Antitrust Law Daily Google charged with monopolizing search service, search advertising markets
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Tuesday, October 20, 2020

Google charged with monopolizing search service, search advertising markets

By Jeffrey May, J.D.

Following a 16-month investigation, U.S. Department of Justice and 11 states have filed three claims for relief and are seeking injunctive and structural relief. Seven states continue to investigate.

The U.S. Department of Justice and 11 states have filed an antitrust action against Google LLC for abusing its monopoly power in general search services, in search advertising, and in general search text advertising through anticompetitive and exclusionary distribution agreements. According to the complaint filed today in the federal district court in Washington, D.C., in exchange for becoming the preset default general search engine for the most important search access points on a computer or mobile device, Google provides a share of its search advertising revenue to Android device manufacturers, such as Samsung, mobile phone carriers, competing browsers, and Apple Inc. "These agreements work exactly as Google designed them—to foreclose distribution to Google’s search rivals, weakening them as competitive alternatives for consumers and advertisers by denying them scale," the government alleges. The suit seeks "structural relief as needed to cure any anticompetitive harm" and injunctive relief prohibiting the alleged anticompetitive practices (U.S. v. Google, LLC, Case No. 1:20-cv-03010).

The government contends that consumers have been harmed because the challenged conduct has reduced the quality of search (including on dimensions such as privacy, data protection, and use of consumer data), lessening choice in search, and impeding innovation. With respect to advertising, the government argues that Google has the power to charge advertisers more than it could in a competitive market and the ability to reduce the quality of the services it provides them. Through the enforcement action, the government intends to restore competition for American consumers, advertisers, and all companies now reliant on the Internet economy.

The suit was announced at a press conference this morning led by Deputy Attorney General Jeffrey A. Rosen. Makan Delrahim, Assistant Attorney General in charge of the Antitrust Division, recused himself from the Google investigation in February reportedly due to a potential conflict. Rosen was joined by Alexander P. Okuliar, Deputy Assistant Attorney General at the Antitrust Division, and Ryan A. Shores, who was appointed Senior Advisor for Technology Industries in October 2019.

"As with its historic antitrust actions against AT&T in 1974 and Microsoft in 1998, the Department is again enforcing the Sherman Act to restore the role of competition and open the door to the next wave of innovation—this time in vital digital markets," said Rosen in the press release announcing the complaint. At the virtual press event, none of the Justice Department officials would comment on specifics about what structural relief would be necessary to resolve the competition concerns. However, Shores said that "nothing is off the table." The complaint seems to take particular issue with Google’s use of "monopoly profits" to strike deals with device makers and telecommunications carriers.

Okuliar noted that the suit is the result of a 16 month-investigation of Google. He added, however, that the government’s work on the case was "just beginning" as the case heads to court.

In July 2019, the Justice Department announced that it was reviewing whether market-leading online platforms were "engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers." At that time, the Justice Department said that it would proceed appropriately to seek redress if violations of law were identified. While the government did not identify the targets of the investigation by name, it was widely accepted that Google was in the government's crosshairs.

The filing of the suit against Google does not mean that the government’s investigation is over. The officials confirmed that the Justice Department planned to continue its review of market-leading platforms.

AG Barr statement. In a written statement, U.S. Attorney General William P. Barr suggested that the case against Google, which he described as the "gatekeeper of the Internet," was akin to the antitrust action against Microsoft more than two decades ago. "The increased competition following the Microsoft case enabled Google to grow from a small start-up to an Internet behemoth, said Barr. "Unfortunately, once Google itself gained dominance, it resorted to the same anticompetitive playbook. If we let Google continue its anticompetitive ways, we will lose the next wave of innovators and Americans may never get to benefit from the ‘next Google.’"

Today’s complaint states that Google once claimed Microsoft’s practices were anticompetitive. It goes on to say that Google learned from the case against Microsoft to choose its words carefully to avoid antitrust scrutiny. According to the government, Google employees were instructed to avoid using terms such as "bundle," "tie," "crush," "kill," "hurt," or "block" competition, and to avoid observing that Google has "market power" in any market.

State AG efforts. The state attorneys general (AGs) participating in the suit, all Republicans, represent Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas. Justice Department officials suggested that other states were following their own paths but did not object to the allegations.

In September, a multi-state investigation of Google was announced. The probe was said to include AGs from all 50 states. Texas AG Ken Paxton was the designated lead.

Today, Paxton said that the federal/state action "is intended to restore competition and allow rivals and next generation search engines to challenge Google so that the marketplace, not a monopolist, will decide how search services and search ads are offered."

AGs from New York, Colorado, Iowa, Nebraska, North Carolina, Tennessee, and Utah issued a statement, saying that their investigation against Google continues. They expect to know whether they will move forward with litigation in the coming weeks.

"If we decide to file a complaint, we would file a motion to consolidate our case with the DOJ’s," said New York AG Letitia James. "We would then litigate the consolidated case cooperatively, much as we did in the Microsoft case."

Google response. In a blog post, Kent Walker, Google's Chief Legal Officer, called the Justice Department lawsuit deeply flawed. "Our agreements with Apple and other device makers and carriers are no different from the agreements that many other companies have traditionally used to distribute software," said Walker. "Other search engines, including Microsoft’s Bing, compete with us for these agreements. And our agreements have passed repeated antitrust reviews."

Section 230 of the Communications Decency Act. It was noted at the press event that the antitrust concerns raised in the lawsuit were separate from concerns from the Trump Administration and Capitol Hill about bias in content moderation by online platforms and reform of Section 230 of the Communications Decency Act. The government representatives made clear that the antitrust case was not about content moderation. The content moderation discussion involved policy and legislative issues.

In September, draft legislation was sent to Congress by the Justice Department that would make changes to the immunity protections afforded to online platforms by Section 230. It is intended to promote transparency and open discourse and ensure that platforms are fairer to the public when removing lawful speech from their services. The legislation would implement an executive order by President Trump aimed at limiting companies’ ability to claim Section 230’s liability shield for third-party content if they remove or limit access to content.

Companies: Google LLC

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