TR Daily DoJ, 11 State AGs File Antitrust Suit Against Google; Other States Weigh Options
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Tuesday, October 20, 2020

DoJ, 11 State AGs File Antitrust Suit Against Google; Other States Weigh Options

The U.S. Department of Justice announced today that, along with 11 state attorneys general, it has filed an antitrust complaint against Google LLC for allegedly unlawfully maintaining monopolies in the markets for general search services, search advertising, and general search text advertising through anticompetitive and exclusionary practices, such as tying arrangements and other agreements with device manufacturers and browser developers.

In a conference call with reporters, Associate Deputy Attorney General Ryan Shores, who is also DoJ senior adviser–technology industries, described Google’s practices as "a web of exclusionary and interlocking agreements that shut out competitors." Deputy Attorney General said that if the government does not act to stop these practices, "we could lose the next wave of innovation."

Justice Department officials emphasized that their investigation of Google’s practices—part of a larger review of competitive practices by online platforms—has been going on for more than a year and they plan to continue their review of other platforms.

In a statement, Attorney General Bill Barr said, "This is an important milestone, but not the end of our review of market-leading online platforms. The Department will continue to vigorously investigate and enforce the antitrust laws where appropriate to protect and promote competition in the digital economy for the benefit of the American consumer."

Mr. Rosen also emphasized—in response to a question about whether Justice had discussed the case with the White House—that the antitrust litigation is "very separate" from concerns about political bias by social media platforms, which led President Trump to issue an executive order last spring calling for actions by Justice, the Federal Trade Commission, the National Telecommunications and Information Administration, and the FCC to address potential changes or reinterpretations of the immunity for platforms and other Internet intermediaries for liability over third-party content in section 230 of the 1996 Communications Decency Act (TR Daily, May 28). "That’s a totally separate set of concerns," and the development of legislative proposals at DoJ as directed by the executive order was carried out by a different part of the department, he said.

Also today, New York State Attorney General Letitia James and the state attorneys general of Colorado, Iowa, Nebraska, North Carolina, Tennessee, and Utah—four Democrats and three Republicans—said that they expect to seek to consolidate their own lawsuit with the Justice Department’s if they decide to follow one.

"Over the last year, both the U.S. DOJ and state attorneys general have conducted separate but parallel investigations into Google’s anticompetitive market behavior. We appreciate the strong bipartisan cooperation among the states and the good working relationship with the DOJ on these serious issues. This is a historic time for both federal and state antitrust authorities, as we work to protect competition and innovation in our technology markets. We plan to conclude parts of our investigation of Google in the coming weeks. If we decide to file a complaint, we would file a motion to consolidate our case with the DOJ’s. We would then litigate the consolidated case cooperatively, much as we did in the Microsoft case," they said in a statement.

Joining the Justice Department in its complaint filed with the U.S. District Court for the District of Columbia are the attorneys general of Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas—all Republicans.

Asked about the separate line taken by a bipartisan group of state AGs and the fact that the state AGs’ signing on to the DoJ complaint were all Republicans, Mr. Rosen said that "other state AGs have indicated that they share the concerns that we have." He added that he doesn’t view "the fact that sometimes people want to do their own thing" as indicating they don’t support DoJ’s action. He also noted a recent report by the Democratic-controlled House Judiciary Committee’s antitrust subcommittee that found antitrust concerns in digital markets (TR Daily, Oct. 6).

The complaint filed by DoJ and the 11 state AGs says that "Google pays billions of dollars [as a percentage of its search advertising revenue under revenue-sharing agreements (RSAs)] each year to distributors—including popular-device manufacturers such as Apple, LG, Motorola, and Samsung; major U.S. wireless carriers such as AT&T, T-Mobile, and Verizon; and browser developers such as Mozilla, Opera, and UCWeb—to secure default status for its general search engine and, in many cases, to specifically prohibit Google’s counterparties from dealing with Google’s competitors. Some of these agreements also require distributors to take a bundle of Google apps, including its search apps, and feature them on devices in prime positions where consumers are most likely to start their internet searches."

"Today, Google has revenue sharing agreements (RSAs or MIAs) with all major U.S. carriers and Android device manufacturers, as well as a number of smaller carriers and manufacturers. Google’s revenue sharing agreements (and preinstallation agreements) with Android device manufacturers, together, account for more than 30 percent of mobile device usage in the United States," it adds.

"In Google’s latest round of negotiations with some Android manufacturers, Google has replaced RSAs with mobile incentive agreements (MIAs), under which Google pays manufacturers to (1) forego preinstalling rival general search services on their Android devices and (2) comply with a significant number of ‘incentive implementation requirements’—including preloading up to fourteen additional Google apps. LG and Motorola have MIAs with Google," it says.

The complaint says that "Google’s exclusionary agreements cover just under 60 percent of all general search queries. Nearly half the remaining queries are funneled through Google owned-and-operated properties (e.g., Google’s browser, Chrome). Between its exclusionary contracts and owned-and-operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States. Largely as a result of Google’s exclusionary agreements and anticompetitive conduct, Google in recent years has accounted for nearly 90 percent of all general-search-engine queries in the United States, and almost 95 percent of queries on mobile devices."

It also notes Google requires device manufacturers to agree to "anti-forking" provisions that "specifically forbid manufacturers from developing or distributing versions of Android that do not comply with Google-controlled technical standards" if they want to obtain "a license to distribute devices with must-have proprietary Google apps and APIs," or application programming interfaces. "Over time, Google has chosen to include important features and functionality in Google’s own ecosystem of proprietary apps and APIs, rather than the open-source Android code," the complaint adds.

It notes that Google "has had a series of search distribution agreements with Apple," which does not use the Android operating system, to use Google as the default search service in its Safari browser.

In laying out the harms from Google’s practices, the complaint says, "By restricting competition in general search services, Google’s conduct has harmed consumers by reducing the quality of general search services (including dimensions such as privacy, data protection, and use of consumer data), lessening choice in general search services, and impeding innovation."

It adds, "Google’s exclusionary conduct also substantially forecloses competition in the search advertising and general search text advertising markets, harming advertisers. By suppressing competition, Google has more power to manipulate the quantity of ad inventory and auction dynamics in ways that allow it to charge advertisers more than it could in a competitive market. Google can also reduce the quality of the services it provides to advertisers, including by restricting the information it offers to advertisers about their marketing campaigns."

In addition, the complaint says that "Google’s conduct also has harmed competition by impeding the distribution of innovative apps that offer search features that would otherwise challenge Google. Google has also harmed competition by raising rivals’ costs and foreclosing them from effective distribution channels, such as distribution through voice assistant providers, preventing them from meaningfully challenging Google’s monopoly in general search services."

The complaint seeks an injunction to bar Google from the allegedly anticompetitive practices it describes, as well as "structural relief as needed to cure any anticompetitive harm"; "any other preliminary or permanent relief necessary and appropriate to restore competitive conditions in the markets affected by Google’s unlawful conduct"; "any additional relief the Court finds just and proper"; and legal costs for DoJ and the state AGs participating in the complaint.

In a blog post, Google Senior Vice President–global affairs Kent Walker said, "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," Mr. Walker added.

He said that Google’s payments to device makers to make Google their default search services are similar to payments by cereal producers for desirable positions on grocery store shelves.

"Other search engines, including Microsoft’s Bing, compete with us for these agreements. And our agreements have passed repeated antitrust reviews," Mr. Walker said.

"We understand that with our success comes scrutiny, but we stand by our position. American antitrust law is designed to promote innovation and help consumers, not tilt the playing field in favor of particular competitors or make it harder for people to get the services they want. We’re confident that a court will conclude that this suit doesn’t square with either the facts or the law," he continued.

"In the meantime, we remain absolutely focused on delivering the free services that help Americans every day. Because that’s what matters most," he concluded.

Congressional praise for DoJ’s action came from both sides of the aisle and both chambers.

Sen. Josh Hawley (R., Mo.) said, "Today’s lawsuit is the most important antitrust case in a generation. Google and its fellow Big Tech monopolists exercise unprecedented power over the lives of ordinary Americans, controlling everything from the news we read to the security of our most personal information. And Google in particular has gathered and maintained that power through illegal means. That is why I launched a sweeping antitrust investigation of Google when I was Missouri Attorney General, and that’s why I stand behind the Department of Justice’s actions today. But to be clear—this is just a first step, and I will continue to fight for the legislative solutions needed to end the tyranny of Big Tech."

House Judiciary Committee antitrust subcommittee Chairman David Cicilline (D., R.I.) said, "Antitrust enforcement against Google is long overdue. The Subcommittee’s investigation uncovered extensive evidence showing that Google maintained and extended its monopoly to harm competition. It is critical that the Justice Department’s lawsuit focuses on Google’s monopolization of search and search advertising, while also targeting the anticompetitive business practices Google is using to leverage this monopoly into other areas, such as maps, browsers, video, and voice assistants."

House Judiciary Committee Chairman Jerry Nadler (D., N.Y.) said, "There is bipartisan agreement in Congress and among federal and state antitrust enforcers that protecting competition and innovation online is essential to our economy. Today’s antitrust lawsuit against Google is an important step for ensuring a competitive online space. The Committee will continue our robust oversight of the antitrust laws and the antitrust agencies to ensure that we address the rise of monopolization in our economy. As I said throughout the House investigation of digital markets, the antitrust laws are a critical bulwark against concentrations of economic power, and robust enforcement of the antitrust laws is paramount for safeguarding both a healthy economy and vibrant democracy."

Sen. Amy Klobuchar (D., Minn.), ranking minority member of the Senate Judiciary Committee’s subcommittee on antitrust, competition policy and consumer rights, said, "For years we have heard complaints that Google has used its dominance in online search markets to undermine rivals and limit competition. I am pleased that the Justice Department is finally taking action, but I hope the questionable timing of the suit so close to the election doesn’t undercut the work that must be done for American consumers in the weeks and months ahead."

She added, "While the lawsuit is an important start, it will likely be passed to a new Attorney General, as well as state attorneys general across the country. It will be on them to finish the job and get real results. We also need to pass my bills and make many pro-competition changes to our antitrust laws so that they can be used more effectively to take on the sophisticated mega-mergers and other exclusionary conduct we see in today’s economy."

Industry was less enthused.

Computer & Communications Industry Association President Matt Schruers said, "One reason the U.S. technology sector is the envy of the world is antitrust policy that encourages dynamic markets that reward innovators and disrupt sluggish competitors. It cannot escape notice that this suit was hurried out on the eve of an election where the Administration has aggressively pressured tech companies to take actions in its favor. Antitrust law should be driven by consumers’ interests, not political imperatives. We look forward to a court’s review of the facts and the evidence."

Consumer Technology Association President Gary Shapiro said, "While we familiarize ourselves with details of the lawsuit, we are concerned that the Department of Justice antitrust action against Google is unfair as it distorts existing antitrust standards and seeks to create new laws and apply them retroactively against one of America’s greatest companies." —Lynn Stanton, [email protected]

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