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The United States of America v. Google & What Comes Next

5 MINUTE READ | October 22, 2020

The United States of America v. Google & What Comes Next

The Justice Department and 11 U.S. states filed an antitrust lawsuit against Google, alleging that the tech company uses anticompetitive practices to maintain its dominant position in the online search market. The DOJ’s claim was filed in federal court on Tuesday in Washington, D.C. For months, rumors swelled that any legal action would concentrate on the algorithm for Search Engine Results Pages or the connectivity of Google’s expansive ad-tech and consumer-facing businesses. 

Instead, the legal action focused on the business terms and market effects of exclusionary agreements that made Google products, like its Google Chrome search engine, the default choice for consumers on mobile and desktop devices. In other words, and best said by 2PM’s Web Smith, the DOJ’s action claims that Google earned its dominant position honestly, but maintains it illegally, primarily by paying off distributors. 

“For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising — the cornerstone of its empire.” — United States of America et al. v. Google LLC. 

The U.S. v. Google lawsuit is a historic development in the business world and tech industry, drawing strong parallels to Microsoft’s 2001 antitrust litigation. In a coincidental anecdote, both Google and Microsoft were charged with anticompetitive behavior allegations 22 years after launching. Tuesday’s civil antitrust filing marks the U.S.’s most significant legal undertaking to protect competition in over 20 years. In the EU, similar complaints against some of the world’s largest technology companies have resulted in hefty fines, with many cases still ongoing. 

In a statement released adjacent to the filing, U.S. attorney general William Barr clarified that the complaint filed against Google this week was “based on violations of the U.S. antitrust laws and is separate and distinct from concerns raised about content moderation and political censorship by online platforms.” Later, his statement established that the grounds for the charges were through the lens of “traditional antitrust principles” to “improve consumer welfare through robust competition.” 

Shortly after the case was filed in the U.S. federal court, Google said it intends to challenge the complaint, calling the suit “dubious” and “deeply flawed.” Google argues that while its businesses are large, they are “useful and beneficial to consumers” and face ample competition in the market. 

Several states objected to the DOJ’s charges against Google, including the attorneys general of Colorado, Iowa, Nebraska, North Carolina, Tennessee, and Utah. On Monday, the group released a statement saying, “They have not concluded their investigation into Google and would want to consolidate their case with the DOJ’s if they decided to file,” according to the AP News. Google held a presentation on Tuesday for a select few reporters where the company argued that consumers can switch away from Google services at any time and that the accessibility of its services has helped reduce prices in the smartphone market

Prosecutors say Google entered into exclusionary agreements with companies, including device manufacturers (Apple, LG, and Samsung), major U.S. wireless carriers (AT&T, Verizon, and T-Mobile), and web browser developers (Mozilla and Opera), to help Google maintain its market position. As a result, Google pays distributors billions of dollars to become the default search engine, which then benefits Google via increased usage of its software and services (and thus, more revenue from advertisers), further entrenching the company’s position as search market leader. These tying agreements are allegedly worth billions of dollars and effectively “lock up distribution channels and block Google’s rivals.” 

At the heart of the suit, U.S. government authorities claim that leaders at Apple and Google met in 2018 to discuss “how the companies could work together to drive search-revenue growth.” Soon after, a senior Apple executive allegedly followed up with a Google team member saying, “our vision is that we work as if we are one company.” Later, Google became the default search engine for Apple’s Safari mobile browser. As a result, the DOJ’s filing estimates that the Google and Apple unique mobile search partnership accounts for ~15 to 20 percent of Apple’s annual profits, or roughly $11 billion. 

In return, the plaintiffs allege that “Apple-originated search traffic adds up to half of Google search volume” (and thus, Google benefits from these additional advertising impressions). The terms of this exclusive partnership are alleged to holistically restrict a competitors’ ability to make inroads on Google’s dominant position in the search market, and thus qualify as anticompetitive behavior. 

The narrow focus of the complaint (concentrating only on Google’s dominant position in online search due to exclusionary business agreements) came as a surprise to some Google critics. Still, most analysts agreed that it was a logical approach, especially considering the ongoing investigations into Google’s business practices by other parties, including regulators in the European Union, state attorneys general, and federal authorities. 

Given the complexity of the case and resources available to both parties, the impending litigation is expected to take years before drawing to a close.

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There will not be an impact on the current search advertising landscape for the foreseeable future. The fate of the case — and whether it ends in settlement, fines, or a trial — greatly depends on various factors, including the outcome of the 2020 U.S. elections. The suit asks for “structural relief,” which could be interpreted as a means to break up Google in some way, a judgment that will almost certainly be contested in court if it were to be reached. As the broader examination of Big Tech companies and their role in people’s lives continues, we can expect more information and possibly other legal complaints to be filed in due time.

Posted by Abby Long

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