On October 20th, 2020, the Department of Justice filed suit against Google in the U.S. District Court for the District of Columbia. In its complaint, the D.O.J. alleged that the contracts Google maintains with smartphone manufacturers like Apple to keep its search engine as the factory default on most smart phones violates US antitrust law. While litigation will likely drag on for years, as it did when the D.O.J. sued Microsoft for antitrust violations in 1998, the outcome will undoubtedly have a huge impact on the tech industry regardless of the outcome.
What’s All The Fuss About Anyways?
To put the D.O.J.’s allegations into context, Google pays Apple $7 billion a year to keep its search engine as the default on safari. Being the developer of the Android operating system, Google is in a strong position to make its self-named search engine the factory default on android devices. While Google claims it does not require smartphones running Android to keep Google as the default search engine, it usually is. The result is that Google holds 86.86% of the search engine market, and is so dominant in the popular conscious that “googling” has exists as a verb to describe searching for information on the internet.
“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 suit. “That Google is long gone. The Google of today is a monopoly gatekeeper for the internet.”
Why does Google go through so much trouble to stay on top? Unsurprisingly, it’s all about the money. Ad revenue brought in $21 billion last quarter, or over half of Google’s total revenue. By staying the dominant search engine, Google can guarantee prospective advertisers a massive audience to connect with, thereby bolstering the premium it can place on ad space. These facts by themselves already paint a compelling picture as to why the D.O.J. would be interested in Google. Add in growing public concerns over data privacy and the influence big tech has in the everyday American’s life, the portrait all but screams in neon letters “ITS TIME TO TRUST BUST.”
The Price Of Doing Business
Breaking up Google could send shockwaves through the tech industry and allow prosecutors to lock onto targets already painted on the backs of other tech giants. It is easy to understand why the stakes are high when looking at Google’s potential defenses.
While Google has yet to file a response to the D.O.J.’s complaint, it has recently gone on record saying that it does not have a monopoly because other competition does exist and is readily accessible. No internet browser is locked into using Google for its search engine; users can switch to competitors anytime they want. Moreover, Google argues that two other behemoths of the tech industry, Amazon and Facebook, are direct competitors, with Amazon alone taking up over half of online shopping searches. To top it all off, Google asserts that business deals to make its search engine the default on many web browsers are completely legal.
Should Google’s consumer choice and availability of competition arguments fail, the practical effect could be to make a unique quality of the internet legally irrelevant. Unlike with physical markets, the internet is much less constrained by geography, allowing consumers access to a plethora of competing products and services so long as they know where to look. If these arguments fail, the size of an accused company and the legality of its business practices would become the critical points of contention. While no means a slam dunk for breaking up Google or any of the other big tech companies, a big shield against antitrust action would still be lost. Alternatively, although less likely, the size and popularity of a company like Google that operates largely on the internet could transform normally legal product promotions into antitrust violations because of how the promotions would out compete and drown out the competition.
Should Google win in court, giant tech companies could be far harder to pin down with antitrust law. Business practices that are designed to ensure market dominance could be fair game, ensuring that companies who have the resources to effectively utilize them stay on top. Moreover, if Google makes a consumer choice and availability of competition argument that wins, all of a sudden it gets a lot harder to say the size of a company’s market share on the internet matters for antitrust reasons so long as alternatives do exist.
It will be long, drawn out, and bloody, but Google versus the D.O.J. will be a battle to watch.