United States v Google: a re-found willingness to regulate technology monopolies?
On 20 October 2020, the US Department of Justice (DoJ) and 11 State Attorney-Generals[1] filed a much anticipated complaint against Google for its unlawful monopolisation of the search and search advertising markets in violation of Section 2 of the Sherman Act (the Complaint).
The omplaint is the culmination of a year-long investigation into Google’s conduct in these markets and follows the report of the US House of Representatives’ Judiciary Committee's Antitrust Subcommittee[2] on competition in digital markets which was published at the beginning of October. The timing of the Complaint (two weeks before the date of the US Presidential election) and its overwhelming similarity with the Microsoft antitrust case - now some twenty years ago - makes it all the more interesting.
The complaint
The complaint alleges that Google:
- is a monopolist in the markets for general search services[3], search advertising[4] and general search text advertising[5].
- has been unlawfully maintaining its monopoly by entering into anticompetitive and exclusionary agreements and engaging in anticompetitive conduct to “lock up distribution channels and block rivals”, including paying billions of dollars to distributors to secure default status for its general search engine.
Google’s alleged conduct prevents rivals from entering these markets or increasing their market shares.
Mobile devices:
- Google has entered into agreements with Apple which require that Google is the default general search engine on Safari, Siri and Spotlight. Apple is incentivised through revenue sharing agreements worth an estimated $8-12 billion per year, which makes up almost 15-20% of Apple’s worldwide income.
- Google controls the Android operating system with exclusionary agreements that tie device manufacturers and carriers to Google’s system. Google’s agreements foreclose distribution opportunities to rival general search engines. The agreements include:
- So-called “anti-forking” agreements that hinder the development of alternative operating systems based on Android’s programme code.
- Pre-installation agreements that require preinstallation of Google’s apps and favourable placement of apps on mobile device screens.
- Bundling of Google search with a suite of Google apps.
- Revenue sharing agreements that entitle Google to “default” status in exchange for a substantial portion of Google’s search advertising revenues.
Browser distribution:
- Google has entered into revenue sharing agreements with web browsers, such as Apple's Safari and Mozilla's Firefox, to ensure Google is the default general search engine for those browsers.
Future abuses:
- Interestingly, the Complaint also addresses forward-looking aspects of Google's conduct. It asserts that Google is positioning itself to dominate the next generation of distribution channels for general search engines, including smart watches, smart speakers, smart TVs, and connected automobiles.
The Complaint concludes that Google’s conduct harms competition, innovation and consumers in the relevant markets and that the anticompetitive effects of that conduct outweigh any procompetitive benefits in those markets. The Complaint seeks declaratory, injunctive and structural relief to cure any anti-competitive harm and to restore competition in the affected markets.
Google’s response
Google has strongly denied its practices are anticompetitive, describing the Complaint as ‘deeply flawed’. However, Google does admit to paying to promote its services and attempts to deflect criticism by noting that other technology companies use these types of agreements and listing devices that install rival general search engines.
An opportunity for the US to show it is tough on big tech (again)
The Complaint is the most decisive antitrust action the US government has taken against a US technology company in over two decades. The last company to receive this level of antitrust scrutiny was Microsoft in 1993, a case which resulted in a settlement in 2001 with Microsoft agreeing to share its application programming interfaces with other companies. More recently, the US Federal Trade Commission’s 2011 investigation into Google’s dominance in the search advertising market did not lead to proceedings.
On the other side of the Atlantic, the European Commission (EC) has been more active in the technology sector, adopting three separate infringement decisions against Google with fines of more than €8 billion: Search (Shopping)[6], Android[7], and AdSense[8].
The Complaint has a number of similarities to the 2018 EC Android Decision, which found that Google imposed unlawful restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general search. If the Complaint is upheld at trial, it will have lasting ramifications both for Google and the technology sector. However, it remains to be seen whether the Complaint will mark a lasting shift in US antitrust regulation towards a more interventionist approach.
With thanks to intern Ben Evans for his assistance with this blog.
Footnotes
[1] Attorney-Generals of the States of Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina and Texas.
[2] Subcommittee on Antitrust, Commercial and Administrative Law.
[3] Services which allow users to find information across the internet using a general search engine such as Google, DuckDuckGo, Bing or Yahoo! Search.
[4] Advertisements (ads) which appear at or close to the top of a search engine results page (SERP) in response to a user’s query, including general search text ads and other, specialised search ads (which usually contain dynamic features such as images). When they appear is determined by the Google Ads auction.
[5] Advertisements which appear at or close to the top of a SERP in response to keywords in the user’s search terms. They are text based and do not contain images. They are labelled “ads” or “sponsored”. When they appear is determined by the Google Ads auction.
[6] Case AT.39740 Google Search (Shopping).
[7] Case AT.40099 Google Android (the EC Android Decision).
[8] Case AT. 40411 Google Search (AdSense) (the text of the AdSense decision is yet to be published).
