Google considered buying Tencent's Epic stake in Swipe at Fortnite
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By Olga Kharif, Malathi Nayak
Epic Games says Google went as far as to explore buying Tencent Holdings' stake in the game maker to stop it from launching its Fortnite game app on Android by bypassing the Google Play store.
Epic's year-old lawsuit against the Alphabet Inc. unit characterizes Google as perceiving the closely held game maker to be a threat to its app store. Epic alleges the Tencent plan was hatched in a 2018 meeting of Google executives, according to an unredacted version of Epic's lawsuit against Google that was made public Thursday on orders from a judge.
"A senior Google executive proposed that Google 'consider approaching Tencent,' a company that owns a minority stake in Epic, 'to either (a) buy Epic shares from Tencent to get more control over Epic,' or '(b) join up with Tencent to buy 100% of Epic,'" lawyers for the game maker said in the complaint.
The alleged takeover plan first came to light this month when a partially redacted version of the complaint was filed with the court.
"As we have stated previously, Epic's lawsuit is baseless and mischaracterizes our business conversations," a Google spokesperson said in a statement. "Android provides more choices in mobile devices for developers and consumers."
Epic is battling Google and Apple over fees the companies charge developers in their mobile-app stores. A trial in the Epic-Apple case took place in May, and the companies are awaiting a ruling from the judge. The fight with Google is just heating up.
In July 2018, senior Google executives including Alphabet's chief financial officer considered offering Epic a partnership worth as much as $208 million over three years, according to Epic. They also considered lowering the fees they charged Epic. Epic rejected Google's "special deal," opting instead to distribute Fortnite for Android via Epic's website and through a partnership with Samsung Electronics, according to the complaint.
Google also faces a sweeping complaint filed in July by attorneys general of three dozen states, alleging that the company unlawfully abused its power over the sale and distribution of apps through Google Play. The states allege that after Epic launched its app outside Google Play, Google "bought off" developers to dissuade them from doing the same -- but details of those payouts were redacted in the states' complaint.
In response, Google said the states' antitrust lawsuit "gets it wrong" by limiting the definition of the app marketplace to Android devices and ignoring that Google competes with Apple for developers and consumers.
In its own complaint, Epic says Google executives came up with a plan to offer a $208 million "custom" deal to persuade the game maker to launch Fortnite on Google Play. Google planned to offer Epic a discounted fee of 25%, compared with the standard 30% cut it took from developers, to give Epic additional revenue share, according to the unredacted complaint. When Google realized that Epic might not accept such a deal, it considered approaching Tencent, Epic said.
Thursday's filing fleshes out Epic's claims that Google "developed a series of internal projects" to stop other game makers and app developers from distributing their apps the way Epic did with Fortnite. One such effort by Google was to strike exclusive deals with device makers to thwart the presence of alternative app stores on mobile devices, according to the complaint.
Google has been entering into agreements with certain mobile device makers since 2019 that restrict them from pre-installing other app stores on most or all new Android devices they sell, Epic said in the unredacted complaint. In exchange for that, Google shares "monopoly profits Google earns from its search business (and in some cases, profits from the Play Store itself)," Epic said.
The case is Epic Games Inc. v. Google LLC, 3:20-cv-05671, U.S. District Court, Northern District of California (San Francisco). The states' case is State of Utah v. Google LLC, 21-cv-5227, U.S. District Court, Northern District of California (San Francisco).