Google's antitrust loss
Does Google hold an illegal monopoly? Viewpoints from multiple sides.
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What’s happening
Last week, US District Judge Amit Mehta ruled that Google broke antitrust law to maintain a monopoly in “general search services” and “general search text advertising.” Mehta concluded that certain Google practices violate Section 2 of the Sherman Act, which prohibits the use of exclusionary conduct to protect a monopoly.
The case originated from a 2020 lawsuit filed by the Department of Justice (DOJ) under the Trump administration. Mehta’s decision is the first significant antitrust ruling in the US since US v. Microsoft (2001).
What is a monopoly: Monopoly power is one company’s ability to exclude competition or control prices without competitive consequence. Holding a monopoly is not illegal by itself, but becomes illegal when maintained through anticompetitive practices.
Google’s actions: The ruling focused on Google’s practice of paying phone makers and web browser operators such as Apple, Samsung, and Mozilla (Firefox) billions of dollars to be their default search engine. Google pays 36% of its ad revenue generated through the Safari browser to Apple, which amounted to $20B in 2022, a figure estimated to have accounted for 5% of Apple’s revenue and 14-16% of its operating income.
The ruling said these contracts are exclusive and anticompetitive because their sheer size prevents competitors from securing similar arrangements and makes it uneconomical for partners like Apple to develop competing search engines of their own.
Because of its dominance in “general search services,” the ruling finds, Google also maintains a monopoly in “general search text advertising” because it can raise ad prices without any competitive threat.
What’s next: The next phase of proceedings, the date for which is yet to be decided, will focus on what remedies Google will be required to take to restore competition. Google said it will appeal the decision, which could drag out the case over many months or even years.
Regardless of the outcome, some observers expect the decision to influence future decision-making at Big Tech companies and the results of pending lawsuits against Amazon, Meta, and Apple.
There are a wide range of perspectives on whether or not Google holds an illegal monopoly. This week, we bring you the viewpoints from multiple sides. Let us know what you think.
Notable viewpoints
More supportive of the ruling:
Google’s actions are anticompetitive.
Google’s large contracts – totaling $26B+ in 2021 – with device makers and browsers to make Google their default search engine have foreclosed the most effective search distribution channels from Google’s rivals, an anticompetitive practice intended to protect its monopoly and in violation of the Sherman Act. (Summarized from ruling.)
Apple’s revenue share contract with Google – worth $20B in 2022 – to make Google the default search engine in Apple’s Safari browser disincentivizes Apple from building its own search competitor when it otherwise has the means to do so, a dynamic that is anticompetitive. (Summarized from ruling.)
“Google is the best because the more people use it, the more data it has to improve its results. The more it improves its results, the more people use it…That gives it all the advantage it ought to need to earn default placement on iPhones or anywhere else on the merits. So why allow it to buy even more of a leg up, at a price no one else (thanks to its monopoly) can afford?” (Molly Roberts, Washington Post.)
A competitive market would expect to see new entrants and shifting market shares over time; Google’s steadily increasing dominance of the search market – from 80% of all US general search queries in 2009 to 90% in 2020 – is a marker of an anticompetitive environment. (Summarized from ruling.)
Enabled by its default search agreements with phone makers and browsers, Google has also foreclosed an estimated 45% of the search text ads market, above the 40% traditionally viewed as a threshold for liability in exclusive dealing cases under the Sherman Act. (Summarized from ruling.)
Google should be forced to divest its own Chrome web browser and Android operating system, which function as “choke points” that prevent users from using alternative search engines; divesting those assets would make it easier for entrants to compete with Google.
Google’s search dominance hurts the consumer and downstream businesses.
Google’s search monopoly affects search results, the ads served to consumers, and the data collected from them, which impacts the overall online experience; a more competitive search market would improve consumer choice and satisfaction.
“The fiction of a Google search is that it scours the web for the best information out there…these days searchers have to wade through a thicket of advertisements, search-engine-optimized content that might or might not be correct and, yes, unreliable AI content. Without competition, it’s a problem that’s poised to get worse. (Bina Venkataraman, Washington Post.)
Google’s search dominance creates an unfair advertising landscape because it can dictate terms and charge higher prices, which can stifle the growth of small businesses and advertisers.
Google is too powerful.
Google’s wide ecosystem of services give it vast amounts of data that exceed any competitor, giving it an unmatched advantage in refining its search product and ad targeting, which entrenches its market position in a virtuous cycle.
In addition to its search and advertising dominance focused on in the case, Google’s flywheel of businesses and previous acquisitions – including, YouTube, Android operating system, DoubleClick advertising, and Waze navigation app – make it a data behemoth that holds too much power and insight into users’ personal data.
With AI as the next frontier, Google should be forced to grant anyone free and open use of its AI models and underlying data, which would increase competition and innovation in AI technology development while broadening the population of developers that can help ensure safe AI.
More opposed to the ruling:
Google’s actions are not anticompetitive.
Google has gained a large market share because it is a superior product that consumers enjoy and prefer over other search options, not because it holds an illegal monopoly.
To find that Google’s conduct is exclusionary, the ruling in part used an overly narrow definition of the search market that inflated Google’s market share calculation at 90%; in reality, it should have included alternatives to general search engines like Amazon (where 57% of Americans’ shopping queries start), AI-generated search (which didn’t exist when the DOJ lawsuit was initially filed in 2020), and TikTok (where Gen Z users increasingly start content searches) that would have effectively reduced Google’s total share.
Google’s agreements with device makers and browsers to be their default search engine are not exclusive because 1) the deals do not prohibit browsers from promoting other search engines in their apps and 2) Google simply fulfilled a browser design demand – assigning a single default search engine – with a superior product. (Summarized from arguments made by Google in the case.)
Consumers have always had the ability to use the search engine of their choice or delete default apps on their devices; Google’s deals with Apple and Samsung to make Google the default search engine in their browsers did not make them the exclusive search engine available.
In the EU, where users are required by law to be given the option of choosing their default search engine upfront, ~90% of users choose Google, a portion similar to that in the US and suggestive that Google’s dominance is based more on the quality it provides to consumers than anticompetitive practices.
Google’s search dominance does not hurt the consumer or downstream businesses.
Google helps consumers because it is superior to search alternatives, and since antitrust law is intended to protect consumers and not competing companies, it’s hard to argue that Google is violating antitrust.
To violate antitrust law, a company’s conduct must harm consumers; Google’s actions do not harm consumers because users can switch to other search engines in their settings if they want, and even Apple and Mozilla have promotional deals with other search engines like Microsoft Bing and DuckDuckGo.
“The fact that Google search has an 80% market share even on Windows devices, where Edge is the default browser and Bing is the default search engine, demonstrates that consumers go out of their way to use Google because they believe it is the best option.” (Geoffrey Manne, International Center for Law & Economics.)
In search text advertising, the price of Google’s ads have actually decreased for buyers over time relative to quality of placements provided, suggesting Google does not artificially inflate prices. (Summarized from arguments made by Google in the case.)
Ruling that Google holds an illegal monopoly sets a bad precedent.
The ruling sets a dangerous precedent for more anti-capitalist efforts from both political parties to rein in companies that are cast as “bad” just because they are big, and a return to the antitrust landscape of the mid-1900s when aggressive antitrust pursuits damaged the economy.
“In a free market, consumers pick economic winners and losers, with antitrust law serving as a tool to maximize consumer welfare. The Google decision is part of a long pattern of government abuse of antitrust law to protect some firms and punish others — consumers be damned.” (Tom Hebert, National Review.)
Blocking Google from being able to pay device makers like Apple to be the default search engine would likely hurt the device makers by removing a significant revenue source, which may drive them to increase prices, ultimately hurting the consumer.
Other viewpoints:
AI-driven search engines, an area where Google hasn’t yet excelled, are most likely the future of search, making this antitrust suit the latest example of the US antitrust system being too far behind in providing solutions, where the market solves the problem itself.
The ruling represents an evolution of thinking in the courts that antitrust protections should extend beyond consumers, a contrast to the “consumer welfare standard” that became the mainstream interpretation of antitrust law in the 1980s, holding that if consumers weren’t harmed, there was no antitrust violation.
It’s unclear whether there is any consumer harm in Google’s monopoly; the legal argument that Google is violating antitrust law is not definitive, which suggests that congressional updates to antitrust law and the Sherman Act, which was enacted in 1890, may be necessary to make future rulings more definitive.
While Big Tech opponents have called for breaking up Google’s parent company Alphabet and other Big Tech players, a breakup of Alphabet is an unlikely outcome given how narrow the ruling was.
One potential outcome of the ruling may be prohibiting Google from paying browser providers like Apple and Mozilla; such a move may hurt Apple and Mozilla (which attributes 80%+ of its revenue to its Google deal) more than Google.
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From the source
Read more from select primary sources:
Full text of ruling in US v. Google (2024)
Full text of Section 2 of the Sherman Act
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