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October 29, 2020updated 29 Jul 2022 10:57am

Why Google’s antitrust case could be much bigger than it looks

Google is facing a lawsuit over alleged anti-competitive business practices. Some have sought to minimise the case – here's why they're wrong to.

By Laurie Clarke

After years of demands for Big Tech to be held to account, Google is facing down an antitrust case that could strike at the core of its business. The Department of Justice’s (DOJ) case takes aim at Google’s dominance in the search market, charging that the platform uses anti-competitive practices to cement its power and squeeze out competitors.

Google antitrust

Google is facing a lawsuit over alleged anti-competitive business practices. (Photo by Drew Angerer/Getty Images)

The relatively narrow focus of the case – the tech giant’s advertising business is not under scrutiny, for example – has led some to suggest that even if the lawsuit is successful, it might not be consequential. But there are reasons the case could have more impact than it appears.

“I think it’s a substantial case,” says antitrust scholar at Penn State University, John Lopatka. “This is a major case against a major tech platform; it addresses the core business that Google engages in, so I wouldn’t minimise it.”

Google helps shore up its position as the world’s dominant search engine by paying Apple, Android phone makers, and browsers such as Mozilla to feature its search engine as the default. The DOJ alleges that, in so doing, Google uses its monopoly to outbid other search competitors on being the default search engine.

Gary Reback, a US antitrust lawyer who brought the landmark Microsoft antitrust case and has defended companies against Google in Washington, says that despite its narrow focus, the potential implications of the case should not be underestimated. “I think that there is an intentional effort on the part of Google proponents to try to minimise the scope of the case,” he says.

Although the lawsuit primarily targets Google’s position in the search market, Reback says that the case hints at a broader scope. Included in a list of Google’s alleged anticompetitive behaviour, for example, is the claim that the company manipulates search results. It also alleges that Google’s behaviour has harmed consumers by reducing the quality of general search services on dimensions such as “privacy, data protection, and use of consumer data”, as well as impeding innovation.

Although in search, Google’s closest competitor is Microsoft’s Bing, smaller upstarts like DuckDuckGo and Neevo are competing to gain a foothold in the market. The DOJ’s lawsuit alleges that Google creates entry-barriers that prevent nascent start-ups from doing so. (DuckDuckGo has previously provided testimony to the DOJ on this issue.)

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The potential remedies (actions that could be taken if the DOJ wins) proposed in the suit also hint at the lawsuit’s wider ambition, Reback believes. These include “structural relief”, indicating the possibility of an overhaul to Google’s business.

“What the government has done is that they have drawn out a complaint that is narrow in the sense that they don’t have to prove all kinds of allegations… and then they’ve given themselves the flexibility to go much broader in the remedies phase,” says Reback. “In other words, how we’re going to fix this.”

Reback believes it should be fairly straightforward for the DOJ to prove the allegations it has made against Google, and that it will be the second part of the case, the remedies, that will be the most interesting. (For its part, Google has called the lawsuit “deeply flawed”.)

Lopatka, however, thinks that the DOJ will have a fight on their hands. Historically, high prices have been the conventional indicator that a company is abusing monopoly power. “The problem the DOJ has is that Google doesn’t charge consumers for use of its search engine,” he says. “If you’re not charging for the product, then you have to find other dimensions on which consumers are injured by that alleged monopoly.”

The DOJ will charge that Google is injuring consumers on the dimension of quality, particularly privacy. Lopatka says pinning the case on this is problematic. “It’s problematic because they’re going to have to prove that consumers value privacy so much, that they’re being injured by this alleged monopoly.”

Another issue is that the DOJ is arguing Google’s market dominance stems from anti-competitive practices, rather than simply a reflection of how this particular market functions.

Google’s business model is a two-sided market. As a result of platform economics, “the more people on one side of the market use that product, the more valuable it is to users on the other side of the market”, says Lopatka. In Google’s case, the more search engine users, the more valuable the search engine is to advertisers.

This fact is instrumental to the case, because the government will have to “prove that the monopoly power is causally linked to that exclusionary conduct”, says Lopatka. If Google can argue that indirect network effects and feedback effects are just the nature of this market, “it doesn’t really have much to do with these exclusionary agreements that the government claims”.

“If Google establishes that even if [they] didn’t have these agreements, [they] would still have a dominant share of the market,” says Loptka, “that contradicts the government’s case.”

At present, Lopatka says that the DOJ’s approach of breaking up Google’s different markets doesn’t recognise the fact that these markets are all interconnected.

“In that respect, I think that this case against Google is significant, because it will be another effort to analyse antitrust law in one of these two-sided platform markets,” he says.

The return of antitrust

Experts have noted parallels between this case and an antitrust case the DOJ brought against Microsoft, which accused it of using anti-competitive practices to cement the market dominance in the PC. Initially billed to threaten the break-up of Microsoft’s business, the case was settled in 2001. Since this underwhelming outcome, no further antitrust attempts on Big Tech have been made in the US until now.

In 2018, the EU found that Google was illegally using its Android system to privilege Chrome and Google search. It ruled that the company should hold auctions to decide which search engines are selected instead. But rather than solving the issue, rivals say this intervention has actually bolstered Google’s profits.

Reback thinks that the US government will have learned its lesson from previous antitrust failures. “If they do a case, and they bring charges, and they have a trial and so forth, and all they end up doing is voiding these contracts, I think people will laugh at them,” he says. “In the same way the people kind of snicker about all the fanfare in the EU that produced no results.”

“Google is so big by this time, and there’s so little competition, that it doesn’t even need the contracts to maintain its dominant market position,” says Reback.

However, he says given the case is set to span years, Google and other tech companies might have exerted sufficient influence over politicians in Washington to minimise any potential impact. “There are ways to fall off the railroad tracks here.”

But beyond immediate consequences for Google’s business, the case already appears to be having repercussions. The lawsuit notes that at present, Google pays Apple $8–12bn (15% to 20% of Apple’s profit) every year for the latter to pre-load Google’s search engine on Mac and iOS.

In light of the antitrust case, the Financial Times reported this week that Apple is redoubling efforts to develop its own search engine that could replace Google on its products. Apple already offers DuckDuckGo as an alternative to Google in its Safari browser, and the Wall Street Journal reported speculation that the firm could integrate this into its browser in place of Google, given both companies’ emphasis on privacy.

Breaking up Google?

What happens if the DOJ’s case is successful? Experts have said that one of the most extreme outcomes could be compelling Google to break off its Android operations. Although technology analyst Benedict Evans has poured cold water on this idea, writing in his newsletter: “The DOJ’s case is too narrow really to support that, but if you did, again, how would it be funded, given today it’s open-source and free to the [original equipment manufacturers]?”

But perhaps the biggest result of the case will be promoting the antitrust agenda and making an eventual break-up of Big Tech more likely. Lopatka points out that if the government loses the case, it will probably stimulate interest in changes to the laws that currently govern tech giants.

“On the other hand, those eager for legislative reform are unlikely to be appeased even in the event that this case is successful,” he says.

The case has attracted a rare bipartisan consensus with David Cicilline, the Democratic chair of the House of Representatives antitrust subcommittee, calling the action “long overdue”, and Josh Hawley, a Republican senator, saying it was “the most important antitrust case in a generation”.

The Federal Trade Commission and several Federal investigations into Google, Amazon, Apple and Facebook are underway too. Whether this antitrust case is successful or not, significant changes to how Big Tech is regulated seem inevitable.

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