What America’s biggest antitrust lawsuit in 20 years has to say.
The US Department of Justice and attorneys general from 11 Republican-led states filed an antitrust lawsuit against Google on Tuesday, alleging that the company maintains an illegal monopoly on online search and advertising.
The lawsuit follows a 16-month investigation, and repeated promises from President Trump to hold Big Tech to account amid unproven allegations of anti-conservative bias. But reports suggest the department was put under pressure by Attorney General William Barr to file the charges before the presidential election in two weeks’ time.
The idea of regulating Big Tech isn’t itself partisan, however. Earlier this month, House Democrats published a 449-page report looking at all the ways in which Apple, Amazon, Facebook, and Google are monopolistic, and arguing for increased enforcement of antitrust legislation against them. Letitia James, the attorney general of New York, has indicated that seven additional states—including her own—were close to filing their own lawsuit and might join the DOJ’s action later.
The case centers on Google’s tactics and market dominance in search. It currently receives 80% of all search queries in the United States, and the DOJ says it uses the tens of billions of dollars of annual profits from search advertising to unfairly suppress its competition.
Here’s a breakdown of how the DOJ alleges that Google has maintained its illegal monopoly:
Making Google search the default
The suit says Google maintains its advantage through exclusionary agreements worth billions of dollars that make its search engine the default on web browsers, mobile devices, and emerging search technologies like voice assistants and Internet of Things devices. Because most users do not change their default settings, the lawsuit adds, this ends up “making Google the de facto exclusive general search engine.”
The lawsuit specifically singles out Google’s behavior on mobile devices, noting that while its Android operating system is free and open source, in reality it maintains control. Contracts with vendors block forking of Google’s Android software, force the pre-installation of Google apps, and include revenue-sharing agreements that are better for companies that play by Google’s rules.
The lawsuit claims that revenue-sharing agreements with Apple, worth $8 to 12 billion a year and accounting for up to 20% of Apple’s worldwide net income, ensure that Google search remains the default search engine on the Safari browser and iPhones, as well as for Siri and Spotlight, Apple’s system-wide search feature.
The exclusionary contracts cover almost 60% of search queries in the US.
High barriers to entry
Google’s dominance is such that building a competing product is prohibitively expensive. Google is one of just three generalized search companies in the US that use web crawlers—software that constantly looks for and indexes publicly available web pages. The others are Bing and DuckDuckGo. (Yahoo, which has 3% of the market, actually purchases its search results from Bing.)
Creating and maintaining such a search index would require an “upfront investment of billions of dollars,” the lawsuit alleges, and hundreds of million dollars in maintenance costs per year, effectively shutting out smaller competitors from entering the market.
Google’s alleged monopolization of search also amplifies its ability to maintain a superior product, the lawsuit alleges. It dominates the amount of data collected, and its larger data sets can be used to create more accurate algorithms, which in turn results in better search results targeted to each individual user. According to the DOJ, this cycle reinforces Google’s market dominance, unfairly protecting it from the competition.
A monopoly on advertising
Google has also monopolized online search advertisements, according to the lawsuit. Its monopoly on search gives it access to the largest potential audience for advertisers, making it by far the most attractive option. The lawsuit specifically cites the attractiveness of text and shopping ads, both of which appear higher than organic search results.
The online search advertising industry has ballooned to $50 billion, and of that, advertisers pay roughly $40 billion to Google per year.
What the DOJ is seeking to do
Despite these allegations, the Department of Justice is not explicitly looking to break up Google or impose specific fines. Rather, it is asking for “structural relief as needed to cure any anticompetitive harm.” In a press event, DoJ representatives noted that investigations into other tech companies were ongoing, and that it also had not ruled out further charges against Google.
Several hours after the lawsuit was filed, the company called the lawsuit “deeply flawed” in a statement posted to its blog.
“People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” the statement said. “This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use.”
This is not the first time Google has faced scrutiny from American regulators, and it probably won’t be the last. In 2012, the Federal Trade Commission investigated the company before ultimately dropping the case without pursuing charges. In Europe, meanwhile, it has been the target of three separate antitrust lawsuits since 2010, resulting in fines of $9 billion.
What next? The DOJ lawsuit itself will likely take years to make its way through the courts. A 1970s lawsuit against IBM took 13 years to complete, while a 1997 lawsuit against Microsoft took five. In neither case were the companies forced to break up.
Source MIT Technology ReviewRelated posts: