Mountain View’s Google, the company that once adopted the motto “don’t be evil,” was accused on Tuesday, Oct. 20, of illegally maintaining a monopoly position in internet search in the United States through anticompetitive and exclusionary tactics.
In a highly readable 57-page civil complaint filed by the U.S. Department of Justice and 11 state attorneys general in the U.S. District Court for the District of Columbia, the government requested broad categories of relief against Google including injunctions and “structural” relief, a term that includes mandated changes in a defendant’s business organization.
Google issued a brief statement that said the government’s case was “deeply flawed.”
The complaint alleges that Google has a monopoly and holds market power in three different but related antitrust markets: “general search services,” “search advertising” and “general search text advertising.”
General search services are searches made through the search engines, like Google and Bing.
Search advertising and general search text advertising are markets in which Google sells advertisers the opportunity to deliver their ads to targeted consumers searching for a particular product or service.
The complaint is peppered with statistics about Google’s share in each of those markets.
According to the government, Google’s only competitors in the general search services market are Bing, Yahoo!, DuckDuckGo and a few smaller companies. Google’s share of searches in that market is 88%, according to the complaint.
Google’s share of the other markets is also substantial: the complaint alleges that Google holds more than a 70% share of each of the search advertising and general search text advertising markets.
The complaint was brought under the Sherman Act, the antitrust law that most directly addresses monopoly power. Under U.S. antitrust law, monopolies are not illegal by themselves, however a monopolist that protects its monopoly through use of anticompetitive schemes and tactics, as opposed to simply winning through market-based competition, is subject to penalty.
A central part of the complaint focuses on Google’s control of “search access points,” the jumping off place for conducting a search. The most common search access points both for laptop and desktop computers, and for mobile devices such as smart phones and tablets, are web browsers such as Google Chrome, Firefox or Apple’s Safari.
According to the complaint, the best way for the search engine to get traffic is for its application to be the default search service installed on the device. While consumers may be able to change the default search engine, the complaint alleges that consumers “rarely do.”
This leaves “the preset default general search engine with de facto exclusivity. As Google itself has recognized, this is particularly true on mobile devices, where defaults are especially sticky,” according to the complaint.
The government identifies a series of anticompetitive tools that Google has used to assure that it has the lion’s share of search access points. Among those tactics are exclusionary agreements with distributors such as revenue-sharing agreements with Apple that make Google’s search engine the default provider of search services on all Apple phones and computers.
According to the government, Google also has contractual arrangements with the makers of Android phones that result in a similar exclusivity.
The government alleges that “Google’s exclusionary agreements cover just under 60% 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% of the general search queries in the United States.”
According to the complaint, Google is so dominant as a search engine 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 effect of Google’s control over search access points means that “new search models are denied the tools to become true rivals: effective paths to market and access, at scale, to consumers, advertisers, or data,” according to the complaint.
The complaint alleges — and Google is certain to contest — that Google’s practices have hurt both consumers and advertisers.
Though consumers do not pay money to use the general search services, the government alleges that consumers are nevertheless injured 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.”
With respect to the markets for search advertising and the general search text advertising, Google’s practices harm advertisers by allowing Google to collect “prices above the level that would prevail in a competitive market,” according to the complaint.
The last tech antitrust case in the United States of similar scale and scope was the 1998 case, U.S. v Microsoft, which challenged Microsoft’s use of its market power to bundle its web browser, Internet Explorer, with the Windows operating system that was widely used on personal computers.
That case took more than three years to resolve and ultimately ended in a settlement that placed some restrictions on Microsoft but did not break up the company.
In the Google complaint, the government harkens back to that case and notes that 20 years ago, Google claimed Microsoft’s practices were anticompetitive, and yet today “Google deploys the same playbook to sustain its own monopolies.”
That barb complements the two sentences the government used to begin the complaint.
As the opening salvo in what will likely be a long war, the government lawyers wrote: “Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet. That Google is long gone.”