In another attempt at tackling big tech, the U.S. government filed a civil antitrust lawsuit against Google in late October, alleging that the company has been illegally monopolizing the search and search advertising markets through the use of highly exclusionary contracts and anticompetitive practices. In an increasingly digital society, Google has been heralded as “the gatekeeper of the Internet”, and such a significant suit could have massive implications on the landscape of digital markets in the future.
The Nature of the Lawsuit
There exists little doubt about the extent of Google’s current reach in the digital markets. It currently stands as one of the wealthiest companies in the world, with a market value of $1 trillion. It brought in $162 billion in revenue last year, and has accounted for just under 90% of all general search queries in America. The Department of Justice’s lawsuit against Google is one that is expected to potentially drag on for years to come, and “nothing is off the table” with regards to remedies, according to associate deputy attorney general, Ryan Shores. Specifically, the government seems to be pushing for “structural relief”, which could involve the selling and/or cessation of portions of the company’s business.
The suit is the product of about a year-long investigation that U.S. officials began last summer into Google’s advertising practices. The inquiry then rapidly expanded to encompass search monopoly allegations after the emergence of several complaints from rival tech and media companies. In response, the Justice Department has decided to once again enforce the Sherman Act, an antitrust law regulating enterprise competition that the government has previously used on a number of occasions in the past to combat notable companies in the tobacco, oil, and telecommunications industries.
Anticompetitive Conduct and the Potential Harms
The Justice Department claims that Google locks up digital channels of distribution by implementing a string of highly exclusionary contracts and tying arrangements with manufacturers and distributors such as Apple, LG, Motorola, Samsung, AT&T, T-Mobile, Verizon, Mozilla, Opera, and UCWeb. These contracts include anti-forking agreements that constrain manufacturers and distributors to remain in relation with Google, pre-installation agreements for premium placement of Google products, and revenue-sharing agreements in exchange for preset, default search engine privileges. For instance, the company has long-term agreements with Apple to be the default search engine on Apple’s products. The two tech giants are indeed tremendously reliant on each other – last year, about 50% of Google’s search traffic came from Apple devices, while Google annually pays Apple billions of dollars for the privilege of exclusivity, its payments making up approximately 15 to 20% of all Apple’s profits.
There are a number of reasons why antitrust laws are in place, and why exclusionary and anticompetitive conduct on the part of big tech companies is discouraged. It can harm competition and stunt technological innovation by denying established rivals and emerging startup companies the necessary channels and recognition to compete effectively in the market. The government also alleges that Google’s conduct harms consumers because it diminishes choice and lowers the quality of search services, especially with regards to consumer privacy and data protection. Moreover, the company’s monopoly over the online advertising market allows them to charge higher rates than they would be able to in a competitive market, thereby reducing the quality of the services that Google must provide to advertisers.
In Google’s Defense…
Shortly after the announcement of the U.S. government’s lawsuit, Google’s chief legal officer Kent Walker published a response on the company’s website, calling the claim “[a] deeply flawed lawsuit that would do nothing to help consumers”. On the company’s behalf, he insists that consumers “use Google because they choose to, not because they’re forced to, or because they can’t find alternatives”, and goes on to demonstrate the ease with which users can set up their search engine of choice or alter their default settings. Walker argues that the suit would artificially bolster lower-quality search alternatives, hike up phone prices, and inconvenience users in getting to the search services they want to use. Furthermore, while the government seems to think that Google competes exclusively with other general search engines, the company upholds that in practice, people find information through a variety of mediums, thereby expanding the competitive landscape to include such rival companies as Twitter, Instagram, Pinterest, and Amazon.
Other critics have questioned whether the timing of the suit might be politically-motivated, seeing as how the federal government and Attorney General William P. Barr allegedly rushed to file the claim (against the recommendation of some government lawyers) by the end of October, just weeks ahead of the 2020 presidential election. It might also be noteworthy that all eleven of the state attorneys general that have currently signed on to support the lawsuit represent Republican state governments, and that President Trump has previously criticized tech companies like Google and other widespread media platforms for politically leaning towards the left. However, both conservative and liberal leaders alike have denounced the lack of regulation over big tech in the past, and concerns that arise in the meantime regarding any political undertones within the lawsuit remain as speculation.
“Whether led by Donald Trump or Joe Biden, the next administration should think systematically and comprehensively about the power of tech companies and what needs to be done about it.” – Bill Baer, former chief of the Justice Department’s antitrust division
Judging from the parallels between the present case and the Justice Department’s 1998 suit against Microsoft, it is clear that this development is only the start of something much bigger. Colorado, Iowa, Nebraska, and New York state governments have asserted that they are still investigating Google’s business practices, and may sign on with the other state attorneys general in supporting the case at a later date. Regardless of what the court decides, the stakes remain considerable – either a potential restructuring of one of the world’s biggest digital empires, or a huge hampering of the government’s efforts in enforcing antitrust laws onto the big tech companies that it’s been battling for years.
Emily Xiang is a first year JD candidate at Osgoode Hall Law School. She is an IPilogue editor and a 1L executive for the Intellectual Property Society of Osgoode.