BACKGROUND Google LLC and Alphabet Inc. (Google) moved to dismiss a third successive complaint that alleged it tied the sales of Maps, Routes and Places application programming interface (API) services to one another. A basic tying claim involves a seller leveraging its market power in one product (the “tying” product) to force sales and gain market share over a different product (the “tied” product). Following the dismissal of an initial complaint filed in 2022, the plaintiffs filed an amended complaint alleging Google created a “three-way” tying arrangement by conditioning the sale of one API service (e.g., Maps) on the required purchase of the two other services (e.g., Routes and Places) through its contractual terms of service. The plaintiffs alleged that the tying product could be any of the three APIs and that Google had market power in all three. Whichever plaintiffs bought first was the tying product, and the other two were tied products – allegedly locked in by forced sale or prohibition on use of competitor APIs as a condition of the first sale. The court granted Google’s motion to dismiss because the plaintiffs did not explain how a product could be both a tying product (requiring market power) and the tied product (lacking market power) depending simply on the order of the sales. In their second amended complaint, the plaintiffs abandoned the three-way tying claim, instead bringing a basic tying claim with Maps as the tying product and Routes and Places as the tied products. Google has again moved to dismiss the complaint. THE DETAILS
- Maps, Routes and Places APIs are interrelated but separately licensed services that appear alongside each other in mapping applications like Google Maps.
- In response to the first amended complaint, Google argued that the plaintiffs did not explain how a product could be both a tying and a tied product depending on the order of sale, given the inherent conflicts in market power required of each.
- Google also argued that it had broad rights to dictate the terms of use and display of its mapping services, including a right to protect and control user experience through restricting use of its mapping API services in conjunction with or in proximity to non-Google mapping API services, relying in part on a case called Sambreel. 906 F. Supp. 2d at 1073 (S.D. Cal. 2012).
- The US Department of Justice Antitrust Division (DOJ) intervened, filing a Statement of Interest urging the court to reject Google’s interpretation of Sambreel as establishing an “unqualified right” over the use and display of its services. The DOJ did not take a position on whether the claim should survive otherwise.
- The court agreed with the DOJ, holding that Google’s interpretation of “control” is too broad and could justify any tying arrangement as an exercise of a supplier’s right to determine or dictate the terms on which its product or service was used.
- The court also found that the plaintiffs failed to explain how a product could be either a tying or a tied product depending on purchase order, given it is necessary to show market power in tying products and lack of market power in tied markets, or how Google allegedly leveraged its products that way here.
- Notably, the court said that a three-way tying theory might be viable in some instances, but it was “unclear” how. The court acknowledged an ongoing litigation that allowed a tying claim to proceed where purchase order determined which product was the tying product and which was the tied product despite the “inconsistency” of the allegation. That case is in early stages, and it remains to be seen whether the claim will survive summary judgment.
- Despite the opportunity to do so, the Google plaintiffs did not attempt to reprise their three-way tying claim in their second amended complaint. They instead pivoted to a basic tying claim with Maps API as the tying product and Routes and Places APIs as tied products.
- Google has again moved to dismiss the complaint, stating that the plaintiffs mischaracterize Google’s terms of service and its enforcement; that the plaintiffs have not alleged any coerced sales of Google API services; and that the plaintiffs did not sufficiently plead API product markets or market power. That motion is pending.
WHY IT MATTERS
- The court here acknowledged three-way tying claims might be viable in some circumstances. The plaintiffs changing course in their second amended complaint means this will not be the test case to find out how.
- The DOJ’s Statement of Interest made clear its stance that sellers do not have unqualified rights over the use of their products. The court’s adoption of the DOJ’s position shows that courts, in addition to agencies, are closely scrutinizing the interactions between the antitrust laws and product licensing. The court went further to say these licensing and control rights “particularly in technology context” do not trump antitrust laws.
- All companies – with tech firms under particular scrutiny– should consider the antitrust laws when establishing licensing and services agreements governing product use. As this case shows, litigation on these issues can be protracted and expensive even when largely successful.
