In US v Google, the Department of Justice aims to break what it sees as an unfair monopolistic position in search. The DoJ alleges that through a series of deals with Apple and other firms, it ensured that Google was made the default search engine. Google, on the other hand, says that its virtual monopoly on search is purely a function of the quality of its product. Not since the DoJ took on Microsoft in the 1990S, has it launched such a massive antitrust campaign. After hearing Google’s closing arguments just under a fortnight ago, Judge Amit Mehta of the U.S. District Court for the District of Columbia, said that he had “no idea” what he was going to do. The case is historic, and is part of a series of four cases that began under the Trump Administration, and whose purpose is to rein in Big Tech. The consequences will be felt throughout the world.
Google’s Undeniable Dominance
For context, Google’s dominance in search is so large that in a chart of its market share and innovative use of AI, such as the one below, its rivals barely register. Google, a decision of Alphabet, has 91.55% of the search market, compared to 3.11% for Bing, 1.83% for Yandex, 1.21% for Yahoo!, 1.02% for Baidu, and 0.54% for DuckDuckGo. On the face of it, it should be easy to prove that Google is a monopolist.
Source: Stats Counter
The Arguments
The DoJ certainly put forward a lot of evidence to show that Google paid Apple at least $10 billion a year in order for it to be the default search engine on Safari. The company also paid Verizon and Samsung for the similar privileges. Alphabet’s CEO, Sundar Pichai, said he recognised the value of being the default search engine on mobile, laptops and tablets. Google, however, contended that even though Microsoft’s Bing had a small share of the search market, that it still had to compete with Microsoft to be the default search engine. In addition, John Schmidtlein, one of Google’s lawyer’s, argued that these arrangements were perfectly legal revenue-sharing agreements whose purpose was to ensure that carriers conducted updates and secured data. The government’s key witness, MIT economics professor Michael Whinston, pointed to the firm’s ability to raise advertising fees with impunity, as a sign of its monopoly position. The professor also said that the company’s dominance was so great that it could merely reap monopoly profits without investing in improving the product. Schmidtlein, however, pointed to reviews of mobile phones which showed that customers were less satisfied when Bing was their default search engine. In fact, Apple has considered having its own search engine, investing in Bing and making it native to Safari, or buying Bing from Microsoft, but, it refrained from doing so for fear of competing with Google’s search engine, and, for fear of losing the billions generated from these agreements.
Microsoft’s CEO, Satya Nadella, gave an additional and intriguing reason for why these agreements were in place: if Google was not the default search engine, it would then compete with Apple’s products, promoting apps such as GMail, Maps, and YouTube, and its own browser, Chrome. Nadella gave the example of Apple’s Spotlight, which forced Google to introduce similar features in Chrome. In this way, Nadella framed the deals more as peace treaties than monopolistic payments.
Antitrust Law Is Not Fit for Purpose
When the Biden Administration appointed Lina Khan to be the Federal trade Commission’s chairperson, it was in recognition of the power of her legal work and understanding of the weaknesses of modern antitrust law. In her seminal paper, Amazon’s Antitrust Paradox, Khan laid bare just what was wrong with antitrust law. Antitrust law is built on the theory that monopolies exploit consumers through eye-gouging, constantly raising prices. This stands in contrast with how platform-based businesses such as Amazon,a nd in this case, Google behave. It is notable that the DoJ refrained from making the argument that Google was raising prices for consumers, because, after all, Google is free. So under current legal frameworks, there is no harm to consumers, even if driving prices down is done to fight off competitors. Amazon, for instance, deliberately drove its prices down in the first decade or decade and a half of its existence, to build a lead on rivals who could not afford to be as cheap as Amazon. It is unlikely that Judge Mehta would intervene to end contracts between peers. If, however, the judge decided that these contracts were improper, the effect would simply be to prevent Apple and other firms from earning money from these revenue-sharing agreements, without actually changing its decision-making regarding default search engines. At this stage, Google’s dominance is baked in, the word is already synonymous with search. For this reason, the government has struggled to beat back Big Tech, because the law simply has not adjusted quickly enough to a world where monopolies drive down prices to compete.
