7:17am PT by Eriq Gardner
Justice Department Hits Google With Antitrust Lawsuit
Google has used its behemoth might as the world's biggest search engine to the detriment of consumers, rivals, and others, according to a complaint filed by the Department of Justice on Tuesday. The action is the culmination of a years-long investigation into Big Tech and could become the biggest antitrust case since the U.S. government took on Microsoft at the turn of the century. That latter suit influenced both the structure and course of digital innovation, and if the pattern holds again, the newest case against Google could be as sweeping in its impact.
In the complaint filed in D.C. federal court (read in full below), the DOJ and 11 states focus on how Google has allegedly abused market power to protect its 90 percent share of internet search and 95 percent share of mobile search. The government asserts that Google is violating Section 2 of the Sherman Act through its alleged monopoly maintenance.
"Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet," states the complaint. "That Google is long gone. The Google of today is a monopoly gatekeeper for the internet, and one of the wealthiest companies on the planet, with a market value of $1 trillion and annual revenue exceeding $160 billion. For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising—the cornerstones of its empire."
According to the government, Google has been employing Microsoft's old playbook and protecting its search monopoly through "exclusionary agreements, including tying arrangements" and has also "engaged in anticompetitive conduct to lock up distribution channels and block rivals." The government points to Google's deals with mobile phone manufacturers which allegedly secure search engine default status and also require distributors to take a bundle of Google apps, feature them prominently, and not engage with Google's rivals.
"Google has thus foreclosed competition for internet search," continues the complaint. "General search engine competitors are denied vital distribution, scale, and product recognition—ensuring they have no real chance to challenge Google. Google is so dominant that 'Google' is not only a noun to identify the company and the Google search engine but also a verb that means to search the internet."
The court papers also rely on Google's internal documents. For example, in one notable section, the government addresses how Google pays Apple billions of dollars a year to be the de facto exclusive search engine on the Safari web browser on Apple devices. (Few consumers switch even if they are technically able to do so.) "Indeed, Google’s documents recognize that 'Safari default is a significant revenue channel' and that losing the deal would fundamentally harm Google’s bottom line," states the complaint. "Thus, Google views the prospect of losing default status on Apple devices as a 'Code Red' scenario. In short, Google pays Apple billions to be the default search provider, in part, because Google knows the agreement increases the company’s valuable scale; this simultaneously denies that scale to rivals."
Elsewhere, the government claims that Google's so-called "anti-forking agreements" are preventing alternative operating systems to develop on Android devices. "Distributors know that any violation of an anti-forking agreement could mean excommunication from Google’s Android ecosystem, loss of access to Google’s must-have GPS and Google Play, and millions or even billions of dollars in lost revenue sharing," alleges the government.
The Justice Department is seeking structural relief, which could mean divestitures, plus injunctive relief against Google continuing to engage in alleged anticompetitive practices.
Alphabet's Google may attempt to defend itself by pointing to search rivals (such as Microsoft's Bing and DuckDuckGo), the zero cost for consumers who wish to switch, the competitive bidding to get on various distribution platforms, the benefits to innovation, and consumer preference. It's also possible that Google attacks the suit as politically motivated coming just weeks before an election amid talk about bias from digital platforms. Regardless, the case will take years to litigate, and unless there's a settlement or unexpected change in direction, it will likely outlast the Donald Trump administration.
In a blog post after the filing, Google SVP Kent Walker wrote, "Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to, not because they're forced to, or because they can't find alternatives. 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."
More legal actions against Google could soon follow as more state attorneys general are said to be eyeing their own suit. That one could be a broader attack that also challenges Google's conduct with respect to its advertising services.
Google has recently tapped two powerhouse law firms — Williams & Connolly as well as Wilson Sonsin — to handle the defense.