputy Attorney General, Consumer Protection Division-Consumer Litigation Section, Antitrust Enforcement. “Will be responsible for investigation, review, and litigation of antitrust cases and competition policy issues relevant to Indiana, and ensuring free and fair competition.” Based in Indianapolis, but remote work two days a week is possible.
NEW South Carolina Office of Attorney General: Assistant Attorney General, Consumer Protection and Antitrust. “The attorney in this position will handle civil matters and be part of the Office’s consumer protection and antitrust section.” Closes October 21.
McKinsey: Director of Compliance, Antitrust. “You will own and drive the firm’s end-to-end antitrust programs.” Requires “thorough understanding” of the risk associated with pricing algorithms. Based in Atlanta, New Jersey, New York City, or DC.
Meta: Associate General Counsel, Competition and Regulatory. “You will advise product teams on competition and consumer protection issues, manage investigations and inquiries related to antitrust matters and help develop the company’s legal position and strategy on competition and consumer protection matters throughout the world.” Based in Burlingame, CA, Los Angeles, Menlo Park, San Francisco, or Seattle.
NBCUniversal: VP, Legal, AI Innovation and Acceleration. “Serve as the lead business lawyer for the newly formed AI Innovation and Acceleration group,” a “great opportunity to work on complex and evolving legal frameworks in an exciting, fast-paced environment.” Based in New York.
Thermo Fisher Scientific: Senior Corporate Counsel, Lead Counsel – Antitrust. “This ambitious role involves guidance on substantive antitrust and competition law matters, with a special focus on managing merger review processes and general antitrust counseling.” Based in Waltham, MA, or D.C.
Coming up
October 9, 11 am: Lexology/Holland & Knight – Antitrust’s New Frontier: Collusion by Algorithm
October 17, 11 am: Baker Botts – Competition Currents: Summer’s Hottest Headlines and Future Forecast
October 22, 1pm: Technology Policy Institute – The Google Search Antitrust Case: Finding a Remedy that Helps Consumers
November 14: American Bar Association – Antitrust Fall Forum
November 14-15: FTC/Yale – 17th Annual Microeconomics Conference
November 20-21: Commerce, State Departments – Convening of International Network of AI Safety Institutes in San Francisco
January 16, 2025: Concurrences – The Tech Antitrust Conference
February 25, 2025: FTC – The Attention Economy: Monopolizing Kids’ Time Online
