The Justice Department Puts Google on the Defensive

From a story on by Mathew Ingram headlined “The Justice Department puts Google on the defensive”:

In 1998, the US Department of Justice sued Microsoft, alleging that the company had abused its monopoly over personal computing by forcing users of its Windows operating system to adopt Internet Explorer as their browser, among other things. In 2001, the two sides settled the case. The government initially asked for Microsoft to be broken up. That outcome was overturned on appeal, but some experts argued that the glare of the legal spotlight nonetheless slowed Microsoft down in key ways. These, in turn, allowed an upstart named Google—founded a month before the trial was launched—to eventually dominate the internet search market.

Two decades later, Google is ten times the size that Microsoft was in the nineties, with a market value of almost two trillion dollars and control over more than 90 percent of online search and related advertising. On Tuesday, the first major antitrust case since the Microsoft trial got underway in a DC courtroom—with Google in the role of defendant.

The Justice Department intends to prove that Google has misused its search monopoly to harm its competitors and that it has maintained that monopoly through illegal means, including paying smartphone companies like Apple billions of dollars to make Google the default search engine on their products. (Google’s dominance in advertising is the subject of a separate lawsuit that has yet to reach trial.) Kenneth Dintzer, a Justice Department lawyer, opened by arguing that Google viewed these default search deals as a “powerful strategic weapon” to cut out rivals. The resulting feedback loop, Dintzer argued, is a wheel that has been turning for more than twelve years, always “to Google’s advantage.”

Google’s lawyer hit back, arguing that “users today have more search options and more ways to access information online than ever before.” The crux of the company’s defense was outlined in a pretrial filing arguing that the Justice Department has defined the search market too narrowly, that Google doesn’t have a monopoly (which it defines as “the ability to raise prices beyond a competitive level”), and that its dominance in that market actually helps consumers.

According to Google, its status as the default browser on products like Apple’s did not result from massive payments but because Google “successfully competed on the merits—that is, on the basis of product quality and price.” Breaking up the company, or forcing it to divest itself of certain software operations, would make the global technology landscape poorer for everyone, Google says. The trial continues, and could take as long as ten weeks to conclude.

The Times has characterized the case as “the most significant challenge to big tech in the modern internet era” on the basis that the outcome could affect the entire technology industry, not least other behemoths such as Meta (which has been the target of its own antitrust lawsuit), Amazon, and Apple itself. Some observers view the Google case and other similar activity in the US as part of an effort by the Biden administration to match the recent trust-busting behavior of the European Union, which has leveled multibillion-dollar fines against Google and Meta. But some legal experts reckon that the US could find it difficult to bring its legal action to a satisfactory conclusion— just as it failed to do with Microsoft in the nineties—precisely because US antitrust law is not European antitrust law.

In the US, obtaining a monopoly through anti-competitive behavior is illegal, as is maintaining that monopoly by similar means—but having a monopoly is not illegal in itself. (In the Microsoft case, for example, the court ruled that the company engaged in anti-competitive behavior by forcing computer makers to install its Internet Browser software alongside Windows’ operating system.) Sean Sullivan, a former antitrust attorney with the Federal Trade Commission, told Ars Technica that “it’s not enough that the defendant’s conduct disadvantages its rivals”; the government has to prove that Google, in doing so, “lacked any business justification except to reduce the rivals’ competitive significance.”

Traditionally, US courts have defined anti-competitive behavior, in no small part, by assessing whether consumers have been harmed, with an emphasis on economic harm. Google can argue that its dominance in search benefits users because its service is free. The Department of Justice is expected to counter that consumers can be harmed in ways that go beyond high prices: lack of choice could also be defined as consumer harm, as could low product quality. In its pre-trial filing, the Justice Department argued that Google’s anti-competitive conduct has harmed consumers because Google “has not innovated as it would have with competitive pressure.”

Advocates of stronger government action against companies such as Google and Meta have argued for some time, however, that US antitrust laws’ focus on consumers and prices have made it too difficult to prove harm, with the result of effectively condoning the existence of monopolies—instead of assuming (as regulators in the EU tend to do) that they are objectively bad. The Obama administration examined allegations of anticompetitive behavior by Google, but in 2013, it closed the case without launching a formal investigation; more recently, when the FTC has tried to rein in the tech giants, it has had trouble meeting the law’s threshold of proof. As Ars Technica notes, last year, Congress recommended that antitrust laws should be strengthened in order to more directly prohibit the abuse of monopolies. But those suggestions have gone nowhere.

The Washington Post reports that the Google trial is part of a broader “reappraisal in Washington of the common wisdom that the internet is open by nature and therefore can self-regulate through free-market competition,” and that advocates of stronger antitrust action fear that the tech giants will use their market dominance to control the next generation of technology, not least in the field of artificial intelligence. Phil Weiser, the Colorado attorney general who helped convince a coalition of states to join the Justice Department’s lawsuit, told the Post that, in the nineties, the internet was widely viewed as “a dynamic, wide-open, competitive area that was just going to bring goodness to the world.” Today, he said, “the world looks very different. We see a lot of harms.”

In 1998, the Microsoft case was a front-page story for some time, driven in part by a frenzy in internet stocks and the fact that Bill Gates, the company’s founder and CEO, was then the richest man in the world, with a net worth of more than a hundred billion dollars. Going forward, the Google case may not be quite as compelling—in part because lawsuits against tech companies have become commonplace but also because the judge hearing the case has agreed to restrict the amount of information coming out of court. In addition to sealing many of the documents in the case following Google’s argument that they include proprietary information, access to the trial has been restricted. (The judge recently denied a request to provide a live audio feed.)

And even if the Justice Department succeeds in proving that Google has a monopoly and has illegally maintained it to the detriment of consumers, that still leaves the question of what remedy the court might impose. In Microsoft’s case, the company agreed not to engage in certain kinds of behavior going forward. The American Economic Liberties Project—a nonprofit anti-monopoly group funded in part by Pierre Omidyar, the founder of eBay—has recommended that Google be forced to spin off assets such as its Chrome browser or Android operating system. But the remedies could be smaller in scope: in order to sidestep penalties in the EU in 2019, for example, Google added a “choice screen” that allows users to pick their preferred search engine, instead of being forced to use Google’s as the default.

The court and the Justice Department could also wind up where they did in 2001—settling the case without breaking Google up but in ways that do slow the company down, allowing some new upstart to win the next iteration of the internet. That, perhaps, would be the best outcome of all. Or it could lead to another generational antitrust trial in twenty-five years time.

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