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The Department of Justice filed an antitrust lawsuit against Google in October, claiming the search giant abuses its position to keep competitors out. Here's what you need to know about the situation, including what started the probes and where we are now.
Major tech companies such as Apple and Google have been the targets for criticism, with their large sizes prompting some to closely examine rules and practices of big firms for any potential issues. Antitrust accusations have been raised countless times by observers and those who feel wronged by those at the top of the food chain, and occasionally that leads to investigations and sometimes a lawsuit.
In this particular thread, we are covering the antitrust lawsuit filed by the Department of Justice against Google, one which accuses it of having too much power in search, to the detriment of any other potential competitor. While the Department of Justice believes there is some antitrust violations in play with Google's search-related dealings, the company itself insists it is innocent, and that the lawsuit is meritless.
If Google fails to convince the court otherwise, it could be forced to pay fines, or worse, be forced to sell off or separate parts of its business. Since this also occurs during a time when the US government and other international regulators are applying pressure on tech firms for seeming antitrust issues, the lawsuit will be closely watched.
Here's how we reached this point.
2012 Department of Justice tech probe into Google
Google's current antitrust situation could have been avoided completely, an October report from the New York Post claimed, with Google's general resistance to attempts by regulators to rein in its behavior allegedly forcing the DOJ into its legal action. The lack of previous cooperation with authorities has led to a situation where the DOJ is going for the heavy-handed approach.
This includes a 2012 attempt by the FTC to offer Google a plea deal over allegations of anticompetitive practices, which sources claim would have most likely protected the company from the latest legal dispute. The FTC offer included a consent agreement that allowed Google to not admit guilt, if it would cut out some of its search activities.
This included cutting down on its scraping of content from third-party sites like Yelp, performed without a crediting link, as well as eliminating Google-created restrictions on advertisers being prevented from working with competing sites.
"Google resisted everything," the source claimed. "They said, 'We don't think you have the votes to sue."
By 2013, the FTC announced Google had agreed to change its policies for site scraping and ad sales, but via a non-binding "commitment letter." The letter have the FTC no authority over Google to monitor its activity and ensure compliance.
"They would have been smart to sign a consent decree with the FTC," the source added, as while the agreement would have put it under the FTC's jurisdiction for between seven and ten years. It is believed signing would have also prevented the DOJ from probing Google and forming the antitrust lawsuit at all.
Former FTC commissioner Professor William Kovacic suggests "If the FTC had come home with a real order, that could have been seen as a much more legitimate law enforcement measure. The whole narrative of government ineffectiveness in dealing with big tech would have been different." Kovacic adds "It's entirely possible that emboldened Google."
Seven years later, the restart
In July 2019, the U.S. Department of Justice announced an antitrust review of major tech companies, including Apple, Amazon, Google, and Facebook. The probe was widely anticipated at the time.
The review was set to assess "the widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online," a DOJ statement said. "The Department's Antitrust Division is conferring with and seeking information from the public, including industry participants who have direct insight into competition in online platforms, as well as others."
Assistant Attorney General Makan Delrahim of the Antitrust Division further explained "Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands. The Department's antitrust review will explore these important issues."
The wide-ranging review would cover topics such as whether online platforms dominate specific fields, such as search or online retail, DOJ officials said. As the Federal Trade Commission was also conducting its own antitrust efforts since February 2019, the agency would attempt to avoid covering the same ground.
The DOJ was also preparing separate probes into Apple and Google about monopolization, but officials suggested some threads could intersect with the announced review.
The timing of the probe's announcement followed after an appearance by representatives from Google, Apple, Amazon, and Facebook in front of the House Judiciary Committee over antitrust issues the previous week. The House Antitrust Subcommittee was investigating "platform gatekeepers" and "dominant firms" in tech.
Earlier the same year, then-presidential candidate Sen. Elizabeth Warren was using antitrust as a talking point of her campaign, calling for a Bell or Standard Oil-style breakup of major tech firms.
Alphabet confirms DOJ investigation
Much later, in September 2019, Google parent company Alphabet revealed it was actively being investigated by the DOJ over potential antitrust violations. Revealed in an SEC filing, Google had received a civil investigative demand from the DOJ in August, for "information and documents relating to our prior antitrust investigations in the United States and elsewhere."
Alphabet was confident more trouble was on the way, adding in the filing "We expect to receive in the future similar investigative demands from state attorneys general."
House Reps: "Break up tech firms"
On October 6, 2020, following the ending of hearings by the U.S. House of Representatives into big tech antitrust, a draft response for an unreleased proposal apparently called for the breakup of the tech giants.
Republican Congressman Ken Buck responded to the forthcoming report with criticism, claiming it is a "thinly veiled call to break up Big Tech firms." While admitting to agree with concerns about Big Tech, Buck objects to the plan to require companies to delineate a clear "single line of business," which would affect companies like Amazon who deal with both retail and cloud services.
"The report offers a chilling look into how Apple, Amazon, Google, and Facebook have used their power to control how we see and understand the world," wrote Buck. "[However] these potential changes need not be dramatic to be effective."
Antitrust lawsuit murmors suggest Chrome splinter
In reports ahead of the DOJ's lawsuit announcement, it was rumored that Google could be forced to splinter off the Chrome browser from the core company as a solution to its antitrust problem.
Report sources on October 12 claimed there were discussions on the matter taking place, but no final decisions on what courses of action would be appropriate had been made. Investigators were said to have been asking the opinions of experts and competitors in the online advertising industry for advice on how to reduce Google's dominant control in the field, with some pointing to the potential sale of Chrome as a solution.
The criticism was due to Chrome's major dominance, with changes in how it handled advertising effectively becoming an industry standard. Google's ownership of the browser also led to claims that the search company's advertising arm was practically immune to efforts to minimize third-party cookie tracking for privacy reasons.
While third-party advertising firms would be impacted by a phasing out of third-party cookies over a two-year period, it was reckoned Google would simply use its knowledge of a user's browsing history and search history to perform the same ad-tracking task.
At the same time, the DOJ was also said to be looking into a lawsuit against Google over its control of online search, details of which didn't take long to surface.
DOJ files search antitrust suit against Google
On October 20, the DOJ filed its antitrust lawsuit against Google, accusing it of becoming a "gatekeeper" to the Internet by abusing its position to prevent the rise of effective competitors. The filing was made by the DOJ as well as 11 state attorneys general.
The lawsuit alleged Google was spending considerable sums to companies like Apple to make its search the default option in browsers like Safari, instead of allowing others to take the place. Officials were also unhappy with agreements for Android, where Google required search tools to be preinstalled on devices from vendors using the mobile operating system.
The actions were unlawfully exclusionary according to the DOJ, as its interconnected list of agreements effectively prevented rivals from adequately competing, such as preventing competitors from having search apps preinstalled on Android devices.
By taking control of roughly 80% of the US search market, Officials believed the remaining 20% wasn't enough for rivals to acquire enough of an audience to grow and become real competition for Google. This was thought to leave consumers with fewer options for search, while advertisers had to deal with uncompetitive prices.
Competitors were quick to pass comment on the legal action, seemingly welcoming it with open arms.
DuckDuckGo CEO Gabriel Weinberg admitted the privacy-focused search company is "pleased the DOJ has taken this key step in holding Google accountable for the ways it has blocked competition, locked people into using its products, and achieved a market position so dominant they refuse to even talk about it out loud."
Yelp was positive about the lawsuit, calling it a "critical first step in confronting Google's anticompetitive abuses and monopoly power in search."
Yelp referenced a "self-serving bias" in Google, where consumers are "unwittingly steered" to its own services. "By systematically reducing the quality of its search results in order to entrench and extend its search and search advertising monopolies, Google is directly harming consumers.," the company suggested.
Yelp "encourages swift action" from the DOJ and the attorneys on the matter.
Google's initial rebuttal
Hours after the DOJ lawsuit filing, Google offered its response to the lawsuit, declaring it to be "deeply flawed." Google SVP of Global Affairs and Chief Legal Officer Kent Walker insisted in a blog post "People use Google because they choose to, not because they're forced to, or because they can't find alternatives."
Walker characterized the DOJ's "dubious antitrust arguments" by likening Google's payment of services to feature its search engine by default as similar to show "a cereal brand might pay a supermarket to stock its products at the end of a row or on a shelf at eye level," actions its competitors are also able to undertake. Said agreements are also said to have "passed repeated antitrust reviews."
Google also offered arguments for specific hardware platforms, such as how Google is featured because "they [Apple] say Google is 'the best," and that the arrangement isn't exclusive to Google, with rivals also appearing in search and even paying for similar positions. Meanwhile on Microsoft's operating systems, the default Edge browser uses Bing as its default search provider, not Google.
The ability to change from Google to another search provider is also raised, as it is easy for users to change to a different service. Furthermore, Walker suggests Google's data claims to show users are actively selecting it as its preferred service, such as when Yahoo paid Mozilla to be the default search in Firefox for a period of time.
"We understand that with our success comes scrutiny, but we stand by our position," Walker writes in conclusion. "American antitrust law is designed to promote innovation and help consumers, not tilt the playing field in favor of particular competitors or make it harder for people to get the services they want. We're confident that a court will conclude that this suit doesn't square with either the facts or the law."
Apple's role in the lawsuit
While not a defendant in the lawsuit, Apple is mentioned as part of it, but more in its dealings with Google than in its own right. Specifically, a deal between Google and Apple that allows Google search to be the default search engine in Safari and Siri on iPhone and iPad.
In a report on October 20, it was claimed securing the prominent position in Safari was so important that Google internally dubbed the prospect of losing it "Code Red."
In terms of how much Google pays Apple for the privilege, it is thought Apple benefited by billions of dollars. In 2018, it was believed Apple was paid upwards of $9 billion to maintain the arrangement.
Terms of the deal itself are unknown, with neither party revealing figures directly, but it is suggested in the lawsuit the payments from Google alone account for between 15% and 20% of Apple's annual profits, putting it at around $11 billion. The high sums in play are also thought to have influenced the relationship between the two companies.
Citing a meeting between Apple CEO Tim Cook and Alphabet/Google CEO Sundar Pichai in 2018, the lawsuit claims discussions were about how the two could work together to increase search revenue growth. A senior Apple executive is said to have told their Google counterpart "our vision is that we work as if we are one company."
The appearance of such claims in the filing may find Apple being dragged to court to explain its position with Google.