Kaylee Yang
Background
You open your phone to check the results of last night’s basketball game. Open Safari. Tap the address bar. Type in “March Madness results”. A custom widget appears. As you get ready for your day, you ask Siri for the weather. She relays what Google told her: sunny with showers in the afternoon. Later that day, holed up due to the rain, you decide to do some online shopping for your friend’s birthday. You look up “handcrafted wooden jewelry” and the top results you get are ads from different jewelers with eye-catching images. You browse them, but none seem to fit your friend’s style so you give up for the day. As you wind down, you ask your Google Home Assistant for a honey substitute to put in your tea. She responds that a teaspoon of maple syrup should do the trick. You finish making your tea and head to bed.
What started out as one person’s research project in 1996 has become a $1.37 trillion tech behemoth.[1] Taking advantage of loose regulations and the public’s initial support, Google has managed to grow relatively unchecked over the past two decades. But recently, Google’s unmatched success has left critics and legal experts suspicious of its potentially monopolistic business practices.
In recent legal challenges, tech leaders have been facing public scrutiny over their large influence in the market and on the lives of consumers. After a flurry of activity in the last quarter of 2020, Google faced three antitrust lawsuits from state attorney general offices nationwide and from the Department of Justice (DOJ).[2] Additionally, lawsuits attacking other parts of Google’s extensive business model have since been filed, including another antitrust lawsuit filed by the DOJ in January 2023.[3] While it’s hard to tell which of these cases, if any, could actually rein the company in, these lawsuits—especially the one over Google’s monopolization of search and search advertising—could have a visible effect for end consumers and wide-ranging implications for other pending cases.
In the complaint filed on October 20, 2020, the DOJ and a coalition of states allege that Google violated Section 2 of the Sherman Antitrust Act through its practices in general search services, search advertising, and general search text advertising markets.[4] In the United States, there are only four general search providers, or “one-stop shops” where users can search the web and get results for a variety of things. These four providers are Google, Bing, DuckDuckGo, and Yahoo!, with the latter two buying most of their search results from Bing.[5] Google is by far the leader in this market, with over 88% of the market share.[6] With the most queries going through its search services, Google is able to sell search query data to advertisers who compete to have their ads displayed at the top of search results when certain keywords are entered. The DOJ also accuses Google of arranging exclusionary agreements with mobile phone companies, wireless carriers, and browser companies to set Google’s products as defaults—practices that increase the company’s search access points.[7] These agreements give Google a huge advantage in reaching consumers and have violated competition law by decreasing the room for innovation from smaller companies, according to the complaint.[8]
Sherman Antitrust Act + Pertinent Precedent Cases
Section 2 of the Sherman Antitrust Law is vague; it simply states that it is unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations . . . .“[9] Nowhere in the act does it define what a monopoly is or indicate what actions are banned under the law. The drafters’ hazy wording has enabled the law to remain applicable to patterns of anti-competitive behavior today.
Passed by Congress in 1890, the Sherman Antitrust Act bans trusts, monopolies, and cartels. It is designed to protect consumers against high prices and low-quality products by promoting competition.[10] The first targets of the act were robber barons from the industrial age and the tactics they used, which included horizontal integration, vertical integration, and interlocking directorates.[11] Yet when examining some of the most well-known antitrust cases, we see that courts are constantly battling with the definition of a monopoly and how to effectively enforce a ruling.
The idea that a monopoly increases industry efficiency appears in Standard Oil Company of New Jersey v. United States.[12] In his testimony, John D. Rockefeller claimed that prior to Standard Oil dominating the industry, prices were volatile and inefficiency was rampant.[13] Through his control of the majority of the nation’s refineries, Rockefeller set a fixed price and negotiated deals with railroad companies that increased shipping efficiency. Despite these arguments, the US government ultimately won the case and forced Standard Oil to break up into regional companies.[14] After the breakup, the regional companies still limited their competition with one another and cooperated to keep oil prices fixed.[15]
Similar to the Standard Oil case, United States v. AT&T in 1981 saw the breakup of the telecom giant AT&T along regional lines into smaller Baby Bell companies.[16] Arguments made during the AT&T case are being recycled in Big Tech cases today. AT&T drew support from Commerce Secretary Malcolm Baldrige and Defense Secretary Caspar Weinberger, who called for the DOJ to drop the case because AT&T’s communications network was “too important to the national security to be subjected to antitrust prosecution”.[17] Facebook’s CEO, Mark Zuckerberg, echoed this argument in the Facebook antitrust case recently by claiming that Facebook’s dominance is necessary to compete with China.[18]
The AT&T case also brought up the concern of what to do after breaking up a company. After the Baby Bells were created, they quickly became regional monopolies, once again controlling the telecom and phone industries.[19] It wasn’t until the Telecommunications Act of 1996 was passed that smaller companies had an opportunity to compete with the Baby Bells.[20] There’s no way to realistically “split” Google into smaller companies—splitting Google search along regional lines would further fracture online space in complicated ways. Additionally, the DOJ has hinted at forcing Google to sell some of its properties, like its browser Chrome or its mobile phone operating system Android.[21] Breaking off these “arms” of Google could backfire by turning them into independent monopolies, or by transferring Google’s current monopolistic power to one of their competitors. Another complication is the inefficiency of having many companies build up their search infrastructure to match Google’s. The more likely option would be to have Google license their infrastructure to competitors at fair rates, similar to what the Telecommunications Act of 1996 made the Baby Bells do. [22]
Perhaps the most relevant antitrust case that shares key details with the fact pattern of the Google case is United States v. Microsoft in 2001.[23] Microsoft was accused of establishing a monopoly in the personal computer software market by making it difficult for consumers to uninstall its web browser, Internet Explorer. By making Internet Explorer a part of its dominant Windows operating system and forcing browser exclusivity with Internet service providers, Microsoft forced out its competitor, Netscape Navigator.[24] The court ruled that this practice was unfair and that better products and innovation were being suppressed. In the Google case, the DOJ attacks the exclusionary agreements that Google has with companies like Apple to set its search engine as the default on Safari browsers. Additionally, Google requires developers who use its Android operating systems in their phones to pre-download a bundle of Google applications—precisely what Microsoft did when tying Internet Explorer to Windows.
And that’s why this particular lawsuit against Google is likely to have such a big impact. The government won in 2001 and is hoping to mirror that strategy to win again in 2023. But even though Microsoft lost the case, they were able to overturn the remedy to be broken up.[25] Past cases like US v. Microsoft show that in order to really stop the Google monopoly, the game does not stop after a verdict is reached.
Analysis of the Google Response
Google maintains that they have done nothing wrong. Earlier this year, the courts unsealed Google’s motion for summary judgment. In it, Google refutes the DOJ’s claims and argues there’s not enough evidence to be in violation of the Sherman Antitrust Act.[26]
In their response, Google sorts the exclusionary agreements the DOJ believes to be anticompetitive into two categories: 1) those with web browsers like Apple’s Safari or Mozilla’s Firefox, and 2) those with manufacturers of Android mobile devices, like Samsung, and sellers of those devices, like Verizon. Addressing the first category, Google claims that third party search boxes only allow one search engine to be set as the default, so they were simply being competitive in a market that demands it. They believe that web browsers chose to enter into these agreements with them because Google had the best product; they argue that denying this choice would promote inferior products, causing everyone to lose out.[27]
While this argument might appear sound on paper, it’s important to criticize why Google can argue that it has the best product. The key here is scale and the monetary benefits that come from it: by increasing the number of search access points throughout the years, Google has increased the extent of its search services, which in turn forces advertisers to market on Google platforms to reach more consumers. Google then takes the lucrative revenue generated from these advertisers and splits it with web browsers. It’s less that Apple or Mozilla are choosing to grant Google default status due to a better product, and more that they are financially dependent on Google. For example, 15-20% of Apple’s worldwide net income comes from the revenue that Google shares.[28] If given the chance to compete, it is unlikely that Bing could produce such a big check due to its lack of scale compared to Google.
Additionally, Google mentions that Apple is free to promote rival search engines.[29] The response mentions rivals advertising their search apps on Apple’s App Store and Apple giving users the option to switch search engines within Safari.[30] But if competitors are truly so accessible, why would Google pay $15 billion this year to maintain their default status with Apple’s Safari? A report conducted by Mozilla shows how consumers are unlikely to ever change a default setting.[31] It suggests that if users were given an opportunity to try alternatives, they tend to find suitable substitutes for the default. However, default settings prohibit users from making this first and most crucial choice.
As for the second category of exclusionary agreements, Google has tried to morph the facts of the case to be as dissimilar to the US v. Microsoft case as possible. Google requires manufacturers using an Android operating system to pre-install a suite of Google applications which includes several search points of access like Chrome, Search, and the Play Store. Although Google claims that this is to ensure “compatibility, security, and quality requirements”, these apps are undeletable and are a textbook example of what the Microsoft case prohibited.[32]
Implications for Big Tech, Competitors, and Consumers
With this case being compared to important past cases, it will likely set a significant precedent for our current era of tech regulation.[33] After Facebook successfully defended a lawsuit by the FTC over its acquisition of WhatsApp and Instagram, antitrust advocates are still looking for a big win that would shift the momentum in favor of regulation.[34]
As for Google’s competitors, a DOJ win is not a silver bullet. As mentioned previously, Google has achieved massive scale and has established a loyal, default customer base. However, some innovation might just come out of this market, win or lose.
In February, Microsoft Bing announced that it will be powering its search engine using the OpenAI model and incorporating the ChatGPT chatbot.[35] As the first to announce such an innovation into a relatively stagnant market, Bing finally created a feature that could challenge Google. In a hasty response, Google announced the incorporation of its own chatbot, Bard, into its search. But when Bard produced an incorrect response during the announcement, Google stock dropped 7%, suggesting that Bing has an opening.[36] A DOJ win would help promote this type of innovation, but regardless, Bing currently has a feature that Google has not figured out how to monopolize yet.
As for consumers, it’s hard to say how much of an impact a DOJ win would have on daily search patterns. The longevity of its search monopoly makes it hard to predict changes to the status quo. However, with Google’s market share of searches most likely decreasing in a DOJ win, advertisers might divert less money into Google search ads, thus changing the makeup of ad results that appear.
Conclusion
The antitrust lawsuit brought against Google in 2020 stands to have a large impact on the Big Tech scene. A twenty year game of acquisitions and exclusionary agreements is on the line for Google. An era-defining antitrust win is up for grabs for the government. But surrounded by messy precedent cases and unclear legal definitions, the true winner of the case is hard to predict. In the meantime, Google will continue to accompany us in our daily lives, as we drink our tea and look up the scores of games we wished we watched.
[1] “Alphabet (Google) (GOOG) – Market Capitalization.” CompaniesMarketCap.com – companies ranked by market capitalization. Accessed April 30, 2023. https://companiesmarketcap.com/alphabet-google/marketcap/.
[2] Molla, Rani, and Adam Clark Estes. “Google’s Three Antitrust Cases, Briefly Explained.” Vox. Vox, December 16, 2020. https://www.vox.com/recode/2020/12/16/22179085/google-antitrust-monopoly-state-lawsuit-ad-tech-search-facebook.
[3] “Justice Department Sues Google for Monopolizing Digital Advertising Technologies.” The United States Department of Justice, February 2, 2023. https://www.justice.gov/opa/pr/justice-department-sues-google-monopolizing-digital-advertising-technologies.
[4] “Justice Department Sues Monopolist Google for Violating Antitrust Laws.” The United States Department of Justice, October 21, 2020. https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws.
[5] “United States v. Google Complaint.” Accessed May 1, 2023. https://www.justice.gov/opa/press-release/file/1328941/download.
[6] “United States v. Google Complaint.” 29.
[7] “United States v. Google Complaint,” 4.
[8] “United States v. Google Complaint,” 5.
[9] “15 U.S. Code § 2 .” Legal Information Institute. Legal Information Institute. Accessed April 30, 2023. https://www.law.cornell.edu/uscode/text/15/2#.
[10] “Sherman Anti-Trust Act (1890).” National Archives and Records Administration. National Archives and Records Administration. Accessed April 30, 2023. https://www.archives.gov/milestone-documents/sherman-anti-trust-act.
[11] “Sherman Anti-Trust Act (1890).”
[12] Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911)
[13] “Bria 16 2 b Rockefeller and the Standard Oil Monopoly.” Constitutional Rights Foundation. Accessed April 30, 2023. https://www.crf-usa.org/bill-of-rights-in-action/bria-16-2-b-rockefeller-and-the-standard-oil-monopoly.html.
[14] “Standard Oil Co. of New Jersey v. United States (1911).” Legal Information Institute. Legal Information Institute. Accessed April 30, 2023. https://www.law.cornell.edu/wex/standard_oil_co._of_new_jersey_v._united_states_(1911).
[15] “Bria 16 2 b Rockefeller and the Standard Oil Monopoly.”
[16] “United States v. American Tel. & Tel.. Co., 524 F. Supp. 1336 (D.D.C. 1981).” Justia Law. Accessed April 30, 2023. https://law.justia.com/cases/federal/district-courts/FSupp/524/1336/1430246/.
[17] Behr, Peter. “Justice Rests in AT&.” The Washington Post. WP Company, July 2, 1981. https://www.washingtonpost.com/archive/business/1981/07/02/justice-rests-in-at38/54cd7d11-81e1-4721-8f5b-f182a2db1a42/.
[18] Bond, Shannon. “Mark Zuckerberg Offers a Choice: The Facebook Way or the China Way.” NPR. NPR, October 23, 2019. https://www.npr.org/2019/10/23/772075523/mark-zuckerberg-offers-a-choice-the-facebook-way-or-the-china-way.
[19] Falcon, Ernesto. “What the AT&T Breakup Teaches Us About a Big Tech Breakup.” Electronic Frontier Foundation, March 1, 2021. https://www.eff.org/deeplinks/2021/02/what-att-breakup-teaches-us-about-big-tech-breakup.
[20] “Telecommunications Act of 1996.” Federal Communications Commission. Accessed April 30, 2023. https://www.fcc.gov/general/telecommunications-act-1996.
[21] Nylen, Leah. “Feds May Target Google’s Chrome Browser for Breakup.” POLITICO, 2020. https://www.politico.com/news/2020/10/10/feds-may-target-googles-chrome-browser-for-breakup-428468.
[22] “Telecommunications Act of 1996.”
[23] United States v. Microsoft 253 F.3d 34 (D.C. Cir. 2001)
[24] “U.S. v. Microsoft: Court’s Findings of Fact.” The United States Department of Justice, July 26, 2018. https://www.justice.gov/atr/us-v-microsoft-courts-findings-fact.
[25] Labaton, Stephen. “U.S. Appeals Court Overturns Microsoft Breakup Ruling.” The New York Times. The New York Times, June 28, 2001. https://www.nytimes.com/2001/06/28/technology/us-appeals-court-overturns-microsoft-breakup-ruling.html.
[26] Docket Alarm, Inc. “United States v. Google Defendant’s Memorandum of Points and Authorities in Support of Its Motion for Summary Judgement.” Docket Alarm. Accessed April 30, 2023. https://www.docketalarm.com/cases/District_Of_Columbia_District_Court/1–20-cv-03010/UNITED_STATES_OF_AMERICA_et_al_v._GOOGLE_LLC/451/.
[27] “United States v. Google Defendant’s Memorandum of Points and Authorities in Support of Its Motion for Summary Judgement.” 6.
[28] “United States v. Google Complaint,” 37.
[29] “United States v. Google Defendant’s Memorandum…” 16.
[30] “United States v. Google Defendant’s Memorandum…” 17.
[31] “FIVE WALLED GARDENS Why Browsers Are Essential to the Internet and How Operating Systems Are Holding Them Back.” Mozilla. Accessed May 1, 2023. https://research.mozilla.org/files/2022/10/Mozilla-Five-Walled-Gardens.pdf.
[32] “United States v. Google Defendant’s Memorandum…” 24.
[33] Miller, Sarah. “A US Antitrust Suit Might Break up Google. Good – It’s the Standard Oil of Our Day.” The Guardian. Guardian News and Media, October 21, 2020. https://www.theguardian.com/commentisfree/2020/oct/21/google-antitrust-monopoly-power-us-politics.
[34] Durkee, Alison. “Facebook Wins Antitrust Lawsuits – at Least for Now.” Forbes. Forbes Magazine, June 28, 2021. https://www.forbes.com/sites/alisondurkee/2021/06/28/facebook-wins-antitrust-lawsuits—-at-least-for-now/?sh=268f558015be.
[35] “Reinventing Search with a New AI-Powered Microsoft Bing and EDGE, Your Copilot for the Web.” The Official Microsoft Blog, February 22, 2023. https://blogs.microsoft.com/blog/2023/02/07/reinventing-search-with-a-new-ai-powered-microsoft-bing-and-edge-your-copilot-for-the-web/.
[36] Ponciano, Jonathan. “Alphabet Stock Plunge Erases $100 Billion after New AI Chatbot Gives Wrong Answer in Ad.” Forbes. Forbes Magazine, February 9, 2023. https://www.forbes.com/sites/jonathanponciano/2023/02/08/alphabet-google-stock-plunge-erases-100-billion-after-new-ai-chatbot-gives-wrong-answer-in-ad/?sh=30d4191255ce.