A ruling was made in a major multi-government lawsuit against Google on August 5th. VerdictThe U.S. District Court for the District of Columbia ruled that Google violated federal antitrust laws.
The case stems from lawsuits filed by the U.S. Department of Justice (DOJ) and several U.S. states. The now consolidated lawsuits allege that Google holds a monopoly on internet search and search advertising, and that in order to maintain this monopoly, it has engaged in “exclusionary conduct” in violation of Section 2 of the Sherman Antitrust Act of 1890.
But far from showing Google as a mustache-twirling villain, the decision shows how vague U.S. antitrust law is, how subjective its interpretation can be, and how oddly federal courts view market forces.
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Google is the default
In a decision written by U.S. District Judge Amit P. Mehta, the court acknowledged that Google achieved its leading position in the search engine industry by hiring highly skilled people, constantly innovating, making “smart business decisions,” and becoming “the highest quality search engine in the industry.” There’s nothing wrong with that.
But Google has also struck deals with browser developers, mobile phone companies and wireless carriers to make it the default search engine for their browsers and devices.
These deals, to me, don’t seem like they should be. illegalNo one can force Apple, Mozilla, or the like to enter into a contract with Google, nor can anyone force users of their products to use Google for web searches just because that’s the default. As the court said, defaults may be “valuable real estate,” but if consumers aren’t happy with Google, they can set a different default.
The reason so many people don’t switch from the default is likely because, in the court’s own words, Google is “the highest quality search engine in the industry.” Of course, inertia and laziness may also play a role, but if Google were so bad, many people would overcome inertia and laziness and switch.
“Today’s ruling pretends that default settings aren’t easy for users to change, when in fact they are,” said Jessica Melgin, director of the Center for Technology Innovation at the Competitive Enterprise Institute. “Apple believed that Google offered the best value, but when customers disagree, it takes them roughly 30 seconds to switch to their preferred search tool.”
Would a ruling that such transactions are illegal actually help consumers? Probably not.
“The default contract was a competitive, private process that is likely to reduce costs for phone buyers,” Melgin said. “Their merits are now being called into question.”
“Google is a monopoly”
After more than two years of discovery, during which “millions of pages” and “petabytes of data” were exchanged, the case went to trial in September 2023 and, after numerous post-trial motions, closing arguments were heard in March 2024. Ultimately, the court found Google’s distribution agreements to be illegal and anti-competitive.
“After careful consideration of the witness testimony and evidence, the Court reaches the following conclusion: Google is a monopoly and has acted as a monopoly to maintain its monopoly,” Mehta wrote.
Specifically, the court found that Google holds a monopoly on general search services and general search text ads. “Google’s distribution agreements are exclusionary and have anticompetitive effects,” the ruling stated. “Google has not presented a valid procompetitive justification for those agreements.” The court also concluded that Google “exercised its monopoly power by charging above-competitive prices for general search text ads.”
It wasn’t all bad news for Google in the ruling: The court rejected the Department of Justice’s argument that Google had a monopoly on search advertising, found that the company was not liable for “conduct related to its advertising platform, SA360,” and decided not to penalize Google for failing to preserve employee chat messages.
Google is the best
Still, the decision shows just how strange antitrust law can be. The court isn’t denying that Google has a good product, nor is it alleging that it engaged in any deceptive or unfair practices to get people to use it. The issue is simply that Google deliberately sought to maintain its position as the top search engine by making deals to make it the default search setting on browsers and phones, and by making it the default in its own products.
Google argues that it won the contract through competition with other technology companies, and the court found that “in some sense Google is not wrong. Google has long been the premier search engine, especially on mobile devices,” and has constantly innovated.
“Google’s partners value Google’s quality and continue to choose it as their default because its search engine offers the most promise for monetizing queries,” Mehta wrote, noting that Microsoft and DuckDuckGo have tried to bid for default status, but “these companies have not been successful, in part due to poor quality.”
The court also found that Google won because of its foresight, while Microsoft failed to focus on mobile devices.
However, the court found that “Google’s monopoly in general search has been so remarkably enduring” that it currently has “no real competitors,” and therefore the contracts that Google makes to maintain its monopoly are fundamentally illegal.
This is crazy. The court is basically saying that you can work hard, innovate, be smart, spend money, and do all sorts of legal things to gain market share, but once you have it, you’d better sit back and let someone else take it from you, or you’ll become an illegal monopolist.
“Courts aren’t very good at understanding how markets work.”
“The court’s order relies heavily on a controversial theory in the field of behavioral economics about default power and fails to show how the contractual agreements at issue harm consumers or competition,” Jeffrey A. Mann, president of the Center for International Law and Economics, said in an email. “Furthermore, the court overlooks the broader competitive environment in search and the intense competition that Google has engaged in to become the default search engine.”
“The fact that Google Search commands 80% market share even on Windows devices where Edge is the default browser and Bing is the default search engine indicates that consumers go out of their way to use Google because they believe it is the best option,” Manne noted. “Default placement means little if the product is not good. Similarly, Google has not been pushed out of the default everywhere because it has a better product. The opinion presents no evidence that Bing would have been a viable competitor under other factual circumstances.”
Or as Dan Greenberg, general counsel at the Competitive Enterprise Institute, put it: “People use Google not because of its monopoly power, but because the company offers something people like. Courts sometimes don’t understand how markets work very well.”
One long-standing flaw in antitrust rulings over technology is that courts can’t look at the current technology landscape and imagine how things might change. This happened before, in the 1990s with Microsoft, and is similar to the current case against Google. The case centered on accusations that Microsoft had illegally set its own browser, Internet Explorer, as the default for its Windows operating system. I looked at the Microsoft case and its lessons in a post about bipartisan antitrust battles against big tech companies in 2021.
Attorney General Janet Reno argued that Microsoft was “strangling itself against the browser software needed to access the Internet,” even though computer manufacturers could provide users with other browser software and Windows users could install it. Because Explorer was included as a default option (and could not be completely removed) and Windows was the most widely used operating system at the time, the federal government argued that consumers were trapped or tricked into using Microsoft’s web portal. The Department of Justice tried to force Microsoft to either unbundle its Internet Explorer browser or include a competing Netscape browser with the operating system.
The Justice Department’s case was based on the assumption that Microsoft had gained an unfair advantage over its competitors, making it the technology industry’s king of perpetuity. The argument assumed that markets were static and that change could only come through heavy-handed government intervention. But as with IBM, Microsoft lost its market power as agile emerging competitors found ways to meet consumer needs in unexpected ways.
Just as web-based applications triumphed over operating system-based applications and mobile operating systems triumphed over desktop computing, the government went after Microsoft.
Jennifer Huddleston, a senior fellow for technology policy at the Cato Institute, suggests the same thing may be happening now with Google.
“The court’s decision takes a fairly static view of the search market (and whether a typical search engine will be relevant in a few years’ time) at a time when the way we interact with technology is changing what search means, Huddleston said. Posts Regarding X: “For example, the Court did not address how generative AI products such as Google’s own Gemini or ChatGPT might change the overall market for search services.”
Huddleston also points out that the ruling isn’t focused on consumer well-being or utility: “It’s notable that this ruling was focused on the underlying agreement between various companies, not on end-user consumers and their preferences for different search services. It’s unclear what the potential remedies are and how they might impact the consumer experience,” he said.
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