In many ways, the DOJ’s complaint is a near clone of the Microsoft case, making it a strong, low-risk first step in curbing Google’s monopolization. Yet the case only addresses a fraction of Google’s anticompetitive behavior. Congress should not wait for years for US v. Google to wind through the courts before passing structural reform.
Amidst a global pandemic and a presidential election that have America on edge, October 2020 will not be remembered as the best of times. But for the antimonopoly movement, October has been a momentous month. It started with the release of the House Judiciary Antitrust Subcommittee’s nearly 450-page report, detailing anticompetitive conduct and acquisitions by the big four digital platforms: Facebook, Amazon, Apple, and Google. And last Tuesday, the US Department of Justice filed its long-awaited antitrust complaint against Google for illegal monopolization.
There’s no doubt about it: we are in the midst of a historic turning point for antitrust enforcement.
For those parsing through the DOJ’s complaint, the most important takeaway is that the case was filed at all. Google has had durable monopoly power going on two decades, and yet until now the government has sat by idly and watched Google do the same types of anticompetitive conduct Microsoft was sued for in the late 1990s. My book Monopolies Suck, out tomorrow, gives an easy-to-understand overview of US v. Microsoft for the layperson and shows how each of the four tech giants is following in Microsoft’s footsteps. Just as Microsoft used its monopoly power in intel-compatible PC operating systems to exclude competition from Netscape’s internet browser, Google used its monopoly power in licensable mobile operating systems to exclude competition from search engines and various types of apps. Such exclusion, in turn, fortified both corporations’ existing monopoly power.
The US v. Google complaint shows Google was careful to obscure similarities with Microsoft’s conduct, quoting Google’s Chief economist as cautioning: “We should be careful about what we say in both public and private. ‘Cutting off the air supply’ and similar phrases should be avoided.” He was referencing the notorious words of Paul Maritz, the former Microsoft VP, speaking to executives about a plan to exclude competition from Netscape.
In many ways, the DOJ’s complaint is a near clone of the Microsoft case, making it a strong, low-risk first step in curbing Google’s monopolization. US v. Google should be a slam dunk case because it so closely mirrors US v. Microsoft, yet antitrust thinkers should not make the mistake of treating that landmark precedent as equivalent to the Sherman Act Section 2 itself, as if the fact pattern of every subsequent monopolization case must not diverge from this one major victory. One single case should not set the limits of what counts as illegal monopolization for all future instances of exclusionary conduct.
With attorneys general from 51 US states and territories currently investigating Google, the DOJ’s complaint is indeed only the opening move. The DOJ takes aim at a small fraction of Google’s anticompetitive conduct, and even antitrust enforcement is only one piece of the puzzle when it comes to reining in Google’s monopoly power. As I argued in my testimony before the House Judiciary Antitrust Subcommittee, and as its report reflects, a whole host of solutions are needed, including non-discrimination rules, interoperability rules, and structural separation of platforms from commerce.
Though the DOJ’s complaint includes a prayer for structural relief, Congress should not wait years for US v. Google to wind through the courts and should pass structural reform in the near term. Chairman Cicilline has suggested that Glass-Steagall could be a model for such legislation.
Taking a step back, Section 2 of the Sherman Act requires (1) monopoly power and (2) the acquisition or maintenance of that monopoly power using exclusionary conduct. As the Microsoft court explained, for conduct to be exclusionary it must “harm the competitive process and thereby harm consumers.” When a corporation uses its monopoly power to harm the competitive process, consumers are harmed by loss of choice and innovation, and innumerable other ways as citizens, entrepreneurs, employees, and taxpayers. Note that US v. Microsoft did not involve price increases to consumers, and neither must US v. Google.
Nonetheless, the complaint makes clear that Google’s services are not free. “When a consumer uses Google, the consumer provides personal information and attention in exchange for search results. Google then monetizes the consumer’s information and attention by selling ads.” Seeing the price that consumers pay for Google’s services is their data, Google’s monopoly power allows it to extract supra-competitive prices from consumers.
Further, as the gatekeeper to the internet, Google charges all businesses a tax just to be discovered in search results, and these costs inevitably reach consumers in multiple ways, including in the form of higher prices for consumer goods. As the complaint alleges, “countless advertisers must pay a toll to Google’s search advertising and general search text advertising monopolies; American consumers are forced to accept Google’s policies, privacy practices, and use of personal data; and new companies with innovative business models cannot emerge from Google’s long shadow.”
The complaint is full of allegations showing that Google has harmed the competitive process itself. For example, the DOJ alleges, “On mobile devices, Google’s exclusionary agreements cover more than 80 percent of all US search queries.” Further, “General search engine competitors are denied vital distribution, scale, and product recognition—ensuring they have no real chance to challenge Google.” As the complaint explains, “Today, Google has [revenue sharing agreements] with nearly every significant, non-Google browser other than those distributed by Microsoft, including Mozilla’s Firefox, Opera, and UCWeb. These agreements generally require the browsers to make Google the preset default general search engine.” Interesting that Microsoft, whose antitrust case is probably the reason Google even exists today and wasn’t just shut out like Netscape, is the lone hold-out.
Importantly, the complaint notes the importance of curbing Google’s monopolistic practices in new technologies as they emerge. “Google is now positioning itself to dominate search access points on the next generation of search platforms: internet-enabled devices such as smart speakers, home appliances, and automobiles.”
Most notably, Google’s pending acquisition of Fitbit is a repeat of its Android strategy, and should be stopped. The complaint references a 2007 Google internal document that states, “More individuals are using non-desktop devices to access the internet. If users of these devices do not widely adopt versions of our web search technology, products or operating systems developed for these devices, our business could be adversely affected.” Google’s acquisition of Android allowed it to extend its desktop search monopoly into mobile as technology evolved, and we should not permit Google to do the same with wearables.
Many allegations in the complaint take the steam out of Google’s typical defenses. Google often denies having monopoly power in the Android operating system by pointing to Apple. But Apple’s operating system is not a substitute for Android because phone manufacturers cannot license it. “Android represents over 95 percent of licensable mobile operating systems for smartphones and tablets in the United States,” reads the complaint. The DOJ’s sound analysis is consistent with what the European Commission found in its Google Android case, and is highly aligned with Europe’s findings. Announcing the EC’s Android decision, Commissioner Margrethe Vestager condemned Google’s anticompetitive restrictions and stated: “Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere.”
Google has argued its Android practices are different from the conduct described in US v. Microsoft because the Android operating system is open-source. But internal Google communications cited in the DOJ complaint shatter that notion: “How do we retain control of something we gave away?” “Google’s answer is the set of contractual ‘carrots’ and ‘sticks’ . . . that empower Google to ‘[o]wn the ecosystem’ and help thwart any alternative mobile ecosystem from developing that could support a different search provider,” alleges the complaint.
Google also argues it has competed fair and square and consumers simply choose its search engine because it’s the best. But Google’s own internal document, cited in the complaint, admits “People are much less likely to change [the] default search engine on mobile.” Why else, after all, would Google pay Apple an estimated $12 billion last year to be the default search engine on its devices?
Lastly, the US can learn a lot from the European Commission about what has worked and what hasn’t in its attempts to stop Google’s anticompetitive practices. The EC did pioneering work bringing antitrust cases against Google, but its behavioral remedies have not been enough to make the tech giant change its ways. Complainants in the EC’s Google Shopping case say Google has refused to treat competitors equally as it treats itself in search results, as that decision requires. And the EC started investigating Google for its anticompetitive agreements with phone manufacturers (also known as Mobile Application Distribution Agreements, or MADA) back in 2015. The DOJ’s complaint alleges: “Before 2017, most MADAs also required manufacturers to set Google as the default general search engine for all key search access points on any device with preinstalled Google apps—these requirements are now found in the revenue sharing agreements discussed below.” Google, under fire from the EC, simply achieved the same anticompetitive ends through different means.
Google has shown the world’s antitrust enforcers that behavioral remedies alone simply won’t work.