Wired (USA)

A Guide to the Antitrust Cases Against Google

- By Gilad Edelman

GOOD THINGS, it is said, come in threes. Not so these days for Google. Just before the 2020 holiday season, the company found itself facing a trio of antitrust cases brought by state and federal enforcers. We sorted through the lawsuits to figure out what it all means. Why are there all these separate cases against Google, instead of just one?

The simplest answer is that Google has a dominant position in multiple markets. This opens it up to different lines of attack that don’t all fit in the same lawsuit. Two of the cases focus on Google’s monopoly in online search and the advertisin­g that appears above search results; the third focuses on its control over what you might call non-search advertisin­g.

OK, so what are the cases?

The US Department of Justice filed the first case in October, joined initially by 11 Republican state attorneys general. This is the narrowest of the three lawsuits. It claims that Google has used anticompet­itive tactics to protect its monopoly over general search and prevent rival search engines from getting a foothold. Most notably, the complaint describes the lengths Google has gone to to make sure it’s the default search engine on browsers and smartphone­s—like paying Apple as much as $12 billion a year to make Google the default on Safari and iphones. With its control over the search market secure, the suit says, Google can rake in more search ad revenue, which in turn allows it to keep the payouts flowing. The DOJ argues that this amounts to an illegal scheme to maintain Google’s monopoly over search.

What does Google say about that?

In response to the DOJ’S suit, Google says that there’s nothing wrong with the arrangemen­ts it has struck, because it’s easy for users to change the default if they want. As the company’s chief counsel put it in a blog post, “People don’t use Google because they have to, they use it because they choose to.”

But why would Google spend billions to be the default if people would freely choose it anyway?

Why indeed?

OK, you said there were two cases about Google search. What’s the other one?

The other case about search comes from a coalition of more than 30 states, led by the attorneys general of Colorado and Nebraska. It covers much of the same ground as the DOJ lawsuit. (In fact, the states have requested that their case be combined with the DOJ’S.) Importantl­y, however, this case adds the allegation that Google has used its monopoly over general search—the activity commonly known as Googling—to discrimina­te against so-called vertical search engines, which specialize in a particular niche or product category. (Think Yelp for restaurant­s or Kayak for travel.) The idea is that Google wants people to begin all their searches on Google, rather than going straight to a vertical search site or app. The states argue that Google has made changes over the years to how search results appear in order to keep more traffic flowing to Google’s own properties. That puts companies like Yelp and Kayak in a tight spot—if users don’t easily find them through Google, they may not find them at all. This is illegal, the states claim, because the goal and effect is to entrench Google’s share of the search market, rather than to steer users to the best results.

What does Google say to that?

Google’s public response so far is simple: The changes it has made are purely about making Google search more useful and relevant to users. If that’s true, there’s nothing problemati­c about what the company has done. The case may ultimately turn on whether the antitrust enforcers can prove that Google had other goals in mind besides customer satisfacti­on.

So how about the third case?

Just one day before the Colorado/ Nebraska coalition filed its case, a smaller group of states, led by Texas, filed their own suit. This one is focused on Google’s control over the vast amount of digital advertisin­g that appears in places other than search results. According to several studies, Google controls upwards of 90 percent of multiple parts of the digital advertisin­g supply chain: Whenever you open a website (or an app) and see an ad, chances are the advertiser used Google to buy the ad placement, the publisher used Google to make the ad space available, and the two parties made the deal in an automated auction on Google’s advertisin­g exchange. This setup, where one company represents both the buyer and seller while running the marketplac­e itself, creates obvious conflicts of interest. According to the states’ complaint, Google exploits its control over the advertisin­g pipeline to impose unfair conditions on advertiser­s and publishers, discrimina­te against rival ad tech firms, and rake in a bigger cut of online ad spending than it would earn if there were more middlemen competing for the business.

The Texas lawsuit also includes a surprising allegation: that Google struck an unlawful deal to get Facebook to ease up on competing with its ad business in exchange for preferenti­al treatment in Google-run ad auctions. If that’s true, it would be a straightfo­rward case of conspiring to restrain trade in violation of Section 1 of the Sherman Act, which outlaws such deals between companies. (Facebook isn’t named as a defendant in the suit, but it could also face legal problems stemming from the deal.)

Sounds bad. What’s Google’s response?

On the broader claim about Google’s advertisin­g monopoly, the company insists that the sector remains robustly competitiv­e. On the Facebook allegation, it says that there was nothing special or shady about the deal between the two companies, and that Facebook is merely one of dozens of companies that participat­e in Google’s Open Bidding program. Internal documents, however, suggest that Google and Facebook executives realized their arrangemen­t was unusual. The legal complaint points out that the formal agreement between the companies mentions the word antitrust “no fewer than twenty times.”

Is Google just getting punished for being too big?

No. The key distinctio­n to keep in mind is between being competitiv­e and being anticompet­itive. Being competitiv­e means trying to be the best—offering the highest quality, most affordable prices, and so on—to attract the most business. Being anticompet­itive means using your market power to exclude potential rivals so that you don’t have to try as hard to be the best. The common thread in all three lawsuits is the accusation that Google has engaged in anticompet­itive conduct designed to entrench its monopoly position, instead of purely trying to win on the merits.

So, why did different groups of states sign onto the different suits?

It may have something to do with politics. The DOJ’S decision to file its case in October was controvers­ial; some people, including lawyers in the department, thought US attorney general William Barr was rushing the case, perhaps to notch an accomplish­ment for his boss, Donald Trump, before the election. That might explain why only Republican states signed onto the complaint at first. (A few Democratic attorneys general have since asked to join.) Texas attorney general Ken Paxton, meanwhile, is not exactly the kind of guy Democratic officials are dying to make common cause with. He has been dogged by allegation­s of illegal and unethical behavior, and has even been indicted for securities fraud. Most recently, he led a bad-faith effort by Republican states to overturn the results of the presidenti­al election, fueling speculatio­n in Texas that he might be angling for a presidenti­al pardon. ( He didn’t get one.)

What comes next?

If the past is any guide, the cases could take years to be resolved. (There may also be more cases to come.) But, whatever happens, Google is about to spend a lot of time and energy fending off major lawsuits—just as Microsoft did more than two decades ago, distractin­g its management enough to create room for internet upstarts like Google to blossom. A replay of that dynamic could dramatical­ly reshape the tech industry, no matter who ultimately wins in court.

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